WASHINGTON, April 29, 2015--The International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) have decided to support US$1.1 billion in total debt relief for Chad, of which US$1.0 billion is expected to be delivered by multilateral creditors and the remainder by bilateral and commercial creditors.
The Boards of Directors of both institutions[1] determined that Chad has made satisfactory progress in meeting the requirements to reach the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative, the stage at which the HIPC debt relief becomes irrevocable and the country will benefit from the Multilateral Debt Relief Initiative (MDRI). Chad has taken the key decisions, actions and measures required to fulfill all but four of the fifteen triggers, including the participatory preparation of a full Poverty Reduction Strategy Paper (PRSP) and its satisfactory implementation for at least one year, and the continued maintenance of macroeconomic stability as evidenced by broadly satisfactory implementation of the Extended Credit Facility (ECF) supported program.
Debt relief under the HIPC Initiative from all Chad’s creditors was estimated at US$170.1 million in end-2000 present value terms. Debt relief from the IMF would total US$18.0 million and from the World Bank’s IDA, US$68.1 million. After reaching the HIPC completion point, Chad also becomes eligible for further nominal debt service reduction from IDA (US$509 million) and the African Development Fund (US$236 million) under the MDRI.
“Reaching the HIPC completion point represents an important achievement and milestone for Chad. It reflects the significant improvement in economic management in recent years, including during the period covered by a staff monitored program (SMP) approved by Fund management in July 2013 and the ongoing three-year ECF-supported program approved by the Executive Board in August 2014,” said Mauricio Villafuerte, IMF mission chief for Chad.
“It will also help Chad allocate more resources for poverty reduction and the promotion of economic growth. Sound macroeconomic management will remain critical after the completion point for Chad to reap the full benefits of the debt relief,” Mr. Villafuerte said.
“The attainment of the HIPC completion point opens a new development era for Chad. It acknowledges the many efforts accomplished by Chad to exit from a difficult decade of conflict and instability, and allows refocusing attention and resources on Chad’s forward looking emergence agenda. In the next months, the World Bank will present its new Country Partnership Framework to support Chad’s aspirations over the period 2016-20, notably in terms of rural development, health, education, social protection, and governance,” said Paul Noumba Um, World Bank Country Director for Chad.
Full delivery of debt relief (HIPC Initiative, MDRI, and additional bilateral assistance at the completion point) will significantly reduce the debt burden of Chad. The present value of debt-to-exports ratio would fall from 55.1 percent at end-2013 to 31.3 percent at end-2015. It is projected to fall further to 12.5 percent at end-2019. However, the future evolution of these indicators will be sensitive to the macroeconomic developments, particularly petroleum exports and the terms of new external financing, as well as government policy. In particular, sound macroeconomic management, further progress with export diversification, and strengthened debt management will be important for debt sustainability.
Chad is the 36th country to reach the completion point under the HIPC Initiative.
The HIPC Initiative. In 1996, the World Bank and IMF launched the HIPC Initiative to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world's poorest and most heavily indebted countries to ensure debt sustainability, and thereby reduce the constraints on economic growth and poverty reduction imposed by the unsustainable debt-service burdens in these countries.
The MDRI. Created in 2005, the aim of the Multilateral Debt Relief Initiative is to reduce further the debt of eligible low-income countries and provide additional resources to help them reach the Millennium Development Goals. Under the MDRI, three multilateral institutions – the World Bank’s International Development Association, the International Monetary Fund and the African Development Fund-- provide 100 percent debt relief on eligible debts to qualifying countries normally at the time they reach the HIPC Initiative completion point.
[1] The IMF Executive Board met on April 27, 2015, and the IDA Executive Board met on April 28, 2015.
