Impact of HIPC
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This page looks at the progress  of HIPC so far and contrasts the World Banks positive spin on debt cancelled with the statistics that show how little has been achieved!

This data on this page is derived primarily from the World Bank report titled

Financial Impact of the HIPC Initiative July 2002 (but data not changed in September report).  First 26 countries  (available in pdf format at Financial Impact Paper )

The World Bank has issued a report rejecting the call for 100% debt cancellation-

( available as pdf format at 100 Percent Debt Cancellation?)

World Bank 'spin'

Financial Impact Report claims:-

Statistics! 

an alternative perspective

for the 26 countries approved so far

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HIPC has cut debt stock US$25bn

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Cut debt service US$41bn (over time?)

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reduced debt service by two thirds

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progress is to 70% of HIPC initiative (ie after 23 countries)

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Debt stock 'slashed' from 60% of GDP in 1999 to 24% after HIPC which is 10% lower than the average for developing countries

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Debt Service cut by a third ($1bn) from 1999 levels

BUT:- Look at the relatively limited scope of enhanced HIPC.  In effect, progress has only been made reducing a small proportion of the debts of the poorest countries (only 26 of the 52 countries identified).

The World Bank /IMF do not accept that all the countries Jubilee identified have unsustainable debts.

Although the HIPC program has addressed the debts of 26 countries and cancelled about half of the US$100bn debt promised, this covers only 13% of the unsustainable debts 

(Note -this graph uses EDT because NPV values for debt stock are only available for HIPC countries)

Financial Impact Report claims:-

Statistics! 

an alternative perspective

bulletDebt service as % of exports cut from 16% to 9%
bulletdebt service will fall from 4% of GDP to 2% and from 20% of government expenditure to 11%
bulletsocial expenditure will increase by US$2.6bn/a to 9% of GDP (driven by diversion of debt service into social expenditure)

Note however particularly on this chart that the debt service due was about to have almost doubled without HIPC, -it could never have been afforded!  The actual debt service being paid falls by about 25%

On the published figures, all 26 countries have total social expenditures higher than debt service. 

This graph shows the actual and projected debt service payments after enhanced HIPC 1999 & 2000 are pre-enhanced HIPC

bulletThis is a minimal real reduction in debt service (26%).
bulletThis is no basis for achieving the 2015 poverty reduction targets

Although the debt reductions for the 23 HIPC countries that have reached decision point so far are significant, they are just 5% of the debt service problem highlighted by Jubilee.
bulletThe growth in social expenditure and the reductions in debt service to GDP also assume unrealistic growth targets of about 10% 
bulletIf debts were cancelled, social expenditure could increase by some 30%

Financial Impact Report claims:- Statistics! an alternative perspective

The first two columns are debt stock at NPV the second two are Nominal or EDT values of debt stock.

 

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HIPC relief so far is US$25bn out of US$31  (NPV)

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Total relief (including bilateral cancellation) is US$40bn a reduction of two thirds

 

This graph shows the actual (1999) and projected 2003 debt service payments after enhanced HIPC 

bulletThis is a minimal real reduction in debt service overall -just 26%
bulletThe progress after 5 years only addresses about half the HIPC debt service.
bulletThe HIPC scope is only about 50% of the problem
This is no basis for achieving the 2015 poverty reduction targets

 

Jubilee Debt Web Group Last updated- 22-Sep-03