The HIPC Initiative and the MDRI: Status of Implementation Report 2007

1. The HIPC Initiative and the MDRI: Status of Implementation Report 2007 Briefing to the Multilateral Development Banks Gallina Vincelette PRMED, The World Bank July 2007

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

3. Progress in Implementation: Overview

4. Implementation Progress – Completion-Point Countries Main Challenges in Meeting CP triggers: • extended interruptions to PRGF-supported programs • weak budget execution and poor policy • extended duration in preparing fully-participatory PRSPs, Yet, the HIPC Initiative process has engendered a notable improvement in the overall quality of institutions of HIPCs

5. Implementation Progress – Completion-Point Countries Evolution of the CPIA in Post-Decision-Point HIPCs

6. Implementation Progress – Interim Countries Of the Nine Interim countries: • 3 have experienced interruption of IMF programs, but currently all on track • Several experience political tensions • 6 have completed preparation of full PRSPs, and 3 have established 1-year satisfactory record • 3 are drafting PRSPs • 6 could reach CP by end 2008 -- Burundi, Chad, DRC, the Gambia, Guinea, and Haiti

7. Implementation Progress – Interim Countries Estimated Timing for Upcoming Completion Point HIPCs • The Gambia • Burundi • Chad • DRC • Guinea • Haiti • Congo, Rep • Guinea-Bissau Q3/Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2009 or later

8. Implementation Progress – Pre-Decision-Point Countries Of the Ten Pre-Decision-Point HIPCs: • Most are making progress toward qualifying for debt relief under the HIPC Initiative • Half are facing difficulties in implementing macroeconomic policies and structural reforms • PRGF-supported program with the IMF in Nepal, CAR, Kyrgyz, • Staff Monitored Programs in Liberia and Togo • 4 countries do not have IMF-supported programs and so are not yet eligible for HIPC debt relief (Somalia, Sudan, Eritrea, Comoros)

9. Estimated Timing for UpcomingDecision Point HIPCs • Implementation Progress – Pre-DP Countries • CAR • Liberia • Comoros • Côte d’Ivoire • Eritrea • Nepal • Somalia • Sudan • Togo Q3 2007 Q1 2008 Q2 2008 ?

10. II. Costing UpdateCost of HIPC Initiative Debt Relief Total cost for 41 potentially eligible HIPCs is estimated at $67.6 bln (end-2006 NPV terms) Debt relief to the 22 post-completion-point HIPCs is nearly 1/2 (US$32.8bln, end-2006 terms) of total cost Debt relief to 9 interim HIPCs is about 18% (US$12.1bln, end-2006 NPV terms) of total costs Estimated cost to 10pre-decision-point HIPCs is US$22.7bln, end-2006 NPV terms

11. II. Costing UpdateCost of MDRI Total cost of MDRI debt relief for all potentially qualifying HIPCs is estimated at $44 bln (nominal terms, discounted to end-2006) Debt relief to qualifying post-completion-point HIPCs is nearly 80% of total estimated costs IDA provides about ¾ of the MDRI total estimated costs

12. III. Creditor Participation -Paris Club Creditors Paris Club creditors account for 37% of total cost of HIPC Initiative to 31 post-DP HIPCs Continue to provide interim relief to DP HIPCs, and stock-of-debt reductions to CP HIPCs Estimated cost for the 31 post-DP countries – US$16.5bln, end-2006 NPV terms Estimated cost of additional debt relief beyond HIPC Initiative to post-CP countries– US$7bln

13. III. Creditor Participation –Non-Paris Club Creditors Non-Paris Club creditors account for about 9% of total cost of HIPC Initiative to 31 post-DP HIPCs Low participation in delivering HIPC relief Survey sent out to major non-Paris Club creditors and all post-CP HIPCs Estimated delivery of exp. HIPC relief around 32-39% Large variation in HIPC relief delivery

14. III. Creditor Participation –Private Creditors Private creditors account for about 4% of total cost of HIPC Initiative Survey sent out to 30 post-DP HIPCs & interviews with London Club members on participation and litigation Most commercial banks & few non-bank creditors delivered their share of HIPC relief, roughly 27% of expected commercial creditors relief The IDA’s DRF catalyzing commercial creditors’ participation: extinguished US$8bln external commercial debt in 21countries

15. III. Creditor Participation –Private Creditors’ Litigation against HIPCs Some non-participating private creditors resort to litigation for debt recovery Survey results: • 11 of 24 post-DP HIPCs targeted by 47 litigating creditors • 24 of 47 litigating creditors have court judgments against seven HIPCs for US$1.2bln Litigation has significant economic costs for HIPCs • E.g. litigated debts of Rep. of Congo and São Tomé e Príncipe are about 15% and 13% of GDP, respectively

16. Summary • Since mid-2006, 3 HIPCs reached CP and 2 reached DP • By end-2008, 6 HIPCs could reach CP and another 2 DP • Delivery of debt relief sound, mainly due to multilateral, Paris-Club, most commercial banks, & some bilateral creditors’ efforts • Other non-Paris Club & non-bank commercial creditors participation still low