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Fighting poverty

Successful debt relief

by Jürgen Zattler

In brief

New industry: team leader and operator in a Senegalese call centre in 2004.

New industry: team leader and operator in a Senegalese call centre in 2004.

In 1999, the G8 summit in Cologne launched multilateral debt relief in the HIPC initiative. The acronym stood for “highly-indebted poor countries”. The approach for reaching consensus with developing countries proved successful and has been adopted in subsequent policy initiatives as well.

Thirty-six countries, of which 30 are African, benefited from the HIPC initiative. Their debt situation improved substantially. They also made solid progress in economic and social terms. About 75 % of the economies concerned grew continuously for at least 10 years. Some diversified, with new industries emerging. That happened in Rwanda, Ghana, Ethiopia and Senegal for example. Statistics on health and educational performance improved fast.

The way the initiative was designed made the difference. The countries concerned had to draft “poverty reduction strategy papers” (PRSPs). The term itself proves they were not just about improving short-term competitiveness on world markets. The focus was now on issues that earlier structural-adjustment programmes had largely ignored.

PRSP implementation was monitored regularly. IMF, World Bank and other international donors made further support dependent on PRSP performance. A particular incentive for governments was that considerable debt-relief would be the reward for full implementation. It turned out, moreover, that the PRSPs were a good basis for ongoing debate between donors and recipient governments, ensuring that donor support was aligned to national exigencies. Another strong point was the long-term outlook. The development of institutional capacities was a core objective. (jz)

 

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