The HIPC Initiative and the MDRI: Status of Implementation Report 2006

1. The HIPC Initiative and the MDRI: Status of Implementation Report 2006 Briefing to the Multilateral Development Banks PRMED The World Bank June 2006

2. Outline I. Progress in Implementation II. Costing Update III. Creditor Participation

3. I. Progress in Implementation – Overview As the 10th anniversary of HIPC approaches of 40 HIPCs, • 29 have reached DP of which 19 countries have reached CP and • 10 are in the interim period. • 11 pre-DP countries remain.

4. I. Progress in Implementation – Overview

5. I. Implementation Progress – Completion Point and Interim Countries One interim country reached CP in past 12 months: • Cameroon (in April 2006) Out of 10 interim countries: • 2 have reached the decision point during last 12 months: • Burundi (in August 2005) • Republic of Congo (in March 2006) • 5 faced interruption of or delays in macroeconomic programs: • No PRGF currently in DRC, Gambia, Guinea, Guinea Bissau • Chad faced delay in first review under PRGF • 3 could reach CP in remainder of 2006: • Malawi, Sao Tome and Principe and Sierra Leone

6. I. Implementation Progress – Pre-DP Countries • In September 2004, the Boards of World Bank and IMF decided to extend the sunset clause to end-2006; and • to “ring-fence” its application to countries that meet the Initiative’s income and indebtedness criteria at end-2004. • In April 2006, staffs provided Boards with a list of 14 pre-DP countries that could be shown to meet the income and indebtedness criteria at end-2004

7. I. Implementation Progress – Pre-DP Countries Of these 14 countries: • 7 have been previously identified as HIPCs (CAR, Comoros, Cote d’Ivoire, Liberia, Somalia, Sudan and Togo); • 4 have newly joined the HIPC countries (Eritrea, Haiti, Kyrgyz and Nepal); • 3 indicated they wished not to avail themselves of the Initiative (Bhutan, Lao PDR and Sri Lanka) It was not possible to assess two additional countries (Myanmar and Afghanistan)

8. I. Implementation Progress – Pre-DP Countries As a result of the ring-fencing exercise, the set of countries that are potentially eligible for HIPC changed Pre-Decision Point Countries are now defined as countries: • that meet the income and indebtedness criteria at end-2004; and • wish to avail themselves of the HIPC Initiative Future of the sunset clause now under review

9. I. Implementation Progress – Pre-DP Countries There are 11 Pre-Decision Point Countries: • Central African Republic • Comoros • Côte d’Ivoire • Eritrea • Haiti • Kyrgyz Republic • Liberia • Nepal • Somalia • Sudan • Togo

10. I. Implementation Progress – Pre-DP Countries Of the 11 pre-decision point countries: • 3 are making progress toward meeting the qualification for debt relief under the HIPC Initiative (Kyrgyz Republic and Haiti could reach DP in 2006; CAR in 2007) • 3 are facing difficulties in implementing macroeconomic policies and structural reforms (Cote d’Ivoire, Nepal, Togo) • 5 countries do not meet policy performance criteria and so are not yet eligible for HIPC debt relief (Somalia, Sudan, Eritrea, Comoros and Liberia)

11. II. Costing Update • Total costs for the 40 potentially HIPC-eligible countries are estimated to be $62 billion in 2005 NPV terms • Change from 2005 Progress Report largely due to change in set of pre-decision point countries, inclusion of Rwanda topping up and updated information on Republic of Congo and Cameroon. • The total cost for the post-decision point countries is $41.3 billion in 2005 NPV terms, compared to $38.2 in 2004 NPV terms.

12. II. Costing Update cont’d

13. II. Costing Update- MDRI 2006 Progress Report will present initial progress with implementation of the Multilateral Debt Relief Initiative (MDRI)

14. III. Creditor Participation • Full creditor participation is critical for the success of the HIPC Initiative and concerted efforts are needed to improve participation • To examine participation of Non-Paris Club creditors in more detail, questionnaires have been sent to major Non-Paris Club creditors • Results of the questionnaires will be presented in the Progress Report

15. III. Creditor Participation cont’d • Progress report will also include survey results on commercial creditor participation and litigation • Commercial creditors are generally not participating in the initiative and some are resorting to litigation as a means of debt recovery • IDA Debt Reduction Facility was replenished by US$50 million and extended by 3 years in July 2004 • Mozambique and Nicaragua operations in an advanced stage of development • DRC is tendering for financial and legal advisers following Board approval of a preparation grant in August 2005 • A Sierra Leone preparation grant under discussion

16. Summary • In past 12 months 1 HIPC reached CP and 2 reached DP • In 2006, 3 HIPCs could reach CP and 2 DP in remainder of 2006 • Total HIPC costs have increased by US$4 billion due to increase in number of pre-decision point countries, inclusion of Rwanda’s topping up and discount rate changes • Progress report will present for the first time implementation of MDRI • Progress report will include update on creditor participation