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Friday, 29 October, 1999, 15:49 GMT 16:49 UK
Debt relief
poverty
Debt relief will ease the burden but critics say it's not enough
After years of debate on the morality and practicality of it, debt relief to some of the world's poorest countries is being significantly boosted. BBC News Online looks at what relief is actually on offer.

World Debt
The industrialised nations have finally reached a fresh agreement, which brings new momentum to an initiative launched three years ago.

The Heavily Indebted Poor Countries (HIPC) initiative is aimed at cutting some $70bn off the $214bn debt burden of the world's poorest nations.

About half the total debt is owed directly to individual governments - mainly Japan, the US, Britain, Canada, France, Germany and Italy - the G7. Most of the rest is owed to the World Bank and the International Monetary Fund, which are effectively run by the G7 governments. Only about 10% is owed to private banks.

G7 leaders say the number of countries which will qualify has been increased, from 29 to at least 36.

'Too little for too few'

When the G7 nations agreed in June in Cologne, Germany, to go ahead, it was hailed as an historic breakthrough.

But critics such as Jubilee 2000 say the scheme does not go far enough.

When Mozambique receives debt relief later this year it will save about $12m on a debt service bill of $108m. And it will continue to spend more on debt servicing than on health and education combined.

They also point out that only 24 nations are expected to qualify by the end of 2000.

They say only 16 will see their annual debt repayments reduced by a significant amount.

Strict conditions

According to International Monetary Fund figures, a country like Burkina Faso will see its total debt service costs reduced from $55m to $33m.

The main sticking point is the complex monetary criteria that countries must meet to qualify - they must adhere to strict IMF programmes.

The G7 finance ministers said: "There will have to be a strong link between debt relief, continued adjustment, improved governance and poverty alleviation."

The IMF and World Bank will decide whether a nation has met the criteria laid out for receiving relief.

In the past, a country had to take part in an IMF programme for six years before receiving any actual relief.

Under the terms, it is hoped that the qualifying period will be reduced to three years.

But countries will still have to meet strict conditions laid down by the IMF, including sound economic policies, good governance, and reform.

Since the HIPC began in 1996, it has come under fire for requiring so many conditions that the process took years and the countries' economies came under even more pressure in the meantime. The IMF criteria have been attacked as part of the poverty problem itself.

Three years after HIPC was launched, only four countries have actually received debt relief, according to World Bank figures - Bolivia, Uganda, Guyana and Mozambique.

See also:

26 Sep 99 | Business
28 Sep 99 | In Depth
24 Sep 99 | Business
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