News Brief: IMF Welcomes Russia, Paris Club Understanding; Hopes for Early HIPC Decision on Mozambique

June 24, 1997

IMF Welcomes Russia, Paris Club Understanding; Hopes for Early HIPC Decision on Mozambique

Mr. Jack Boorman, Director of the IMF's Policy Development and Review Department, made the following statement after the approval by the IMF Executive Board of the second annual loan for Mozambique under the Enhanced Structural Adjustment Facility (ESAF--see Press Release No. 97/28):

"We welcome the understanding reached between Russia and the Chairman of the Paris Club, as reflected in the communiqué of the Denver Summit of the Eight. We hope this understanding will be approved by the Paris Club and allow the IMF Executive Board to make an early determination of Mozambique's eligibility for the HIPC Initiative."

Note to editors: The Heavily Indebted Poor Countries' (HIPC) Initiative is a framework adopted jointly by the IMF/World Bank for action to resolve the external debt problems of heavily indebted poor countries making strong efforts at adjustment and reform. Procedures adopted for implementing the Initiative require all relevant creditors and donors to coordinate their action in the context of a number of steps to be taken at various stages, as outlined below:

  • First stage: Paris Club creditors would provide a debt flow rescheduling under Naples terms along with comparable action by other bilateral and commercial creditors. Multilateral institutions and bilateral creditors and donors will continue to provide support under World Bank/IMF-supported adjustment programs. During the first stage, countries need to establish their first three-year track record of good performance.

  • Decision point: the point at which a HIPC completes its first (three-year) track record of good performance under World Bank/IMF-supported adjustment programs, and when, based on the debt sustainability analysis, a country's eligibility for the HIPC Initiative is determined and, for those deemed eligible, commitments of assistance are made.

  • Second Stage. For countries that are deemed eligible for support under the Initiative, the Paris Club--along with other bilateral and commercial creditors--will, on a case-by-case basis, provide flow rescheduling on more concessional terms involving a net present value reduction of up to 80 percent of eligible debt. The country would establish a further three-year track record of good performance under World Bank/IMF-supported programs, during which time some of the exceptional assistance committed by multilateral creditors could be provided in addition to the flow rescheduling on enhanced terms agreed with nonmultilateral creditors.

  • Completion Point: the point at which the country concerned completes a second three-year track record of good performance under World Bank/IMF-supported adjustment programs, at which time additional measures will be taken to assist the country to reach a sustainable level of debt.

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