Ministers want more participation of bilateral, multi-nationals in HIPC initiative
Accra, March 18, GNA - The Commonwealth HIPC Ministerial Forum has expressed concern at the lukewarm attitude of a number of non-Paris Club bilateral, smaller multilateral and commercial creditors in the HIPC Initiative.
Contributors at the Forum therefore stressed the need for targeted collective diplomatic initiatives to bring such countries and creditors on board to boost donor support to write off intra-HIPC debts. This would also lead to the expansion of the funding of the HIPC Trust Fund to ensure full participation of all multilateral creditors, they said at the end of a two-day meeting held in Maputo, Mozambique on March 16.
The Forum, which was attended by a number of African countries, the United Kingdom, United Nations, International Monetary Fund IMF), World Bank and multilateral organisations reviewed developments in the world economy as their impacted on HIPC.
The Forum assessed the progress being made in implementing the HIPC Initiative, including the proposals for deeper and wider debt-relief and ensuring long-term debt sustainability.
A statement on the Forum, received by the GNA in Accra on Friday, said the Ministers also discussed high domestic debt burden and revisited the issue of public-private partnerships to promote infrastructure investment and service delivery in post-conflict countries.
The Ministers noted that 15 countries had reached their completion points and expressed the hope that the remaining 12 countries, which were at the decision, point would reach their completion points as soon as possible.
The Ministers noted, however, that some of the HIPC initiatives had "slipped through" the envisaged completion point dates leading to suspension of the delivery of the HIPC debt relief from multilateral creditors.
This, they said, had created severe budgetary constraints, which had undermined financing of poverty reduction programmes. "Ministers also remained concerned about the challenges faced by the 11 potentially eligible HIPCs in starting the HIPC process in the time available within the new sunset clause.
"Many of these countries were mired in conflict, had considerable arrears and limited relations with the (IMF)."
The Ministers underlined the need for the abolition of the sunset clause to ensure that all deserving HIPCs and other potentially eligible countries received adequate HIPC debt relief.
The Forum said it was pleased to note that most Paris Club creditors had gone beyond the HIPC Initiative and provided 100 per cent relief on all pre-cut-off debt claims and a significant number also on post-cut-off claims.
The Ministers called on those Paris Club creditors, which had not provided 100 per cent relief on all past claims to do so rapidly. On domestic debt, the Ministers noted that domestic debt financing burden in the HIPC initiatives remained high because of the relatively high interest service payments and short maturity structure. Moreover, the scope for expanding domestic debt was complicated by their shallow financial depth and narrow investor base.
"They (Ministers) were particularly concerned that in some countries domestic debt and debt servicing was emerging as a major problem.
"They noted that this was partly a result of the increased Poverty Reduction Strategy Programme poverty related expenditure commitments and the volatility and shortfalls in aid flows, which had necessitated an increase in domestic borrowing and/or arrears to domestic suppliers." The Ministers said they recognised that the key for dealing with the high domestic debt service burden lay in reducing the high cost of domestic borrowing and extending the short maturities of existing debt. This implied the need to maintain a low inflationary environment to ensure that both nominal and real interest rates remained low. The Ministers emphasised that donors should play a critical role in reducing the domestic debt stock where it was high, especially in clearing arrears and reducing the stock of treasury bills.
They also stressed the importance of donor assistance for financial sector development that can help the HIPC initiatives lengthen the maturity structure of their debt and broaden the investor base. "Ministers reiterated their concern that the burden of domestic debt was curtailing development prospects in a manner that could undermine political stability..."
They repeated their call on the Commonwealth to play a leading role in advocacy for a comprehensive approach to address the domestic debt problem within the context of the new debt sustainability framework.