IMF, World Bank $1.2B debt relief support for Guinea-Bissau
IMF, World Bank $1.2B debt relief support for Guinea-Bissau
Author: White Digital Media
The International Monetary Fund (IMF) and the World Bank's International Development Association (IDA) have decided to support $1.2 billion in debt relief for Guinea-Bissau.
In addition to debt relief agreed at the decision point under the Enhanced Initiative for Heavily Indebted Poor Countries (HIPC), the boards of directors of both institutions agreed to topping-up assistance, including from IDA and the African Development Bank (AfDB) Group, to further reduce the debt of Guinea-Bissau to 150 percent of exports at completion point.
Also, in reaching the HIPC completion point, Guinea-Bissau also became eligible for further debt relief under the Multilateral Debt Relief Initiative (MDRI).
The boards agreed that Guinea-Bissau had taken necessary policy actions ("triggers") to reach the completion point under the HIPC Initiative, a stage in which debt relief under both the HIPC Initiative and MDRI becomes irrevocable.
The triggers included implementing a national poverty reduction strategy; maintaining macroeconomic stability; strengthening public expenditure management; improving education, healthcare and HIV/AIDS prevention; and demobilising former combatants.
Debt relief for Guinea-Bissau will lead to debt service savings consisting in nominal terms of $703.0 million from the HIPC Initiative, $107.9 million in expected additional assistance from Paris Club creditors beyond the HIPC Initiative, $230.3 million in topping-up assistance, and $139.2 million from the MDRI.
Debt relief from the IMF and IDA, the World Bank's fund for the poorest, will total $15.0 million and $347.2 million, respectively, with the remaining relief expected to come from bilateral, commercial, and other multilateral creditors. As a result of this relief, Guinea-Bissau's external debt outlook will improve significantly.
Paulo Drummond, IMF mission chief for Guinea-Bissau, said: "Reaching the HIPC completion point and getting debt relief demonstrates and recognizes the progress achieved by Guinea-Bissau in the last two years in strengthening macroeconomic policies and performance following a prolonged period of political instability.
"It will help Guinea-Bissau improve further its relations with its external creditors, send a positive signal to donors and potential investors, and greatly enhance debt sustainability."
Habib Fetini, World Bank Country Director for Guinea-Bissau, said: "This rewards the country's tremendous efforts to reestablish economic, social and institutional stability, and permits Guinea-Bissau and its partners to shift their focus toward meeting the enormous challenges of regaining what was lost over the past conflict-afflicted decades."
Guinea-Bissau becomes the 32nd country to reach the completion point under the HIPC Initiative. The completion point marks the end of the HIPC Initiative process, which started in December 2000 when the executive boards of the IMF and IDA agreed that Guinea-Bissau had met the requirements for reaching the decision point, a point in which countries start receiving debt relief on an interim basis.
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