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Ethiopian Prime Minister
says HIPC is failing
March 5, 2003 Addressing a joint meeting
of the All Party Parliamentary Groups on Overseas Development and
Ethiopia in the UK House of Commons last week, the Prime Minister of
Ethiopia, Meles Zenawi, declared that the HIPC Initiative was failing
his country. He said that he intended to ask the UK Government to
address this problem by urging a review of the HIPC process. Ethiopia entered the
Enhanced HIPC Initiative in November 2001 and currently hopes to reach
completion point in September 2003. The agreement afforded debt relief
of approximately $1.3 billion, or 47% of the country’s total external
debt after traditional debt relief. At decision point the World Bank had
predicted that this reduction would return the country to sustainability
by 2007. [1] Mr. Meles Zenawi said that
this prediction was no longer credible. The World Bank’s
sustainability indicators had been based on unrealistic assumptions that
ignored a number of vital factors affecting the projected growth of
Ethiopia’s economy. These included the fall in the global price of
coffee, the reduction in US interest rates, and the appreciation of the
euro against the dollar. The Bank’s predictions had also failed to
allow for climate disasters, such as the drought that has currently left
14 million Ethiopians facing starvation. Jubilee Research agreed
that HIPC was failing, and asked the Prime Minister what particular
course of action he would be urging on the UK Government. At present,
Ethiopia’s debt was steadily increasing due to continued borrowing,
and since January 2000, loans from the World Bank alone had amounted to
over $1 billion. External debt service estimates for 2003 were in excess
of $50 million, and the current famine was making this use of scarce
resources particularly unacceptable. Mr. Zenawi replied that much of Ethiopia’s debt was multilateral, and he feared there was little that could be done at the moment to reduce this portion of the burden. He would therefore concentrate on bilateral debt cancellation, and in addition would call for the ‘topping up’ of the relief afforded under the HIPC Initiative.[2] He was also going to ask the UK Government to use their influence to encourage other countries to cancel their bilateral debt and support a top-up policy for Ethiopia.
[1]
For further details, see Ethiopia in Country Profiles at http://www.jubileeplus.org/databank/profiles/ethiopia.htm
and Debt Relief for Ethiopia Demonstrates Weaknesses in
HIPC Process at http://www.jubileeplus.org/hipc/debt_relief/debt_relief_ethiopia.htm
[2] Faced with the fact that
the HIPC Initiative was failing to return countries to
sustainability, the G8 leaders committed themselves in September
2002 to providing an additional $1bn of debt relief to ‘top up’
countries at Completion Point if their debts remained unsustainable.
So far only Burkina Faso has received this form of relief.
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