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Ottawa, April 19, 2002
2002-032

Minister Martin Calls for HIPC Program Review

Finance Minister Paul Martin today called on G-7 countries to launch an immediate review of the process that provides debt relief to heavily indebted poor countries (HIPCs).

The Minister’s concern arises from a joint review by the International Monetary Fund (IMF) and the World Bank, which found that not enough poor countries taking part in the HIPC process are achieving manageable levels of debt.

"HIPC has made good progress, but these findings underline the need for an immediate review of the process," Minister Martin said. "We need to know whether the HIPC Initiative is indeed delivering debt sustainability and, if not, why not."

Among the Minister’s concerns found in the IMF/World Bank review are:

• the higher-than-anticipated cost of ensuring that countries are sustainable when they get through the process;

• the lack of realistic assumptions underlying the debt sustainability analysis;

• the failure of some bilaterals to participate in the Initiative;

• there are cases where the claims of non-Paris Club creditors were bought on the secondary market at a discount by commercial creditors that have then sought full payment through the courts; and

• the fact that debt management capacity in many HIPCs should be enhanced.

The IMF and World Bank launched the HIPC Initiative in September 1996. Its goal is to provide debt relief to some of the world’s poorest countries, enabling them to direct resources out of debt servicing and into vital social areas, such as health, education and poverty reduction.

Since the launch of the Initiative, Canada has been a strong advocate of accelerating debt relief for the world’s poorest countries. It is widely recognized that the debt burdens of low-income countries are a major barrier to development, growth and poverty reduction.

"If there are problems with the HIPC process, it is critical that the G-7 countries take the lead in finding the solutions," the Minister said.

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