There had been successive initiatives since the 1980s to tackle debt owed to other Governments, known as bilateral debt. These high levels of debt have been increasingly recognised as a constraint on the ability of poor countries to pursue sustainable development and reduce poverty. In 1994 the so called ‘Naples terms’ were launched offering 67% debt relief on government to government debt.
The HIPC Initiative, launched by the World Bank and the IMF in 1996, was the first comprehensive effort to eliminate unsustainable debt in the world's poorest, most heavily indebted countries, by including multilateral debt.
The UK was concerned that the original HIPC Initiative agreed in 1996 was not getting debt relief through fast enough and was failing to free up resources for spending on poverty reduction.
By 1997 not one country had completed the process and by 1999, despite renewed efforts, only four of nearly forty poor countries had done so and only five had completed the first stage.
The UK successfully pushed for an enhanced HIPC Initiative which would...
Under the Enhanced HIPC initiative agreed at Cologne in 1999, some $100 billion will be provided in debt relief for HIPC countries pursuing sound policies and who are committed to poverty eradication. By Spring 2003 $62bn of this $100bn has already been agreed.
As part of the push for an enhanced HIPC Initiative, on 2nd December 2000 Gordon Brown, the Chancellor of the Exchequer, announced that the UK would no longer benefit financially from the historic debt of HIPC countries.
Speaking at the final meeting of the Jubilee 2000 organisation, the Chancellor announced “on behalf of the British Government - I will renounce our right to receive any benefit from the historic debt owed by all the 41 most indebted countries.” For those countries still to secure debt relief, all payments will be held in trust until they become eligible for debt relief. He called for other countries to follow the UK’s lead, which built on the UK’s existing 100% debt relief policy.
Since then, the UK has continued to lead the way on debt relief by using international meetings to encourage other countries and multilateral institutions to make good their commitment that the HIPC initiative would provide a robust exit from unsustainable debt. At the G7 summit in Kananaskis in June 2002, the UK secure agreement that extra funding of up to $1bn was needed to ensure the full financing of the initiative. G7 leaders also undertook to secure the participation of all creditors and address the issue of debt sustainability for countries leaving the HIPC process.
In addition, the UK has proposed an International Financing Facility (IFF) that would seek to double the amount of development aid from just over $50 billion a year today to $100 billion per year in the years to 2015. This is the estimated amount needed to achieve the internationally agreed Millennium Development Goals. These additional funds would be released in the form of concessional loans and grants, including debt relief.
The Debt Relief Factsheet is available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website.
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PDF file of Debt Relief Factsheet, May 2004
PDF file of Debt Relief Factsheet, Nov 2003
PDF file of Debt Relief Factsheet, August 2003
PDF file of Debt Relief Factsheet, December 2001