Press Release No. 02/1997

Sixth Session of Conference of African Finance Ministers to Examine World Bank and IMF's Highly Indebted Poor Countries (HIPC) Initiative

Addis Ababa, 21 March 1997: With only 9 countries out of 51 for which data is available classified by the World Bank as relatively free of external debt problems, and 32 as severely indebted, the Conference of African Ministers of Finance -- organised by the UN ECA and due to be held between 31 March and 2 April 1997 -- could ill-afford not to revisit Africa's perennial agenda item.

This time, a brief review of Africa's debt profile and the traditional debt relief mechanisms will be followed by a focus on the World Bank and IMF's Highly Indebted Poor Countries Initiative (HIPC).

The profile makes glum reading. Growing unabatedly since 1982, Africa's total external debt outstanding and disbursed has grown to roughly 311 billions by 1995. Nor has the international strategy to deal with the problem been sustainably successful.

During the period January 1980 - December 1995, 22 African countries renegotiated their commercial bank debt a total of 58 times. In the same period 35 renegotiated their external debt to official creditors in the Paris Club a total of 151 times. Some have undertaken 11 reschedulings with the Paris Club with no relief in sight.

Unveiled in September 1996, the HIPC Initiative targets 41 of the most highly indebted countries in the World, 33 of which are in Africa. However, on the basis of preliminary analysis of external debt sustainability only 16 of these are potentially eligible. The external debt situation of the remaining 17 was found to be either "sustainable" or "not yet determined".

African countries and the rest of the international community warmly received the Initiative if only because for the first time in the history of debt management, multilateral debt is on the agenda in much the same way as commercial debt and official debt.

African countries have voiced some concerns over a number of issues at the head of which are the eligibility criteria: the ranges of debt-to-exports and debt-service-to-exports preclude some deserving countries from qualifying for the Initiative.

Some other issues of concern:
- performance criteria under the Initiative's mandatory adjustment programmes may be too stringent;
- treatment of the fiscal burden of debt service and the ability of African countries to control fiscal deficits may not have been given due attention; - weight given to exogenous factors and vulnerability issues will play a key role in the debt sustainability analysis.

The African response is critical. Ministers will examine what steps have been taken in the past to complement international debt strategies to the mutual benefit of both creditors and debtors.
Among those are the optimal utilization of debt mechanisms so as to redirect scarce financial resources presently used to service external debt. The principle of debt conversion has been fully endorsed by the UN General Assembly and has been successfully utilized to retire billions of dollars in external debt in the interest of developing countries.

NB: This press release, as well as detailed background documents, other briefings for journalists, the experts meeting and conference agendas, country profiles and updates of information, can also be read at the following Web Site: http://www.un.org/depts/eca