Facts and figures
- Together, the MDRI and HIPC initiatives are expected over time to reduce the debt burden of the world’s poorest countries by over US $100 billion, allowing the savings from debt relief to be spent on health, education and infrastructure as set out in country-owned poverty reduction strategies.
- To date, 23 countries have completed the HIPC initiative and are in receipt of irrevocable reduction in their debts, including 100 per cent cancellation of debts to the IMF, World Bank and African Development Bank under the MDRI.
- 9 countries have reached the decision point of the HIPC initiative and are in receipt of interim debt relief (i.e. making no payments on their debts)
- The HIPC initiative has helped countries to decrease their debt service payments, which has been accompanied by an increase in poverty reducing expenditures. In countries that have completed the initiative, poverty reducing expenditures have increased from under 7 per cent of GDP in 2000 to 9 per cent in 2006. Such expenditure amounted to $17 billion in 2006, an increase of $3 billion since 2005. This is more than five times the level of debt-service payments after debt relief.
- On average, health and education spending account for around 65 per cent of the use of HIPC debt relief.
- The UK goes further than is required under the HIPC Initiative, providing 100 per cent relief on all bilateral debts owed by HICPs when they reach Completion Point and holding in trust any payments received from HIPC countries before they become eligible for debt relief.
- The UK also provides debt relief through the UK MDRI to 9 non-HIPC countries. We pay 10 per cent of their debt service to the World Bank and, for African countries, the African Development Bank. This will be worth over £120 million until 2015. To qualify countries must demonstrate sounds financial management. We hope more countries will become eligible soon.
Country-level examples
- Ghana received more than $3.5 billion of debt relief through the HIPC initiative in 2002. This has helped it increase its expenditure on education, raising the Net Enrolment Ratio of 7 -13 year olds by 8% and the number of secondary schools from 937 to 1,024 by 2004. Ghana received an additional $57.9 million from the MDRI in 2006, and is using this to spend more on health, energy, water, sports and other infrastructure, as well as to improve major highways and feeder roads in rural areas.
- In Tanzania, a similar amount of HIPC debt relief in 2000 has helped to increase the number of children in primary schools by over 50%, build almost 2,500 new primary schools and recruit 28,000 extra teachers. If this rate of progress continues, Tanzania will meet the goal for universal primary education in the next couple of years – significantly ahead of the target date of 2015. Tanzania is using MDRI savings of $82.3 million in 2006 towards energy projects and food imports, to mitigate the impacts of serious drought.
- In Uganda, HIPC debt relief of nearly $2 billion since 2000 has helped make possible the removal of user fees for healthcare. As a result, the number of new out-patient consultations has increased from 9.3 million in 1999/2000 to 24.5 million, indicating a doubling in the use of health services over 5 years. Immunisation coverage increased from 41% in 1999/2000 to 89% in 2004/05. Uganda will use its MDRI savings ($57.9 million in 2006) for energy infrastructure to try to ease acute electricity shortages, as well as towards poverty reduction priorities set out in the 2006/07 budget such as improving the quality of primary education, malaria control, medicines and health supplies for primary health and immunisation, reproductive healthcare and water infrastructure (specifically targeting the poor and under-served villages).
- Honduras intends to use MDRI debt relief of $27.6 million in 2006 to eliminate fees for public schools. Although too early to provide exact data, early indications are that this has made a significant difference in the numbers of children attending primary school in some of the country's poorest regions.
- Zambia is using MDRI its savings of $23.8 million in 2006 to increase spending on agricultural projects on smallholder irrigation and livestock disease control, as well as eliminate user fees for healthcare in rural areas.
- Cameroon is using the additional $29.8 million freed up by the MDRI in 2006 for pro-poor spending in line with its national poverty reduction priorities, especially infrastructure, social sector and governance reforms.
- Senegal will use the $48.5 million freed by MDRI in 2006 for priority social services.
- Health and education in Nigeria will also benefit as a result of its debt deal at the Paris Club. Approximately $1bn a year that would have been spent by Nigeria on debt service will now be channelled through a poverty reduction fund with a focus on the Millennium Development Goals. As a result, federal health and education budgets received an additional $167 million and $143 million respectively in 2006. The Nigerian Government has agreed that this will help to employ an additional 120,000 teachers and put 3.5 million more children into school.
