Other Debt Initiatives
The UK's Multilateral Debt Relief Initiative
Most major bilateral donors, including the UK, go beyond HIPC and provide 100% relief to countries under the HIPC Initiative, but until recently multilateral institutions were providing relief at only around half this level. In September 2004, the UK agreed to pay its share (10%) of debt service payments owed to the concessional lending arms of the World Bank (IDA) and African Development Bank (AfDB) on behalf of all post-Completion Point HIPCs and all other low-income, IDA-only countries with suitably strong public expenditure management systems. Currently, the presence of a World Bank PRSC or PRSO is taken to be a proxy measure of commitment to poverty reduction and robust public financial management.
Twelve non-HIPCs currently qualify for UK MDRI: Armenia, Bhutan, Cape Verde, Georgia, Lesotho, Moldova, Mongolia, Nepal, Samoa, Sri Lanka, Vanuatu and Vietnam.
For HIPCs, the UK MDRI has been superseded by the G8's debt deal. Non-HIPC countries (which will not benefit from the G8 MDRI) will continue to receive this assistance through to 2015 except in most extreme circumstances, e.g. instigation of conflict or breaking international obligations on human rights.
In the 2007 financial year around £12 million was disbursed under UK MDRI. In 2008 four new countries (Bhutan, Lesotho, Samoa and Vanuatu) joined the initiative.
Commonwealth Debt Initiative
The Commonwealth Debt Initiative (CDI) was launched in September 1997, as part of the Chancellor's Mauritius Mandate (which also covered speeding up HIPC implementation and restricting export credit to productive expenditure).
The Government had already cancelled aid debts of the poorest countries under its Retrospective Terms Adjustment (RTA) policy, and agreed that it would cancel the remaining aid debts of the "poorer" (lower middle-income) Commonwealth countries committed to poverty reduction. The Initiative covers Commonwealth countries with a GNI of less than US$3,115 and small island middle-income Commonwealth countries.
Countries are assessed on their progress in the areas of poverty reduction, economic management and good government. The assessment may recommend that debt is written off in perpetuity, written off on an annual basis, or refused. Most CDI eligible countries are Caribbean countries and many of these have already had their debt written off in perpetuity (e.g. St Vincent and the Grenadines, and Dominica). For others, in particular Jamaica and Belize, the case for debt relief is reviewed annually against performance under the three criteria listed above.
To date 12 countries have benefited from this initiative:
- Barbados
- Belize
- Dominica
- Grenada
- Jamaica
- Mauritius
- Solomon Islands
- St Kitts & Nevis
- St Lucia
- St Vincent and the Grenadines
- Tonga, and
- Turks & Caicos Islands.
Antigua received special treatment of its debt, as part of a wider package of aid agreed in light of its assistance to the refugees from Montserrat following the volcanic eruptions. Partial debt cancellation of £1.25 million was agreed in February 1998.
Commonwealth Development Corporation Loans
In 1999, a portfolio of loans to public sector and parastatal bodies previously held by the Commonwealth Development Corporation (CDC) were transferred to DFID following CDC's part privatisation. CDC undertook to mirror the Secretary of State's commitments with respect to international debt relief operations. For low-income HIPC countries, repayments are suspended when countries qualify for the HIPC Initiative, and are written off once they complete the HIPC process. The most recent country to benefit from this was Cameroon, which received over £50 million worth of CDC debt stock write off after it completed the HIPC Initiative on 1 May 2006.
Last updated: 10 November 2008
