Debt Initiative for the Heavily Indebted Poor Countries (HIPCs)
A Factsheet

Debt Relief for Poor Countries (HIPC): What Has Been Achieved? Country Documents

(HIPC) Debt Initiative
Other Documents


International Monetary Fund
International Development Association

The Impact of Debt Reduction under the HIPC Initiative on External Debt Service and Social Expenditures

September 10, 2001

As of end-August 2001, 23 countries had reached their decision points under the enhanced HIPC Initiative. At the decision point, the international community begins to reduce debt service payments owed by qualifying countries. At the same time, it commits to comprehensive debt reduction once the country has introduced certain policies aimed at ensuring that the funds released by debt relief are effectively used for poverty reduction.


Some observers have questioned whether the debt relief provided under the enhanced HIPC Initiative is sufficient to make a meaningful contribution to poverty reduction. The World Bank and IMF compile relevant information at the time each country reaches its decision point. With a rising number of decision point countries, enough data is becoming available to make some general observations. The attached tables, which will be updated as more countries reach their decision points, present available country data on external debt service and social spending before and after HIPC relief.

Key features of the data

For the 22 countries that reached decision points under the enhanced framework in 2000, interim debt relief was only partially received during that year, as most of them reached their decision points during the second half of the year. For these countries, the impact of the enhanced Initiative will be fully reflected from 2001 onwards. For Chad, which reached its decision point in May 2001, the full benefits of the Initiative are evident from 2002 onwards.

  • Under the enhanced HIPC Initiative, the average debt service due in 2001-03 is roughly 30 percent less than the amount paid before HIPC relief in 1998-99.

  • During 2001-03, the World Bank and IMF will reduce debt service payments by 65 and 55 percent, respectively, by providing interim relief.

  • Debt service drops sharply in relation to exports or fiscal revenues over this period. On average these ratios fall by one-half—see Chart A.

  • In all cases, social expenditures are expected to increase in 2001-02 from the levels in 1999. Average social spending in 2001-02 is expected to be more than 40 percent higher than in 1999, with HIPC savings accounting for a sizable proportion of this increase.

  • Average debt service during 2001-02 will be US$1.9 billion; average social expenditure, at about US$5.9 billion, will be more than three times higher than average debt service.

  • Average net resource flows (loans + grants - debt service payable) to this group of countries will increase from US$3.7 billion in 1998-99 (1.4 times debt service) to US$6.7 billion (3.4 times debt service) in 2001-2003.

On the whole, assistance from the HIPC Initiative is expected to result in substantial reductions in debt service, which will open new possibilities for effective poverty reduction and continued economic growth.

Sources and coverage

Most of the data used has come from the decision point documents considered by the Executive Boards of the IMF and the World Bank in deciding to grant HIPC relief, as noted below. The data presented are the best available, considering that the Initiative is targeted at some of the poorest countries, where the statistical systems have many limitations. What is more, the coverage of data on social spending and poverty varies considerably across countries.

IMF and World Bank staff have assembled the attached tables on the following basis:

  • Debt service for 1998-2005 (Tables 1 and 3; and Chart A): The data for 2000 onwards are based on the decision point documents for the 23 HIPCs that had reached their decision points under the enhanced HIPC Initiative as of end-June 2001. Where necessary data for debt service paid during 1999-98 is supplemented by other IMF and World Bank country documents.

  • Social expenditures for 1999-2002 (Tables 2 and 4; and Chart B): Figures are mainly based on the decision point documents. In the case of Cameroon, data compiled by the staff teams at the time of the decision point are used because there is only partial information in the decision point document.

The coverage of social expenditure data is quite different across countries. In principle, all of the social spending numbers include health and education spending. In addition, social expenditure data includes new programs to be financed partly by HIPC Initiative assistance in Benin, basic sanitary infrastructure in Bolivia, rural development and water supply in Burkina Faso, social affairs in Chad, de-mining and rural development in Guinea-Bissau, funding for the Social Impact Amelioration Program and Basic Needs Trust Fund in Guyana, social safety net and rural development programs in Honduras, poverty reduction programs in Mauritania, other spending including promotion of women in Senegal, water supply in both Tanzania and Uganda, and social safety nets, water and sanitation and disaster relief in Zambia.

Local currency figures are converted into U.S. dollars using relevant period average exchange rates.

Debt service ratios after HIPC debt relief for 23 Decision Point Countries

Social Spending and Debt Service Due after HIPC Releif for 23 Decision Point Countries

Table 1: Summary Debt Service for 23 HIPCs that Reached Decision Points by end-2000
(In million of US dollars, unless otherwise indicated)
  1998 1999 2000 2001 2002 2003 2004 2005
African Countries                
Debt service paid1 1,998 1,849 967          
Total debt service due after enhanced HIPC Initiative relief2     697 1,315 1,298 1,334 1,555 1,501
Ratio of debt service to exports (in percent)3 16.3 14.9 12.6 9.0 7.9 7.5 8.1 7.0
Ratio of debt service to government revenue (in percent)3 25.1 22.0 18.3 12.8 11.3 10.5 11.0 9.7
Ratio of debt service to GDP (in percent)3 3.4 3.2 2.8 2.0 1.8 1.7 1.9 1.6
                 
Latin American Countries                
Debt service paid1 1,030 670 126          
Total debt service due after enhanced HIPC Initiative relief2     627 523 670 701 646 693
Ratio of debt service to exports (in percent)3 19.2 13.2 13.1 8.2 9.4 8.8 7.4 7.2
Ratio of debt service to government revenue (in percent)3 27.8 17.8 19.2 12.2 14.4 13.7 11.6 11.3
Ratio of debt service to GDP (in percent)3 6.2 4.0 4.4 2.9 3.5 3.4 3.0 3.0
                 
Total (23 countries)                
Debt service paid1 3,027 2,518 1,093          
Debt service due after enhanced HIPC Initiative relief2     1,323 1,838 1,968 2,035 2,201 2,194
                 
Weighted average (23 countries)4                
Debt service/exports (in percent) 17.2 14.4 12.1 8.7 8.4 7.9 7.9 7.1
Ratio of debt service to government revenue (in percent) 25.9 20.7 17.6 12.6 12.2 11.4 11.2 10.1
Debt service/GDP (in percent) 4.0 3.3 3.0 2.2 2.2 2.1 2.1 1.9
Sources: HIPC country documents; and World Bank and IMF staff estimates.
1 The debt service figures for 2000 include only those countries that did not reach their decision point until late in 2000 or later. The figures are largely pre-HIPC relief, as these countries received little or no HIPC assistance during the year. The full impact of relief for these countries will not be felt until 2001 and thereafter. See Table 2 for a detailed breakdown.
2The debt service figures for 2000 include only those countries that reach their decision points early that year. See Table 2 for a detailed breakdown.
3Weighted averages.
4The averages for 2000 are largely pre-HIPC as 12 of the 23 countries did not reach their decision point until December 2000 or later. See Table 2 for a detailed breakdown.
Note: Debt service figures for 1998 and 1999 reflect debt relief already provided to Bolivia, Guyana, Mozambique and Uganda under the original framework.

Table 2. Debt Service for Individual HIPCs that Reached Decision Points,
by Country, 1998-2005
(In million of US dollars, unless otherwise indicated)
  1998 1999 2000 2001 2002 2003 2004 2005
Benin                
Debt service paid 64 66            
Debt service due after enhanced HIPC Initiative relief1     63 46 43 39 39 37
Debt service/exports (in percent) 16 17 17 11 9 8 7 6
Debt service/government revenue (in percent) 17 18 12 10 8 7 6 5
Debt service/GDP (in percent) 3 3 3 2 1 1 1 1
Bolivia                
Debt service paid 390 250            
Debt service due after enhanced HIPC Initiative relief1     260 225 238 234 235 266
Debt service/exports (in percent) 29 20 18 14 14 12 11 12
Debt service/government revenue (in percent) 19 13 14 11 12 11 10 10
Debt service/GDP (in percent) 5 3 3 3 3 2 2 2
Burkina Faso                
Debt service paid 60 53            
Debt service due after enhanced HIPC Initiative relief1     34 30 35 38 40 41
Debt service/exports (in percent) 16 18 12 9 10 9 9 8
Debt service/government revenue (in percent) 18 14 9 7 7 7 7 6
Debt service/GDP (in percent) 2 2 1 1 1 1 1 1
Cameroon2                
Debt service paid3 401 401 312          
Debt service due after enhanced HIPC Initiative relief1       226 242 291 328 347
Debt service/exports (in percent) 18 15 11 8 8 9 9 9
Debt service/government revenue (in percent) 28 24 18 12 12 13 13 12
Debt service/GDP (in percent) 4 4 3 2 2 3 3 3
Chad                
Debt service paid4 38 39 33          
Debt service due after enhanced HIPC Initiative relief1       22 25 25 32 36
Debt service/exports (in percent) 12 16 14 9 9 9 8 2
Debt service/government revenue (in percent) 29 31 29 16 16 14 15 11
Debt service/GDP (in percent) 2 3 2 1 1 1 2 1
Gambia, The                
Debt service paid3 26 16 20          
Debt service due after enhanced HIPC Initiative relief1       16 15 8 9 10
Debt service/exports (in percent) 12 13 16 11 10 5 5 5
Debt service/government revenue (in percent) 12 20 23 17 15 8 8 9
Debt service/GDP (in percent) 6 4 5 4 3 2 2 2
Guinea                
Debt service paid3 128 108 140          
Debt service due after enhanced HIPC Initiative relief1       78 90 99 92 88
Debt service/exports (in percent) 15 14 16 8 9 9 8 7
Debt service/government revenue (in percent) 34 28 39 18 18 18 15 12
Debt service/GDP (in percent) 4 4 5 3 3 3 3 2
Guinea-Bissau                
Debt service paid3 7 6 13          
Debt service due after enhanced HIPC Initiative relief1       5 6 8 5 4
Debt service/exports (in percent) 23 11 18 6 7 8 4 3
Debt service/government revenue (in percent) 63 15 32 11 12 13 7 5
Debt service/GDP (in percent) 3 3 6 2 2 2 2 1
Guyana                
Debt service paid3 131 70            
Debt service due after enhanced HIPC Initiative relief1     74 48 34 39 42 43
Debt service/exports (in percent) 19 10 10 6 4 5 5 5
Debt service/government revenue (in percent) 65 32 31 19 13 13 14 13
Debt service/GDP (in percent) 18 10 10 6 5 5 5 5
Honduras                
Debt service paid 311 241            
Debt service due after enhanced HIPC Initiative relief1     167 134 210 276 247 258
Debt service/exports (in percent) 13 10 6 4 6 7 6 5
Debt service/government revenue (in percent) 32 23 15 10 14 16 13 12
Debt service/GDP (in percent) 6 4 3 2 3 4 3 3
Madagascar5                
Debt service paid3 166 106 105          
Debt service due after enhanced HIPC Initiative relief1       64 56 68 79 82
Debt service/exports (in percent) 21 12 11 6 5 5 6 5
Debt service/government revenue (in percent) 42 25 21 12 9 10 10 9
Debt service/GDP (in percent) 4 3 3 2 1 1 1 1
Malawi                
Debt service paid3 90 87 110          
Debt service due after enhanced HIPC Initiative relief1       59 57 45 45 47
Debt service/exports (in percent) 16 18 23 12 11 8 8 8
Debt service/government revenue (in percent) 22 30 31 13 11 8 7 6
Debt service/GDP (in percent) 5 5 6 4 3 2 2 2
Mali                
Debt service paid 74 84            
Debt service due after enhanced HIPC Initiative relief1     88 64 64 66 67 66
Debt service/exports (in percent) 11 13 14 9 8 8 7 7
Debt service/government revenue (in percent) 17 18 20 13 12 11 10 9
Debt service/GDP (in percent) 3 3 3 2 2 2 2 2
Mauritania                
Debt service paid 88 98            
Debt service due after enhanced HIPC Initiative relief1     87 80 58 49 43 43
Debt service/exports (in percent) 22 24 20 18 13 10 8 8
Debt service/government revenue (in percent) 35 35 22 20 14 10 8 8
Debt service/GDP (in percent) 10 10 9 9 6 4 3 3
Mozambique                
Debt service paid 104 81            
Debt service due after enhanced HIPC Initiative relief1     50 48 51 54 55 60
Debt service/exports (in percent) 19 14 9 6 4 4 4 4
Debt service/government revenue (in percent) 23 17 9 8 7 7 6 6
Debt service/GDP (in percent) 3 2 1 1 1 1 1 1
Nicaragua                
Debt service paid3 198 108 126        
Debt service due after enhanced HIPC Initiative relief1 6       117 188 153 123 127
Debt service/exports (in percent) 24 13 13 11 17 12 9 9
Debt service/government revenue (in percent) 37 19 20 16 26 21 13 12
Debt service/GDP (in percent) 9 5 6 5 7 5 4 4
Niger                
Debt service paid3 27 28 20          
Debt service due after enhanced HIPC Initiative relief1       49 49 26 29 29
Debt service/exports (in percent) 7 9 8 18 17 8 9 8
Debt service/government revenue (in percent) 15 16 13 27 24 11 11 10
Debt service/GDP (in percent) 1 1 1 2 2 1 1 1
Rwanda                
Debt service paid3 14 21 40          
Debt service due after enhanced HIPC Initiative relief1       16 13 8 11 11
Debt service/exports (in percent) 13 19 31 11 8 4 5 4
Debt service/government revenue (in percent) 7 11 21 8 6 3 4 3
Debt service/GDP (in percent) 1 1 2 1 1 0 0 0
São Tomé and Príncipe                
Debt service paid3 7 8 6          
Debt service due after enhanced HIPC Initiative relief1       2 1 1 1 1
Debt service/exports (in percent) 55 24 24 10 6 6 4 3
Debt service/government revenue (in percent) 84 44 41 17 10 10 6 6
Debt service/GDP (in percent) 16 17 13 4 3 2 2 2
Senegal                
Debt service paid 222 219            
Debt service due after enhanced HIPC Initiative relief1     173 159 145 143 225 134
Debt service/exports (in percent) 14 15 10 8 7 7 10 5
Debt service/government revenue (in percent) 27 28 19 16 14 12 18 10
Debt service/GDP (in percent) 5 5 3 3 2 2 3 2
Tanzania2                
Debt service paid 224 193            
Debt service due after enhanced HIPC Initiative relief1     154 142 144 148 152 158
Debt service/exports (in percent) 21 16 12 10 8 8 7 7
Debt service/government revenue (in percent) 29 20 15 12 11 11 10 9
Debt service/GDP (in percent) 3 2 2 1 1 1 1 1
Uganda2                
Debt service paid 110 98            
Debt service due after enhanced HIPC Initiative relief1     48 51 56 68 94 103
Debt service/exports (in percent) 15 12 11 6 6 6 6 8
Debt service/government revenue (in percent) 16 13 11 6 5 5 5 6
Debt service/GDP (in percent) 2 2 1 1 1 1 1 1
Zambia                
Debt service paid3 147 136 169          
Debt service due after enhanced HIPC Initiative relief1       158 148 151 211 202
Debt service/exports (in percent) 16 16 16 13 10 10 13 12
Debt service/government revenue (in percent) 24 25 26 25 21 20 27 24
Debt service/GDP (in percent) 5 4 5 5 4 4 5 4
Total debt service paid7 3,027 2,518 1,093          
Total debt service due1     1,197 1,838 1,968 2,035 2,201 2,194
Ratio of debt service to exports (in percent)                
Simple average 19 15 14 10 9 8 7 7
Weighted average 17 14 12 9 8 8 8 7
Ratio of debt service to government revenue (in percent)                
Simple average 30 23 21 14 13 11 10 9
Weighted average 26 21 18 13 12 11 11 10
Ratio of debt service to GDP (in percent)                
Simple average 5 4 4 3 3 2 2 2
Weighted average 4 3 3 2 2 2 2 2
Sources: HIPC country documents; and World Bank and IMF staff estimates.
1Debt service due after the full use of traditional debt relief mechanism and assistance under the enhanced HIPC initiative.
2On fiscal year basis, i.e. 2000 column shows FY 2000/2001.
3The debt service figure for 2000 largely reflects pre-HIPC relief debt service because these countries did not reach their decision point until late in 2000. Thus, the full impact of relief for these countries will not be felt until 2001 and thereafter.
4Debt service for 2000 is pre-HIPC, as Chad reached its decision point in May 2001.
5The assistance for Madagascar is indicative and subject to change. Following the Bank's Board meeting, staff were informed that the Madagasy authorities and Paris Club creditors would need to revisit the outstanding bilateral debt numbers. Also, minor adjustments need to be incorporated in the case of three multilateral creditors. Consequently, the IMF Board approved US$790 million in HIPC assistance, with the understanding that Madagascar's total HIPC assistance will be determined as a result of the expected revisions mentioned above.
6Debt service due in 2002/03 reflects a hypothetical assumption that arrears to non-Paris Club creditors (about US$2 billion) would be regularized and serviced. It also reflects the resumption of payments to the Paris Club creditors that had provided a total deferral of debt service in the wake of Hurricane Mitch in 1998.
7Debt service for 2000 is largely pre-HIPC, as 12 of the 23 countries did not reach their decision point until December 2000 or later. See footnotes 3 and 4.
Note: Debt service figures for 1998 and 1999 reflect debt relief already provided to Bolivia, Guyana, Mozambique, and Uganda under the original framework.

Table 3. Social Expenditure by the 23 Countries that Reached Decision Points1
  1999 2000 2001 2002
  (In millions of US dollars)
Social expenditure        
African Countries 2,515 2,747 3,266 3,663
Latin American Countries 1,625 2,031 2,274 2,638
Total 4,140 4,778 5,540 6,302
   
  (In percent)
Ratio of social expenditure to government revenue2        
African Countries 29.9 30.2 31.7 31.9
Latin American Countries 43.2 51.7 53.0 56.6
Total 34.0 36.7 38.0 39.0
         
Ratio of social expenditure to GDP2        
African Countries 4.3 4.6 5.1 5.2
Latin American Countries 9.6 11.8 12.6 13.8
Total 5.5 6.2 6.7 7.1
Sources: HIPC country documents; and World Bank and IMF staff estimates.
1For the six countries where no data is available for 2002 (Benin, Bolivia, Guinea, Senegal, Uganda and Zambia), social expenditure has been assumed to remain unchanged as a percentage of GDP from the previous year.
2Weighted averages.

Table 4. Social Expenditure for Individual HIPCs that Reached Decision Points,
by Country1
(In millions of US dollars)
  1999 2000 2001 2002
Benin        
Social Expenditure 115 148 195 2142
Social Expenditure/Government Revenue (in percent) 31 36 39 39  
Social Expenditure/GDP (in percent) 5 6 7 7  
Burkina Faso        
Social Expenditure 141 142 165 192  
Social Expenditure/Government Revenue (in percent) 36 37 39 40  
Social Expenditure/GDP (in percent) 5 5 6 6  
Bolivia        
Social Expenditure 839 872 941 1,0862
Social Expenditure/Government Revenue (in percent) 43 46 47 52  
Social Expenditure/GDP (in percent) 10 10 11 12  
Cameroon        
Social Expenditure 264 316 389 451  
Social Expenditure/Government Revenue (in percent) 16 18 21 22  
Social Expenditure/GDP (in percent) 3 3 4 4  
Chad        
Social Expenditure 63 65 75 87  
Social Expenditure/Government Revenue (in percent) 50 58 54 56  
Social Expenditure/GDP (in percent) 5 5 5 5  
The Gambia        
Social Expenditure 23 26 30 34  
Social Expenditure/Government Revenue (in percent) 29 30 33 35  
Social Expenditure/GDP (in percent) 5 6 7 7  
Guinea        
Social Expenditure 101 105 109 1202
Social Expenditure/Government Revenue (in percent) 26 30 29 29  
Social Expenditure/GDP (in percent) 4 3 3 3  
Guinea-Bissau        
Social Expenditure 26 30 42 47  
Social Expenditure/Government Revenue (in percent) 66 74 89 87  
Social Expenditure/GDP (in percent) 12 13 17 16  
Guyana      
Social Expenditure 77 101 106 114  
Social Expenditure/Government Revenue (in percent) 35 42 42 42  
Social Expenditure/GDP (in percent) 11 14 14 15  
Honduras        
Social Expenditure 442 685 721 844  
Social Expenditure/Government Revenue (in percent) 42 60 54 55  
Social Expenditure/GDP (in percent) 8 12 12 13  
Madagascar        
Social Expenditure 156 188 223 277  
Social Expenditure/Government Revenue (in percent) 37 38 41 45  
Social Expenditure/GDP (in percent) 4 5 5 6  
Malawi        
Social Expenditure 99 118 143 161  
Social Expenditure/Government Revenue (in percent) 34 33 32 32  
Social Expenditure/GDP (in percent) 5 7 9 10  
Mali        
Social Expenditure 83 98 115 126  
Social Expenditure/Government Revenue (in percent) 18 22 24 23  
Social Expenditure/GDP (in percent) 3 4 4 4  
Mauritania        
Social Expenditure 85 97 111 121  
Social Expenditure/Government Revenue (in percent) 30 34 37 38  
Social Expenditure/GDP (in percent) 8 8 9 9  
Mozambique        
Social Expenditure 158 161 173 203  
Social Expenditure/Government Revenue (in percent) 32 30 29 30  
Social Expenditure/GDP (in percent) 4 4 4 4  
Nicaragua        
Social Expenditure 267 374 506 594  
Social Expenditure/Government Revenue (in percent) 47 59 71 83  
Social Expenditure/GDP (in percent) 12 15 19 20  
Niger        
Social Expenditure 99 85 112 132  
Social Expenditure/Government Revenue (in percent) 58 55 62 64  
Social Expenditure/GDP (in percent) 5 4 6 6  
Rwanda        
Social Expenditure 75 73 89 108  
Social Expenditure/Government Revenue (in percent) 40 39 45 47  
Social Expenditure/GDP (in percent) 4 4 5 6  
São Tomé and Príncipe        
Social Expenditure 8 8 9 12  
Social Expenditure/Government Revenue (in percent) 93 77 76 86  
Social Expenditure/GDP (in percent) 17 17 20 22  
Senegal        
Social Expenditure 257 258 277 3012
Social Expenditure/Government Revenue (in percent) 33 29 29 28  
Social Expenditure/GDP (in percent) 6 5 5 5  
Tanzania        
Social Expenditure 289 327 361 379  
Social Expenditure/Government Revenue (in percent) 30 31 30 30  
Social Expenditure/GDP (in percent) 3 4 4 4  
Uganda        
Social Expenditure 306 349 400 4362
Social Expenditure/Government Revenue (in percent) 40 39 39 36  
Social Expenditure/GDP (in percent) 5 6 6 6  
Zambia        
Social Expenditure 167 152 248 2632
Social Expenditure/Government Revenue (in percent) 30 24 39 38  
Social Expenditure/GDP (in percent) 5 5 7 7  
Total social expenditure 4,140 4,778 5,540 6,302  
Ratio of social expenditure to government revenue
Simple average 39 41 44 45  
Weighted average 34 37 38 39  
Ratio of social expenditure to GDP
Simple average 7 7 8 9  
Weighted average 5 6 7 7  
Sources: HIPC country documents; and staff estimates.
1The figures for 2000 for Cameroon, Chad, The Gambia, Guinea, Guinea-Bissau, Guyana, Madagascar, Malawi, Mauritania, Nicaragua, Niger, Rwanda, Sao Tome and Principe, and Zambia largely reflect social expenditure before HIPC relief in 2000 because these countries did not reach their decision point until late 2000 or later (Chad). Thus, the full impact of relief for these countries will not be felt until 2001 (or 2002, for Chad).
2For the six countries where no data is available for 2002 (Benin, Bolivia, Guinea, Senegal, Uganda and Zambia), social expenditure has been assumed to remain unchanged as a percentage of GDP from the previous year.