International Initiatives

Author:Poornimah Devi Sookun
Pages:93-98
CHAPTER 8
International Initiatives
So it is to be hoped that … the process of debt cancellation and reduction
for the poorest countries will be continued and accelerated.
Pope Benedict XVI, 8 Januar y 2007
Heads of government, civil society, the IMF and the World Bank have condemned
the behaviour of vulture funds. Ongoing lawsuits have highlighted an increasing
need for suppor t from the international community. One successful step has been
an increase in debt relief, which has ultimately prevented many bilateral creditors from
selling their claims to the vulture funds. This has in turn helped to avoid many lawsuits.
This chapter out lines the main debt relief initiatives and what they have achieved
in curtailing the crippling debt of poor countries.
8.1 HIPC debt relief initiatives (1996)
In the 1990s, many poor countries faced a debt crisis. Interest payments were costing
more than the countries were investing in new infrastructure. The IFIs and regional
banks recognised that the debts could not be repaid. In response, in 1996 the IMF
and the World Bank introduced the HIPC Initiative as a debt reduction package. The
IMF and the World Bank aimed to ensure that poor countries were not encumbered
with unmanageable debt. Under the HIPC Initiative, indebted countries were cate-
gorised as HIPCs and non-HIPCs. Some 40 countries were initially targeted as
HIPCs. These countries received debt write-offs, conditional on their implementing
certain measures, namely adjustment and reform programmes. Once the IFIs consid-
ered a HIPC country eligible for debt relief, they hoped other commercial or bilateral
creditors would join in and write off debts voluntarily. Unfortunately this did not
work out as expected, as creditors started to sell their debts on the secondary market.
The HIPC Initiative was reviewed in 1999 to provide for more ef fective debt relief
and to strengthen the links between debt relief, poverty reduction and social policies.
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Because of several vulture fund lawsuits, the results were still not as expected, and
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