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The Heavily Indebted Poor Countries (HIPC) Initiative: how it works

To qualify for HIPC assistance, a country must:

  • face an unsustainable debt burden - usually expressed as debt to export ratio
  • demonstrate a commitment to poverty reduction: by having developed a Poverty Reduction Strategy Paper through wide consultation of its citizens
  • have established a track record of good financial management: through programmes supported by the external linkInternational Monetary Fund
    • and the external linkInternational Development Association
  • be very poor: demonstrated by being eligible to borrow from the World Bank on very favourable terms and to receive special support from the International Monetary Fund.

Debt relief is delivered in two stages:

  1. When countries reach the first stage, Decision Point, they receive interim relief on their debt service. They must then continue to perform well. They also need to implement key reforms that were agreed at Decision Point, for example tackling corruption.
  2. When HIPC governments have demonstrated progress in tackling poverty and improving their policies, they reach the second stage, Completion Point. At this point, their debts get cancelled. Since the Multilateral Debt Relief Initiative was created in 2005, countries receive 100% cancellation of their debt.

For further information, including how the HIPC Initiative is financed, please see the external linkIMF website.