The attached reports [Progress Report on Poverty Reduction Strategy Papers (PRSPs) and HIPC Initiative - A Progress Report] summarize the progress we have made in these closely linked efforts since the Annual Meetings. When Ministers endorsed the enhanced Heavily Indebted Poor County (HIPC) Initiative in the fall, we all emphasized that faster, deeper and broader debt relief should be linked to poverty reduction. To achieve faster growth and poverty reduction, we proposed the Poverty Reduction Strategy Paper (PRSP), a country-owned action plan, developed through a participatory process, in which poverty-reducing measures are integrated into a coherent, growth-oriented macroeconomic framework. We linked debt relief under the HIPC Initiative and access to concessional lending by the Bank and the Fund to the preparation and implementation of such poverty reduction strategies.

We recognized then the inevitable tension between the delivery of debt relief and the pace at which effective, country-owned poverty reduction strategies can be prepared in a participatory process. To reduce this tension, as a transitional measure, our Boards have agreed that an interim PRSP will be sufficient for a country to reach the decision point and that the timing of the completion point for retroactive cases (which had already reached their decision points under the original Initiative) can be decided on a case-by-case basis, taking into account the overall progress in poverty reduction and economic performance and the preparation of PRSPs. The five country cases which have already reached their decision points under the enhanced HIPC Initiative reflect the application of the above framework.

Achieving our ambitious timetable for debt relief will require, first and foremost, continued progress by the HIPC countries themselves in implementing reforms needed for sustained growth and poverty reduction. It will also require close coordination among the partners involved. For our part, we must continue to do everything in our power to implement the Initiative as speedily as possible. To this end, we have established a joint implementation committee (JIC) to ensure the smooth implementation of both the HIPC Initiative and the PRSP process. The JIC will provide regular updates and informal briefings to the Boards on the timetable for implementation of country cases and will coordinate Bank and Fund implementation of this process.

We need your full support to ensure that all the elements of this initiative are implemented: effective poverty reduction strategies prepared and implemented by low-income countries through a participatory process; additional funding to finance the enhanced HIPC Initiative; the full participation of all creditors in the HIPC Initiative; and the full involvement and participation of bilateral and multilateral agencies in the PRSP process at the country level.

James D. Wolfensohn                     Stanley Fischer