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Treasury's opinion about the HIPC initiative
June
2001
Dear Ms. Bastos:
This is in response to your February 16 E-Mail
message to Secretary O'Neill. You expressed your thoughts about the Heavily Indebted
Poor Countries (HIPC) debt initiative. Please accept my apologies for the delay
in responding to your message. We would like to be able to respond to inquiries
such as yours within 10 working days, but the large volume of letters and E-Mail
messages that we receive make it impossible to answer each one in a timely manner.
I hope you understand, and that the delay has not be a source of undue inconvenience
to you.
As President Bush noted during the campaign, the Administration
supports debt relief for the Heavily Indebted Poor Countries (HIPCs) that have
demonstrated a commitment to economic growth and poverty reduction. As of May
2001, 23 countries had reached their decision points under the enhanced HIPC initiative.
Countries begin receiving debt relief at decision point.
Creditors have
committed to reduce the debt of these countries by about $34 billion under the
HIPC program, which will reduce the debt stock of these countries by almost half
on average. If debt reduction from previous traditional mechanisms is included,
overall debt reduction for these countries amounts to about two-thirds. A rough
estimate of total debt service savings for the 23 HIPCs over the next five years
is more than $1 billion each year.Last year, the United States Congress appropriated
$435 million for the HIPC initiative. This will allow the United States to forgive
100% of our bilateral claims pre-dating the June 20, 1999 announcement at the
Cologne Summit. It also will allow us to make a significant contribution to the
HIPC Trust Fund, which helps regional development banks, such as the African Development
Bank Group, fund their share of the costs of HIPC debt reduction. We have requested
additional funding for Fiscal Year 2002 that will allow us to complete our contribution
to the HIPC Trust Fund.
Some have suggested that the enhanced HIPC initiative
be expanded even further to require 100 percent debt reduction by the International
Financial Institutions (IFIs). This would increase the costs of the HIPC program
substantially.
The current HIPC initiative is only partially implemented,
and is not yet fully financed. We believe that we should concentrate on achieving
full funding and implementing the current initiative in an effective manner. At
this point, we also must focus on making sure the savings from debt relief are
invested in ways that generate economic growth and reduce poverty. We believe
that strategies by the debtor countries to enhance productivity and economic growth,
and reduce poverty, are key to the success of the enhanced HIPC initiative.
National
authorities are preparing the strategies with broad participation by civil society
and in close collaboration with all donors, particularly the World Bank and the
IMF. For more details, the World Bank and IMF web sites (www.worldbank.org
and www.imf.org) have extensive documentation
of the HIPC initiative and the progress made to date. Thank
you again for writing to Secretary O'Neill. We appreciate your interest in reducing
the debt of the poorest countries, and hope this information is helpful to you.
Sincerely,
Dale M. Servetnick
Acting Director of Public Correspondence
Office
of the Executive Secretary
OPCMail@do.treas.gov
http://www.treas.gov/opc
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