World Bank to Cancel Debt of 17 Poorest Countries
WASHINGTON, DC, April 25, 2006 (ENS) – The World Bank has approved the Multilateral Debt Relief Initiative, clearing the path for cancellation of International Development Association (IDA) debt to some of the world’s poorest countries.
Starting on July 1, IDA is expected to provide more than US$37 billion in debt relief over 40 years.
“We have secured the total votes necessary to enact the Multilateral Debt Relief initiative,” said World Bank President Paul Wolfowitz. “Countries will now be able to put more resources into programs that directly help those who need it most - the poor who need better education, better health services and greater access to clean water, for example.”
At the July 2005 G8 Summit in Gleneagles, Scotland, G8 leaders pledged to cancel the debt of the world’s most indebted countries, most of which are located in Africa.
Debt cancellation will be provided by the International Development Association of the World Bank, the International Monetary Fund and the African Development Fund to countries that have graduated from the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Mauritania has completed the HIPC program, but will qualify for relief after implementing key public expenditure management reforms.
The remaining HIPC countries will be eligible for debt cancellation once they have completed the requirements of the HIPC Initiative.
Donors have agreed to a financing package that calls for additional donor contributions over time to ensure delivery of fresh resources for poverty reduction.
Compensatory financing over the duration of the cancelled loans will be based on strong indicative pledges already made, and donors are undertaking the necessary steps in their home countries to provide their financing commitments.
"Last year, donors generously pledged to double aid to Africa and substantially increase aid overall, with the promise to improve our coordination and effectiveness to deliver concrete results," said Wolfowitz. "In return, recipients committed to strengthening governance, accountability, and transparency in managing resources."
"When governance systems fail, service provision weakens, corruption increases, and growth is undermined," he said.
Wolfowitz emphasized prevention of corruption. "We need to focus on building policies and institutions that prevent corruption before it undermines development," he said. "Punishment after the fact can never keep pace with the human temptation for self-enrichment. Institutions and practices that prevent and deter are much more important for long-term success."
He called for opening the process to civil society is also a key ingredient. Parliamentarians, nongovernmental organizations, the media, and a wide range of other groups must have access to information in order to be able to track funds and hold officials accountable, he said.