Debt Relief for the Poorest : An OED Review of the HIPC Initiative

The Heavily Indebted Poor Countries (HIPC) Debt Initiative was established by the World Bank and the International Monetary Fund in 1996, in order to relieve the high external debt of some of the world's poorest nations. The initiative seeks to provide a permanent end to debt rescheduling, promote growth and release resources for social policies targeted at poverty reduction. It is an important but small part of the overall development assistance framework. The review makes four recommendations to address the strategic issues facing the initiative, including the need: to make explicit the methodology underlying the debt projections used and make economic forecasts more realistic in assessing the prospects and risks facing individual countries; and for a greater focus on pro-poor growth to better balance development priorities relative to social expenditures.