dy. Even if all the external debts of these countries were forgiven, most would still depend on significant levels of concessional external assistance; their receipts of such assistance have been much larger than their debt-service payments for many years.So, why was the HIPC Initiative created? It has been well recognized that the external debt situation for a number of low-income countries, mostly in Africa, has become extremely difficult. For these countries, even full use of traditional mechanisms of rescheduling and debt reduction – together with continued provision of concessional financing and pursuit of sound economic policies – may not be sufficient to attain sustainable external debt levels within a reasonable period of time and without additional external support. In September 1996, the IMF and the World Bank launched a program to address this situation. The HIPC Initiative is designed to provide exceptional assistance to eligible countries following sound economic policies to help them reduce their external debt burden to sustainable levels. Since 1996, the HIPC Initiative has had several successes in its development. A total of 23 countries reached their decision point under the enhanced HIPC Initiative by September 2001. The decision point is the phase in the Initiative process where a debt sustainability analysis will be carried out to determine the current external debt situation of the country. A total of $20.7 billion of debt relief in net present value terms ($33.9 billion in nominal debt service relief) has been committed to the 23 decision point countries under the HIPC Initiative. Combined with traditional debt relief and likely additional bilateral debt forgiveness, the HIPC Initiative will reduce the debt stock of the 23 countries by almost two-thirds from $54 billion in net present value terms to roughly $20 billion (International Monetary Fund, 2000).Despite these optimistic progressions, ...
