Get Hipc Returns

Low-income countries face huge economic challenges and financing needs. They rely on international institutions, including the IMF's Poverty Reduction and Growth Trust, for vital policy and financial support. Economically stronger countries have a responsibility to contribute to the funding of this support.

First, if you compare between different countries in the world, then you find that the gap between rich and poor countries has to a certain extent shrunk in recent times with the poorest countries in the world becoming quite a lot richer in the last 4 or 5 decades.

It provides debt relief and low-interest loans to cancel or reduce external debt repayments to sustainable levels, meaning they can repay debts in a timely fashion in the future. To be considered for the initiative, countries must face an unsustainable debt burden which cannot be managed with traditional means.

Larger debt-service payments can also inhibit growth by squeezing the public resources available for investment in infrastructure and human capital. Indeed, such nongovernmental organizations as Oxfam International see high external debt service as a key obstacle to meeting basic human needs in developing countries.

How does debt relief help poor countries and the poor? Debt relief is part of a larger effort to address the development needs of low-income countries. For debt reduction to have a tangible impact on poverty, the additional money needs to be spent on programs that benefit the poor.

The IMF and World Bank launched the Heavily Indebted Poor Countries (HIPC) Initiative in 1996 to ensure that no poor country faces an unmanageable debt burden.

The difference with HIPC consists of MDRI not covering all creditors, only IMF, IDA and AfDB.

Rich and Poor Countries Rich countries should not forgive poor countries all their debt since their poverty is not the responsibility of the rich countries, which when forgiven risk failing to use forgiven debts to revive their economies, but need to establish the underlying reasons for their poverty and fix them.