The Multilateral Debt Relief Initiative

1. The Multilateral Debt Relief Initiative Status of Implementation Multilateral Development Bank Meeting on Debt Issues Washington, DC—June 21-22, 2006

2. Overview • Origins and purpose of the initiative • Financing of the MDRI in the Fund • Eligible countries • Eligible debt • Implementation to date

3. Origins and Purpose of the Initiative • Launched by the G8 in June 2005, confirmed at Gleneagles • Purpose: free up additional resources to help poor indebted countries advance faster towards the MDGs • Three IFIs (IMF, IDA, AfDF) to forgive 100 percent of their claims on 35 HIPCs • Modalities may vary across IFIs • In particular: different financing sources • IMF: own resources • IDA, AfDF to receive compensation from donors

4. Financing the MDRI in the Fund • Two sources of resources available for debt relief from the Fund • Remaining proceeds from the 1999-2000 off-market gold sales • Bilateral contributions received to subsidize lending under the PRGF

5. Financing the MDRI in the Fund • Gold sales proceeds • Must be used uniformly across the membership • Debt relief to all members below a certain income cutoff • Income cutoff set at $380 per capita • 23 HIPCs and 2 non HIPCs

6. Financing the MDRI in the Fund • Bilateral contributions to the PRGF account • Not subject to uniformity of treatment requirement • But require consent from each contributor • Debt relief to HIPCs above the $380 cutoff

7. Financing the MDRI in the Fund • Two Trust Funds set up • MDRI-I: SDR 1.5 bn from gold sale proceeds • MDRI-II: SDR 1.12 bn from PRGF Subsidy account • Donors commit to provide additional funds • Debt relief for protracted arrears cases (Liberia, Somalia, and Sudan) • Debt relief for sunset clause HIPCs (Eritrea, Haiti, Kyrgyz Republic, and Nepal) • Subsidies for future PRGF, ESF loans

8. Country coverage in the Fund

9. Eligible debt • Cutoff date: end 2004 • No provision for reimbursement of payments made between January 1, 2005 and qualification • Delivery through stock-of-debt cancellation • Total estimated cost: SDR 5.3 bn (US$ 8 bn) in 2005 NPV terms

10. Qualification • Post-completion-point HIPCs must qualify for MDRI relief • Other HIPCs qualify automatically upon reaching their HIPC completion point • No additional conditionality after HIPC • No “material change” since completion point • Continued satisfactory performance in three areas: macroeconomic management, poverty reduction policies, public expenditure management

11. Qualification assessments • Undertaken in close collaboration with the World Bank • 17 of the 18 post-completion-point countries qualified for MDRI relief from the Fund • Mauritania to implement remedial actions • 2 non HIPCs also qualified for MDRI relief from the Fund

12. Implementation • Modalities approved November 21, 2005 • Qualification of 19 countries December 21, 2005 • Consents received from contributors January 5, 2006 • Relief delivered to 19 countries January 6, 2006 • Relief delivered to Cameroon upon completion point April 28, 2006 • Mauritania could qualify today

13. MDRI relief delivered to date • Relief delivered to 20 countries: 18 HIPCs and 2 non HIPCs • SDR 2.5 bn (US$ 3.6 bn) • Including SDR 330 mn (US$ 475 mn) in remaining HIPC assistance • Countries expected to receive MDRI relief in the near future: Mauritania, Malawi, Sao Tome and Principe, Sierra Leone