INTERNATIONAL MONETARY FUNDAND INTERNATIONAL DEVELOPMENT ASSOCIATION Heavily IndebtedPoor Countries(HIPC) Initiative-Status of Implementation Preparedby the Staffs of the IMF and World Bank Approved by Timothy Geithner and Gobind Nankani September 12. 2003 Contents Page Executive Summary .................................................................................................................. 5 I. Introduction ....................................................................................................................... 7 I1 . ProgressinImplementation ............................................................................................. A Reduction inDebtStocks and DebtService ........................................................ 88 B Resource Flowsto HIPCs .................................................................................. . C. Implementation and Cost Update........................................................................ 12 14 I11.ChallengesinReaching CompletionPoints and Decision Points................................... A. ChallengesinReaching Completion Points........................................................ 15 16 Achieving Macroeconomic Stability ............................................................. 16 Implementing Poverty Reduction Strategies ................................................. 21 B. ChallengesinReachingDecision Points ............................................................ Satisfying Social and Structural Completion Point Triggers ........................ -25 26 IV. Observationson Governance and Debt Sustainability ................................................... A. Governance......................................................................................................... 27 27 B. Debt Sustainability .............................................................................................. 29 V. Creditor Participation...................................................................................................... 31 A. Multilateral Creditors: Costs, Commitments and Delivery ................................ 31 B. Official BilateralCreditors: Costs, Commitments and Delivery ........................ C. Commercial Creditors and Creditor Litigation................................................... 33 35 VI. Issues for Discussion....................................................................................................... 37 - 2 - Text Figures 1 NPV of Debt for the 27 Decision Point Countries.......................................................... 10 2.. NPV of Debt for the Countries that Reachedthe Completion Point by mid-2003.............................................................................................................. 11 3. Poverty-Reducing Expenditures and External Debt Service inthe 4. 27 DecisionPoint Countries .................................................................................... Gross Flows of Official External Resourcesto the 27 DecisionPoint Countries ..........11 5. Net Flows o f Official External Resourcesto the 27 DecisionPoint Countries ..............12 13 Text Boxes 1. Some Cases of InterimPeriod Countries with Current andExtended Interruptions of -20 2. Examples o f Structural and Social Completion Point Triggers ...................................... Policy Track Records............................................................................................... 3. World Bank Operations Evaluation Department Review of the HIPC Initiative ..........26 30 Text Tables 9 2. 1. Debt Indicators for Developing Countries and HIPCs ..................................................... HIPCs inthe InterimPeriod: Policy PerformanceUnder PRGF-Supported 17 3. Programs Since the DecisionPoint. as of end-July 2003 ......................................... HIPCs inthe InterimPeriod: Key Factors Affecting Policy Performance inCountries That Have HadDelays inthe ImplementationofPRGF 4. HIPCs inthe InterimPeriod: Time Taken from InterimPRSP to FullPRSP ...............22 Programs. as of end-July 2003.................................................................................. 19 23 6. 5. HIPCs inthe InterimPeriod: Some Factors DelayingPRSP Preparation .................... HIPCs inthe InterimPeriod: Status of Macroeconomic Policies and PRSP 24 7. Creditors InvolvedinLitigation against HIPCs.............................................................. Preparation, as o f July 2003...................................................................................... 36 Annexes 1. Country Coverage. Data Sources. andAssumptions for the 38 2. HIPC Initiative: Progress inImplementation by Country............................................... HIPC Costing Exercise ............................................................................................. 40 3. EnhancedHIPC Initiative: Country Implementation Status Notes................................. 43 I.ImplementationStatusofHIPCsintheInterimPeriod............................................ I1. Countries that Could Reachthe Decision Point After July 2003 ............................ 43 I11. Countries that HadReachedthe Completion Point by the EndofJuly 2003 ........62 69 Appendix Tables 1. 77 2. EnhancedHIPC Initiative: Committed Debt Reliefand Outlook................................... 3. Summary of Debt Service for the 27 HIPCs that Have Reachedthe DecisionPoints ..78 Debt Service by IndividualHIPCs that Have Reachedthe DecisionPoints- 79 4. by Country ................................................................................................................ Summaryof Poverty-reducing Expenditures by the 27 HIPCs that Have Reached the Decision Points .................................................................................................. 82 5. Poverty-Reducing Expenditures by Individual HIPCs that Have Reached the Decision Points -by Country ......................................................................... 83 - 3 - 6. HIPC Initiative: Changes inthe Estimates of Potential Costs by Creditor Group ..................................................................................................... 84 7. HIPC Initiative: Breakdown of Estimated Potential Costs 8. by Main Creditors andby Country Groups............................................................... 85 HIPC Initiative: Estimatesof Costs to MultilateralCreditors 86 9. HIPC Initiative: EstimatedDelivery of World Bank Assistance, 2000-09 .................... HIPC Initiative: Status of Delivery of Assistance by the World Bank........................... and Status of Their Commitments ............................................................................ 87 10.. 88 12. HIPC Initiative: EstimatedDelivery of IMF Assistance, 1998-2010............................. 11 HIPC Initiative: Status of Commitments by the IMF..................................................... 89 90 13. Status of Bilateral Donor Pledgesto the HIPC Trust Fund............................................ 14. HIPC Initiative: EstimatedParis Club Costs, by Creditor Country................................ 92 15. HIPC Initiative: Paris Club Debt Relief.......................................................................... 93 95 16. Paris Club Creditors' Delivery of Debt ReliefUnder BilateralInitiatives: Beyondthe HIPC Initiative............................................................................................. 97 17. HIPC Initiative: EstimatedNon-Paris Club Official Bilateral Creditors' 98 18. HIPC Initiative: Delivery of Assistance by Non-Paris Club Creditors ........................ Costs, by Creditor Country ....................................................................................... 102 - 4 - ABBREVIATIONS AND ACRONYMS AfDB AfricanDevelopmentBank AFESD Arab Fundfor Social andEconomicDevelopment AMF Arab MonetaryFund AsDB Asian DevelopmentBank BADEA Arab Bank for EconomicDevelopmentinAfrica BCEAO Central Bank of West African States BDEAC Banquede Developpementdes Etatsde 1'Afrique Centrale (CentralAfrican States DevelopmentBank) BDEGL Banquede Developpementdes Etatsdes GrandLacs (Development Bank of Great Lake States) BEAC Banquedes Etats de 1'Afrique Centrale(Bank of CentralAfrican States) BOAD BanqueOuest Africaine de Developpement(West AfricanDevelopmentBank) CABEI CentralAmericanBank for Economic Integration CAF CorporacionAndina de Foment0 CAS County Assistance Strategy CDB CaribbeanDevelopmentBank CIRR CommercialInterestReferenceRate CMCF CaricomMultilateralClearingFacility DRC DemocraticRepublic of Congo DSA Debt Sustainability Analysis EADB East AfricanDevelopmentBank ECOWAS Economic Community of West African States EIB EuropeanInvestmentBank EU EuropeanUnion EUR Euro FEGECE Fondsd'Entraide et de Garantiedes empruntsdu Conseil del'Entente FOCEM Fondo Centroamericanode EstabilizacionMonetaria FONPLATA Fundfor the FinancialDevelopmento fthe RiverPlate Basin FSID Fundfor Solidarity andEconomic Development GDF GlobalDevelopmentFinance GDP Gross Domestic Product HIPC Heavily IndebtedPoor Country IDB Inter-AmericanDevelopmentBank IBRD InternationalBank for ReconstructionandDevelopment IDA InternationalDevelopmentAssociation IFAD InternationalFundfor AgriculturalDevelopment IFMIS IntegratedFinancialManagementInformationSystem IMF InternationalMonetary Fund I-PRSP InterimPoverty ReductionStrategyPaper IsDB IslamicDevelopmentBank MDB MultilateralDevelopmentBank MTEF Medium-TermExpenditureFramework NPV Net Present Value OPEC OPEC Fundfor InternationalDevelopment PTA Easternand SouthernAfrican Trade andDevelopmentBank PEM Public ExpenditureManagement PERs Public ExpenditureReviews PRGF Poverty ReductionandGrowthFacility PRSP Poverty ReductionStrategy Paper SDR SpecialDrawingRights SMP Staff MonitoredProgram U.A.E. UnitedArab Emirates ZESCO ZambianElectricitySupply Company ZNCB ZambiaNationalCommercialBank - 5 - ExecutiveSummary Progressinimplementation.Twenty-sevenheavily indebtedpoor countries (HIPCs) or more thantwo-thirds o fthe 38 countries that potentially qualify for assistance underthe HIPC Initiative have reached the decision point, the most recent beingthe Democratic Republic o f Congo inJuly 2003. Innet present value (NPV) terms, these 27 countries account for 85 percent o f the total expected relief for the 34 HIPCs for which data are available. EightHIPCs have reached the completionpoint, the most recent beingMali and BenininMarch 2003. The process o f reaching the completion point has generally taken longer than earlier envisaged. Cost estimates for the 34 HIPCs are little changed from estimates from September2002. Reductionsin debt and debt service andincreasesin poverty-reducingexpenditures.As a result o fHIPC relief, debt stocks for the 27 HIPCs that have reached the decision point are expected to decline by about two-thirds inNPV terms. Debt service-to-exports indicators have also been substantially reduced inmost o fthese HIPCs. Savings from lower debt-service payments have contributed to a substantial increase inpoverty-reducing expenditures. Additionality.A keypremise o fthe HIPC Initiative is that the debt reliefprovided should be additional to other forms o f external financing assistance. Revisedfigures on debt relief and net aid flows appear to suggest that this has been the case. Progress in implementingthe PovertyReductionand GrowthFacility(PRGF). Despitethe challenge o fmaintaining macroeconomic stability, 11 of the 19 countries currently inthe period between the decisionpoint and completion point (the interim period) have satisfactory performance records intheir macroeconomic programs. Four countries could resume their PRGF-supported programs over the next few months; the remaining countries will need more time to beginthe process of establishing an adequate performance record. Extended interruptions to PRGF program implementation and macroeconomic stability reflect many factors, with fiscal policy slippages, primarily expenditure overruns, the most common. Weak budget execution and poor policy implementation are often associated with limitedinstitutional capacity, weak governance and deteriorating political and security conditions. ProgressinimplementingPovertyReductionStrategies.The requirement to satisfactorily implementa Poverty ReductionStrategy for one year will not, in itseZJ be a constraint to most interim-period HIPCs. Among HIPCs that have prepared full Poverty Reduction Strategy Papers (PRSPs), this requirementcould only affect the timing o f completion point infour cases. Progress inimplementingstructuraland social triggers. Social and structural completion point triggers have not been the proximate cause o f delays so far but they could become so inthe future.Most countries have made substantial progress with respect to these triggers, although in some cases additional progress will be needed. Progress in reachingthe decisionpoint.Reachingthe decision point remains a substantial challenge for the 11potentially eligible HIPCs that have not done so. Most o fthese countries are affected by conflict and several have protracted arrears. A few o f these countries could start - 6 - establishing a policy performance record before the sunset clause takes effect by the end of 2004, inorder to reachthe decision point. Debt sustainability. The HIPC Initiative was intendedto deal with the overall debt burdenof heavily indebtedlow-income countries by removing their debt overhang, but it cannot ensure debt sustainability into the future.As the recent World Bank Operations Evaluation Department Review of the HIPC Initiative stressed, reductions inthe debt stock through the Initiativewere expectedto contribute to a more comprehensivedevelopment effort but not to supplantit.The Bank and Fund, together with other development partners,have organized a series of workshops on debt sustainability inthe context of achieving the MillenniumDevelopment Goals (MDGs) in low-income countries, including HIPCs. By the end of the year staff of the Bank and the Fund are to produce apaper for the Boards that will address the policy implications of debt sustainability and will reflect many ofthe conclusions reachedinthese workshops. Governance.Good governance is essentialto the success of the HIPC Initiative. The current HIPC framework is fully supportive of good governancepolicies and includes related conditions and indicators. The Initiative forms part of a broader effort by the international community to support improvements ingovernance inthese countries. Creditor participation. The commitment by Libya inSeptember 2002 to participate inthe Initiative and the decision by India inJune 2003 to write off loans to HIPCs has improved the level ofparticipation inthe Initiativeby non-Paris Club bilateral creditors. Participationby commercial creditors has beenlimited, although their share of the outstanding debt stock inthe 34 HIPCs is small (less than five percent of the total). The small share of commercial debtpartly reflects the fact that muchofthe value of commercial debt inHIPCs has beeneliminated through the DebtReduction Facility for IDA-only Countries. - 7 - I.INTRODUCTION 1. This report reviews implementationofthe Heavily IndebtedPoor Countries (HIPC) Initiative since the last report o f September 2002.' Inaddition to updating the information on the delivery of HIPC debt relief and associated assistance, it updates the estimated costs o fthe HIPC Initiative and the status o f creditor participation. It examines the key factors affecting the pace o f implementation o f the Initiative including specific impediments incountries that have experienced difficulties makingprogresstowards reaching the decision and completion points. The report briefly examines the issues o f governance, maintenance o f long-term debt sustainability and the calculation o f additional debt relief at the completion point, issues that are treated more fully in separate papers.2 2. The key objective o fthe HIPC Initiative is to deal comprehensively with the overall external debt burdeno f eligible countries by removing their debt overhang within a reasonable period o f time and roviding a base from which to achieve debt sustainability and exit the rescheduling cycle. The framework o f the Initiative also provides a way forward for HIPCs to 7 effectively use the resources released from lower debt-service payments toward poverty-reducing expenditures. The scope o f the objectives o fthe HIPC Initiative and the use o f HIPC savings for poverty-reducing expenditures were part o fthe focus o f a review by the World Bank Operations EvaluationDepartment which hi hlighted the achievements o f the initiative and pointed out potential areas for improvement. Inline with these objectives, those HIPCs committedto f achieving and maintaining macroeconomic stability, and pursuingreforms aimed at improving governance, stimulating growth, and reducing poverty can benefit from substantial debt relief. To this end, over US$31billion o f debt relief inNPV terms has beencommitted to date to 27 countries that have reached the decision point (AppendixTable 1). Inconjunction with other resource flows, social and poverty reduction expenditures have increased significantly inmost HIPCs. Nevertheless, interms of countries reaching decision and completion points, progress has been slower than that originally envisaged by the international community and by the country authorities themselves. 1 A six-monthly statistical update was also issued inMarch, 2003. See IMF and World Bank, "Heavily Indebted Poor Countries(HIPC) Initiative-Statistical Update," March 11,2003, SMl03191, SUP. 1, http://www.imf.orglextemallnp/hipc/doc.htm,and March 10,2003, IDNR2003-0042, http:/Iwww. worldbank.or.dhiuc. See IMF, "Debt Sustainability in Low-Income Countries-Towards a Forward Looking Strategy," May 28,2003, SM/03/185, httu://www.dse.delefldebtslindex.htm. See IMF andWorld Bank, "Modifications to the Heavily IndebtedPoor Countries (HIPC) Initiative," July 23, 1999, EBW991138, ht~:J/~~~.imf.ors/extemal/nu/hipc, and July 26, 1999, IDMSecM99-475, httdlwww.worldbank.ordhiuc. See World Bank, Operations Evaluation Department, "Debt Relief for the Poorest- An OED Review o f the HIPC Initiative," February24,2003, hthx//www.worldban k.orgloed. - 8 - 11. PROGRESSINIMPLEMENTATION Debt stocks in the 27 HIPCs that had reached the decisionpoint by July 2003 areprojected to decline by about two-thirds once they reach their respective completion points. HIPCs in the interim period have benefitedfrom Paris Club debt relief as well as relief from several multilateral creditors under the HIPC Initiative. This relief lowered debt-service ratios immediately after the decisionpoint. The data suggest that HIPC relief delivered since 1998 has been additional to otherforms of externalfinancing assistance. Since September 2002 two HIPCs have reached their completionpoints and one has reached the decisionpoint. A. Reduction inDebt Stocks and Debt Service 3. Debt stocks in the 27 HIPCs that have reached the decision point are projected to decline by about two-thirds, In2002 NPV terms, such debt stocks are projectedto fall from an estimated US$77 billion before traditional relief to US$32 billion after the full delivery o f traditional debt relief and assistance under the HIPC Initiative, and to US$26 billion after the delivery o f additional bilateral relief committed by several creditors (Figure l).5 Debt-stock reduction inthe eight countries that reached their completion points averaged more than 60 percent in2002 NPV terms (Figure 2).6 4. The HIPC Initiative is projected to substantially lower debt indicators at the completion point to levels comparable to other developing and low-income countries (Table l).' weighted average NPV o f the debt-to-exports ratio for the 27 decision point The countries is projectedto decline from almost 300 percent before HIPC relief at the decisionpoint to 128 percent by 2005 when most HIPCs are expected to have reached their completion points. The weightedaverage NPV o fthe debt-to-GDP ratio is projected to decline from 60 percent before HIPC relief at the decision point to 30 percent in2005. These projected levels are close to those o f other low-income countries. By 2001, the average debt-service-to-exports ratio for HIPCs had already fallen to below the corresponding ratio inother low-income countries. 5, HIPC relief is projected to substantially lower the debt-service-to-exports ratio for most HIPCs that have reached the decision point. HIPCs inthe interimperiod benefitfrom Paris Club debt relief as well as interimrelief from key multilateral creditors. The debt-service- Traditional relief refers to Naplesterms stock-of-debt operations, involving a 67 percent NPV reduction. The 2003 projections for the eight completion point countries are based on the assumptionof full creditor participation. This assumptiontends to overstate the achieved debt reduction, but financing assurancesalready obtained for these countries average approximately 90 percent oftotal required HIPC relief. 'The comparability of NPV statistics derived from Global Development Finance (GDF) data (on developing countries) and HIPC documents and staff estimates (on HIPCs) is limitedby the use of differentmethodologiesto account for debt relief and differences in debt coverage.Debt relief i s reflected inthe GDF database only when actual debt relief agreements are signed, whereas debt relief estimates inHIPC country documentsare basedon the assumptionof full creditor participation inthe HIPC Initiative. Furthermore, debt indicators for HIPCs cover only public and public-guaranteeddebt whereas debt indicators for developing countries cover total public and private debt. GDF debt-servicedatatypically overstatedebt service because grants associatedwith HIPC relief were accounted for separatelyuntil 2001. - 9 - to-exports ratio for the 27 decision point countries declined from an average o f 15.7 percent in 1998 and 1999 to 9.9 percent in2002 (Appendix Tables 2 and 3). Significant debt-serv'ice reductions occur before the completion point due to the provision o f interimrelief; indeed, in 2002 the debt-service-to-exports ratio was 9.9 percent on average for boththe group o f HIPCs in the interim-period and HIPCs that reached the completion point.' Table 1.DebtIndicatorsfor DevelopingCountries andHIPCs (Percent, weighted averages) DevelopingCountries HIPC Countries 11 Developing Non-HIPC Before Debt Debt After enhanced countries low-income enhanced indicators for indicators for HIPC relief at average countries HIPC 2001 2002 the completion 2001 21 2001 relief 31 point NPV of debt-to- exports ratio 41 120 143 274 275 214 128 51 NPV of debt-to- GDP ratio 38 39 61 65 50 30 51 Debt service-to- exports61 19 15 16 71 10 10 8 51 Sources: Global Development Finance (GDF), World Bank 2003; HIPC country documents; and staff estimates. Note: Figures represent weighted averages.Former SFR Yugoslavia, Liberia, Somalia, and Turkmenistan havebeen excluded becauseo f incomplete data. 11HIPC countries refers to the 27 countries that had reachedthe decision point by the end of July 2003 under the enhanced HIPC Initiative. 21Developing countries comprise low- and middle-incomecountries according to the World Bank income classification. 31Debt stocks are after traditional Paris Club reliefbefore the decision point. Data refer mostly to end-1998 and end-1999; for the Democratic Republic of Congo, data refer to end-June, 2002. 41 Exports are defined as the three-year average exports of goods and services up to the dates specified. 51 Data are for 2005. Since the DemocraticRepublic of Congo is expected to reach its completion point only in 2006, the NPV of debt after enhancedHIPC relief assumed committed unconditionally is used. 61Exports are defined as exports of goods and services inthe current year. 7/ Average over 1998 and 1999. 6. Poverty-reducingexpendituresinthe 27 countriesthat havereachedthe decision pointwere almostfour times as great as debt-servicepaymentsin2002 (Figure 3).9 Annual debt service by the 27 decision point countries i s projected to be about 30 percent lower during 2001-05 than in 1998 and 1999,freeing about US$l.O billion inannual debt-service savings. Poverty-reducing expenditures, meanwhile, increased from about US$6.1 billion in 1999 to * An exception i s the Democratic Republic o f Congo, where debt-service ratios rise significantly after the enhanced decision point. The increase is partly due to the resumption o f debt-service payments following the arrears clearance operation, as the Democratic Republic o f Congo had not been servicing most of its debt inthe previous period. The definition o f poverty-reducing expenditures varies across countries although many countries include primary education and basic health as well as expenditures for rural development. Country-specific definitions are included inAppendix Table 5. - 10- US$8.4 billion in2002 and are projectedby staffs to increase to US$11.9 billion in2005 (AppendixTables 4 and 5)'' Figure 1.NPV of Debt for the 27 DecisionPoint Countries (Inbillions ofU.S. dollars, in2002 NPV terms) 100 80 77 60 40 20 0 Before traditional After traditional After HIPC relief After additional relief relief bilateralrelief Source: HIPC Initiative country documents; and World Bank and IMF staff estimates. loCountry authorities are puttinginplace public expendituremanagementsystems that would ensure the efficiency of poverty-reducing expenditures. See IMF and World Bank, "Actions to Strengthenthe Tracking of Poverty ReducingPublic SpendinginHeavily Indebted Poor Countries(HIPCs)," March 22, 2002, SM/02/30 REV. 2, httu:/lwww.imf.orq/external/nplhipc/doc.htm, and March22,2002, IDA SecM2002-30/2, http:llwww. worldbank.oralhirx. - 11 - Figure2. NPV of Debtfor the Countriesthat Reachedthe CompletionPointby mid-2003 (Inbillions o fU.S.dollars, in2002NPVterms) 20 10 I 0 NPV before traditional relief NPV after traditional relief Projected NPV at end-2003 Source: HIPC Initiative country documents; and World Bank and IMF staff estimates. Figure3. Poverty-ReducingExpendituresandExternalDebtServiceinthe 27 Decision PointCountries (Inbillions o fU.S. dollars) Source: HIPC documents and IMF staff estimates. - 12- B. Resource Flows to HIPCs 7. A key premise of the HIPC Initiative-that debt relief should be additional to other forms of external financing assistance--appears to be borne out by the facts. For the 27 decision point countries, both gross andnet flows increased during 1997-2002. l1 agross On basis, official flows increased from about US$8 billion in 1997to almost US$12billion in2002 withhalfo fthe increase due to HIPC relief (Figure4). Net resource flows (Le., difference between gross resource inflows and debt service payments) also increased substantially once the enhanced HIPC Initiative got under way (Figure 5). It should be noted however, that official external financing flows to the 27 decision point countries declined substantially inthe mid- 1990s (as they didto other low-income countries).12 The recent increase inthese flows restores external financing to levels o fthe early 1990s.l3 Figure 4. Gross Flows of Official External Resources to the 27 Decision Point Countries (Inbillions ofU.S.dollars) 12 8 4 0 1997 1998 1999 2000 200 1 2002 Source: HIPC documentsand IMF staffestimates. I'Gross official resource flows are defined as the sum of all external loans and grants disbursed from official sources and HIPC debt relief providedby official creditors. Net official resourceflows are defined as the difference betweengross official resource flows and debt-servicepayments.Debt service paymentsand loan and grant disbursements are based on Balance of Payments data. HIPC debt relief is calculated as the difference betweendebt service due after traditional relief (obtained from HIPC documents) and debt service payments after HIPC relief. The World Bank Operations Evaluation Department also examines this issue. See World Bank Operations Evaluation Department, "Debt Relief for the Poorest," op. cit. l2The decline inaid flows during this period is discussed inGlobal Development Finance (1999). Fiscal consolidation inmany donor countries is identified as an important reasonfor the decline inaid budgets. l3For a discussion ofrecent developments inaid flows see Global Development Finance (2003). -13 - Figure 5. Net Flows of Official External Resources to the 27 Decision Point Countries 1/ 8 6 L 4 2u .-Bc 2 0 1997 1998 1999 2000 2001 2002 Net flows +Net flows inDercent o f GDP 1 Source: HIPC documents and IMF staff estimates. 1/ Gross official resource flows are defined as the sum of all extemal loans and grants disbursed from official sources and debt reliefprovided by official creditors. Net official resource flows are defined as the difference between gross official resource flows and debt service payments. - 14- 8. The overall increasein resourceflows masksdifferencesacross countriesandthe importantrole that programand policyperformancemay haveplayedin attractingofficial resources. Average external financing flows in2000-02 increased for most o fthe 27 decision point countries relative to average levels in 1997-99 butthis was not the case ineight HIPCs. Five o fthese countries (Guinea-Bissau, Malawi, Nicaragua, SBo Tom6 and Principe, and Senegal) went through protracted interruptions intheir PRGF-supportedprograms, which dampened aid inflows. Two other countries (Mali and Mauritania) experienced delays ingrant or loan disbursements.Rwanda benefited from very highinflows duringthe late 1990s, though they ebbed somewhat inthe following years. C. Implementationand Cost Update 9. Since September2002, BeninandMali reachedtheir completionpointsandthe DemocraticRepublicof Congo (DRC) reachedits decisionpoint.C6te d'Ivoire didnot reach its decision point, as anticipated in September 2002, because o f civil strife that beganin September 2002 and continued into 2003. For similar reasons a preliminary document could not be completed for the Central African Republic. Looking ahead, Ethiopia, Guyana,Nicaragua, Niger, Rwanda, and Senegal could reach their completion points by the end o f 2003 or early in 2004 and the Republic o f Congo could have a preliminary document preparedinthe next few months, barringunanticipatedcomplications (see Appendix I1and Appendix 111). 10. The total cost of the HIPC Initiativefor 34 HIPCs is estimatedat US39.4 billionin 2002 NPV terms. This estimate does not include the costs for Liberia, Somalia, Sudan, or Lao PDR due to data problems and in some cases protracted arrears. In2001N P V terms, costs for the 34 countries are estimated at US$37.3 billion, little changed from the September 2002 estimate o f US$37.2 bi1li0n.l~O fthe total cost in2002 NPV terms, US$33.3 billion i s associated with the 27 countries that have reached the decisionpoint (Appendix Table 7). These costs are about equally divided between bilateral and multilateral creditors. Innominal terms, these costs represent about US$51.1 billion indebt-service reliefover time. 11. Preliminarycalculationssuggest that includingSudan,Liberia, Somalia,and Lao PDR couldincreasethe cost of HIPC relief by morethan 25 percent or US$10.6 billion to US$50.0 billionin2002 NPV terms. Most o fthese additional costs are concentrated inSudan (see Appendix 111). These estimates do not include Angola, Kenya, Vietnam, or Yemen, which are estimated to have debt ratios below the HIPC thresholds. l4The underlyingassumptionsand caveats are detailedinAnnex I.The cost revisions are due to a change inthe discount rate from 6.0 percentto 5.45 percent(to reflect the decline inworld interestrates) andto new debt sustainability analyses for the DemocraticRepublic o fCongo andMali. The effect of the change inthe discountrate on the cost estimate is small, havingalmost no effect on costs in2001NPV terms andreducingcosts in2002 NPV terms by approximatelyUS$230million. For the Democratic Republic of Congothe revisionsresultedinan increase inHIPC debt relief costs o f aboutUS$170million in2001NPV terms. Revisionsto costs resultingfrom Mali's debt sustainability analysis were marginal. - 15 - 12. The cost of HIPC debt relief couldincreaseby an estimatedUS$729 millionbecause of topping up of HIPC assistanceat the completionpoint.15Under the enhanced HIPC Initiative, inexceptional cases consideration can be given to providing additional debt relief at the completion point beyond that committed at the decision point. Eligibility for additional relief at the completion point i s determined on a case-by-case basis and may be applied incases where countries suffer from an exogenous shock that leads to a fundamental change inthe country's economic circumstances.'6 The fact that a country's debt burdenexceeds the HIPC ratios at the completion point neither indicates eligibility for additional assistance nor the existence o f serious debt sustainability problems. Current estimates suggest that 7 o fthe 19 interimperiod countries could have debt above the HIPC thresholds when they reach their completion points. 111. CHALLENGESINREACHING COMPLETION POINTSAND DECISION POINTS Debt relief under the enhancedHIPC Initiative isprovided on an irrevocable basis at the completionpoint after satisfactory completion of measures in three broad areas: maintaining macroeconomic stability, implementing apoverty reduction strategy developed through a broad participatory process, and implementing apre-defined set of social and structural reforms. Delays in reaching the completionpoint have been attributed to the challenge of maintaining macroeconomic stability andpreparing and implementing Poverty Reduction Strategies. Most countries thatfaced such challenges have either adopted the necessarypolicy changes or are making efforts toward doing so. Preparingfully participatory PRSPs has taken longer than expected, but 15 of the 19countries in the interim period havefinalized them and will likely not be constrained by the one-year satisfactory implementation requirementfrom reaching the completion point in 2004. Goodprogress has been made in satisfving social and structural triggers. Although these triggers have not been theproximate cause of delays sofar, they could cause delays in some countries in thefuture. Although theprocess of reaching the completion point has taken longer than anticipated and challenges remain in reaching the decisionpoint, existing standardsfor policy performance are being maintained to ensure that the Initiative s objectives are reached." ''Updatedprojections for the nineteenHIPCs betweenthe enhancedHIPC decision and completion points suggest that the possibleNPV of external debt abovethe HIPC thresholds at the completion point after assumingfull delivery of HIPC reliefand additional bilateral assistance would stand at US$729 million. These cost estimates are very sensitive to changes indiscount rate and exchange rate assumptions. l6HIPCs can be consideredfor topping up ifeither their NPV debt-to-export ratio is greaterthan 150 percent or, if they qualified as a fiscal case at the decision point, their NPV debt-to-fiscal revenuesratio is greaterthan 250 percent. See IMF and World Bank, "The EnhancedHIPC Initiative-Completion Point Considerations," August 21, 2001, EBS/O1/141, hm://www.imf.org/external/np/hi?x, and September 10,2001, IDNR2001-152, http://www.worldbank.orrr/hi~c.Also see IMF"Update on the Financing of PRGF and HIPC Operations andthe Subsidizationof Post-Conflict Emergency Assistance," March 20,2003 SM/03/100, http://www.imf.orrr/externaI/np/hipc. "ThisisconsistentwiththerecommendationoftheWorld BankOperations Evaluation Departmentreview which suggestedmaintaining standards for policy performance, and when the establishedcriteria are to be relaxed, the rationale for doing so should be clear and transparentto ensure that Initiative's objectives are reached. See World Bank, Operations Evaluation Department, "Debt Relief for the Poorest" op. cit. - 16- A. ChallengesinReachingCompletionPoints AchievingMacroeconomicStability 13. Macroeconomicstability is necessaryfor underpinningsustainablegrowthand povertyreduction.The HIPC Initiative requires countries to have established a track recordfor macroeconomic performance and that appropriate macroeconomic polices be inplace at the time o fthe completion point. As o f the end o f July 2003, more thanhalf o f the countries inthe interim period-including the Democratic Republic ofCongo, which reachedthe decisionpoint inJuly 2003-were satisfactorily implementingtheir macroeconomic programs, despite challenging global economic environment (Table 2). The remaining countries have either recently experienced problems inprogram implementation (Cameroon, The Gambia, Guinea, and Zambia) or do not have an IMF-supported program inplace after protracted delays in establishing a satisfactory record o f performance (Guinea-Bissau, Honduras, Malawi, and Silo Tom6 and Principe). 14. Maintainingmacroeconomicstabilityhas beena challengefor HIPCs durin the interimperiodand severalcountrieshaveput correctivepoliciesin place(Table 2).E3 Most o f the HIPCs inthe interim-period that experienced problems inmaintaining a satisfactory track record o f macroeconomic performance have had difficulties implementingfiscal policy. Some have also had difficulty implementing key structural reforms (e.g., bankingsector reforms in Ethiopia, public sector reforms in Guyana, and privatization inZambia) (Table 3). O f the eight countries that had program interruptionso f less than a year, Ghana, Ethiopia, Madagascar and Rwanda were able to implement corrective measures that facilitated program continuation and Cameroon, The Gambia, Guinea and Zambia are currently making efforts to implementmeasures that would allow them to do so. Among the seven countries that experienced interruptions o f more than one year, Nicaragua and Senegal made intensifiedefforts to reduce their fiscal deficits and move forward on agriculture and other structural reforms, leading to approval o f new PRGF- supported programs. InGuyana, the authorities are currently implementing measures to contain thepublic sector wage bill and restructure the sugar andbauxite sectors, measuresthat may pave the way for reachingthe completionpoint. 15. Currentlyfour interim-periodHIPCsremainwith protractedprogram interruptions.Guinea-Bissau, Honduras, Malawi, and Silo Tom6 and Principe have experienced severe difficulties in implementing their economic reform programs since reaching their decision points and currently face serious challenges inthe areas o f public resource management, governance, and insome cases, structural reforms (Table 3). Discussions o f policies neededto establish a track record have failed in Guinea-Bissau due to changes ingovernment. Regarding S8o Tome and Principe discussions on a new three-year PRGF-supported program had been hampered by political tensions that culminated inan attempted coup d'Ctat inJuly 2003. In Malawi the authorities have embarked on a strategy to strengthen public expenditure management. InHonduras the authorities are inthe process o f developing a program for fiscal '*The assessment inthis section excludes the Democratic Republic o f Congo, which recently reachedthe decision point. - 17- sustainability based on a social pact with political parties, unions and the private sector (see Annex 111). Table 2. HIPCsinthe InterimPeriod: PolicyPerformanceUnderPRGF-SupportedProgramsSince the DecisionPoint 1/ (As of end-July 2003) No Interruption Interruptions Interruptions of Interruptions of between Interruptions of of less than between 6 and 1and 2 years more than 2 years 6 months 12 months Chad Cameroon21 The Gambia71 Guyana 10/ Guinea-Bissau 15/ Congo,Dem Rep Ethiopia 31 Guinea81 Honduras 111 Malawi 16/ Niger Ghana 4/ Madagascar 9/ Nicaragua 12/ Sierra Leone Rwanda 5/ Si30 Tom6 and Principe 13/ Zambia 61 Senegal 141 Source:IMF country documents. Note. Countries shown in italics have been currently satisfactorily implementingtheir macroeconomicprograms 11Interruptionsof policy performanceunder PRGF-supportedprogramsare definedas the periodstartingfrom the sixth monthfollowing the completionof a semi-annualprogramreview or approvalof anew PRGF arrangementby the Fund's ExecutiveBoardto the time when aPRGFprogramreview is completed or anew PRGF arrangementis approved. 2/ The fourthreview o f the 2000103 PRGF arrangementwas delayedfrom March 2003. 3 / The 2001104 PRGF programreview was delayedfrom Marchto August 2003. 41 The 1999102 PRGF arrangementexpiredinNovember 2002 without completionof the final review.A new PRGF arrangementwas approved in May 2003. 51 The 1998102PRGF arrangementexpired inApril 2002 without completion of the final review.A new PRGF arrangement was approvedinAugust 2002. 6/ The 1999103 PRGF arrangement expiredin March 2003 without completionof the final review. A new PRGF arrangement has not yet been establishedas of July 2003. 7/ The first reviewofthe PRGF arrangementapprovedin July 2002 was delayed. 81The 2001104 PRGF arrangementhas been off track since December2002. 91A political crisis in late 2001 ledto an interruptionofthe 2001 PRGF supportedprogramuntil December 2002. 10/ Inearly 2001, slippages infiscal and structuralpoliciesledto interruptioninthe 1998101 PRGF arrangement.A new PRGF arrangementwas approvedinSeptember 2002 but the first reviewhas been delayedowing to slow implementationof agreed structuralreform actions. Most prior actions for the review have been completed andthe remainder is expectedto be completedshortly. 1 1/ The 1999102 PRGFprogramhas been interruptedtwice. There was a 14-monthlapse betweenthe second andthird reviewsin June 2000 and October 2001. The PRGF expiredat end 2002 and discussionsare underway on a successor arrangement. 12/ The 1998102 PRGF arrangement went off track in early 2001. Successive SMPs were implementedeventuallyleadingto a new PRGF arrangementin December2002. 131The 2000103 PRGF arrangement went off track at end 2001. 14/ The 1998102 PRGF arrangement expiredin April 2002 without completionof the final review.A new PRGF arrangement was approved in April 2003. 151The 2000103 PRGF arrangement has beenoff track since early 2001. 161The 2000103 PRGF arrangement has been off track since early 2001. - 18- 16. Extendedinterruptionsto PRGFprogramimplementationand macroeconomic stability reflecteda confluenceof factors (Table 3 and Box 1). Fiscalpolicy slippages have beenthe most common, generally stemming from overruns inthe public sector wage bill, military expenditures, andother non-priority public spending often exacerbated by tax revenue shortfalls. Weak budget execution i s often attributed to limitedinstitutional capacity and adverse exogenous developments.l9 Poor policy implementation also seems to have been associated with weak governance (e.g., large errors and omissions inthe fiscal accounts of Guinea-Bissau and problems related to oil sector contracts in SZo Tome and Principe) and political events (e.g., disruption o f economic activity inMadagascar following a contested presidential election) or worsening political and security conditions that made it difficult to implementmacroeconomic policies and structural reforms. Recently, difficult domestic political choices in SZo Tome and Principe were compounded by an attempted coup d'Ctat. Discussions have been underway to establish new PRGF arrangements with Honduras and SZo Tome and Principe and to conclude the first PRGF reviewwith Malawi. l9For a recent analysis o f the impact o f natural disasters and other shocks to export prices o f low-income countries, see IMF, "Fund Assistance for Countries Facing Exogenous Shocks," SMl031288, August 11, 2003, Adjustment mechanisms are typically built into PRGF-supported programs and program targets to accommodate exogenous shocks. - 19- Table 3. HIPCS in the Interim Period: Key FactorsAffecting Policy Performance in CountriesThat Have Had Delays in the Implementationof PRGFPrograms(As of end-July 2003) Macroeconomic Policies Structural Reforms PoliticaVSecurity Exogenous (incl. on governance) Factors Shocks Countrieswith interruptions/delaysin PRGF-supported programsof less than six months Cameroon Difficulties in reconciling fiscal data providedby the Ministry of Financeand the Central Bank and weak tax revenue performance in 2003. Ghana Expenditureoverruns in part due to significant increase in wage bill; shortfall in tax revenue Rwanda Expenditureoverruns in the wage bill and a shortfall in tax revenue Ethiopia The completion of the Terms of trade deteriorated financial audit of the resultingfrom lower export Commercial Bank of pricesfor coffee and major Ethiopiawas delayed crop failure due to drought Zambia Expenditureoverruns in the wage bill Delays in implementationof Exportsadversely affected by Low agriculturaloutput in measuresto divest Zambia political turmoil in regional 2002 becauseof poor and NationalCommercial Bank tradino partners uneven rainfall Countrieswith interruptions/delaysin PRGF-supported programsof betweensix and twelve months The Gambia Expenditureoverruns due to debt service Border closures with Senegal Major crop failure due to payments and revenue shortfalls related to that impeded transit trade and delayed rains. weak tax administration. Monetary higher petroleum prices expansionwith credit growth far in excess of targets Guinea Expenditureoverruns due to defense and Security situation along election spending as well as weak borders deteriorated budgetarymanagement Madagascar Prolonged political crisis in 2002 had substantial adverse economic effects and delayed the second review Countries with interruptions/delaysin PRGF-supported programsof betweenone and two years Guyana Expenditureoverruns in wage bill and Delays in public sector Domestic security situation shortfall in tax revenue reform,tax system reforms, deteriorated in 2002 and restructuringof the state- political instability adversely owned bauxite and sugar affected the decision-making companies process Honduras aExpenditureoverruns in the wage bill and Delays in implementationof HurricaneMitch in 1998 and shortfall in tax revenue civil service reform and later a significantdecline in reformof the electricity coffee prices and slow down sector in the U.S.economy Nicaragua Publicsector deficit substantially exceeded Delays in the privatizationof Commitments beyond 2002 HurricaneMitch in 1998 and targets in 2001 due to weak taxpayer the telecommunications were not possible because of later a terms of trade complianceand increases in expenditure company and electricity imminent Presidential shock-significant decline in prior to the elections. Monetary expansion generation plants. elections coffee prices and higher oil with credit growth far in excess of targets prices S%oTomb Expenditureoverruns in the civil service Governance issues related and Principe wage bill, utility and election costs to oil-sector contracts, and delays in the reform measuresfor the utility sector and the civil service Senegal Weak publicfinances due to problems with Delays in reforms in the Low agricultural output in the operations of the state-owned pension system and the 2002 because of poor and electricity and groundnut enterprises groundnut sector uneven rainfall Countrieswith interruptions/delaysin PRGF-supported programs of more than two years Guinea- Fiscalpolicy slippage-loss of budgetary Large errors and omissions Transition after 1999 civil 30 percentdecline in cashew Bissau control in 2000, due to expenditure in budget execution: conflict has been difficult. nut prices in 2001 overrunslargely on defense spending. measuresto address Parliament dissolved since Monetaryexpansion with credit growth far weaknesses in public 11/02-adversely affects the in excess of targets resource management were decision-making process not observed Malawi Expenditureoverruns related to the bail Delays in the Food crises because of out of parastatals, increased wage bill and implementationof public uneven rainfall, drought and reducedincome taxes sector reform and floods. Terms of trade Source: IMF country documents. privatization deteriorated due to lower export prices - 20 - Box 1. Some Cases ofInterim PeriodCountrieswith Current and Extended InterruptionsofPolicy Track Records Guinea Bissau. Guinea-Bissau'sPRGF-supportedprogram went substantially off-track soon after approval in December 2000. The reasons included a loss ofbudgetarycontrol and large unauthorized expenditures equivalentto about 10 percent of GDP (mainly on defense) that were partly financed by credit from the banking system. By end- June 2001, the primary deficit was 3.5 percent of GDP higher than targeted and domestic arrears had increasedby 2 percentof GDP. Moreover, measuresto addressweaknesses infinancial administration were not implemented.In 2002, economic activity declinedby more than 4 percent, adversely affecting the fiscal situation. Revenue declined 20 percent and there was abuild-up inarrears. Efforts to revive the PRGF-supportedprogram ceasedin September 2002 despite attemptsto institute corrective measuresthrough two short-term macroeconomicprograms in2001and 2002. Since then, discussionshave ensued on an extendedstaff monitored program for 2003. These discussions were not completedbecause ofthe dissolution ofparliament and the dismissal of the Government inNovember 2002. A caretakergovernmenthas been appointeduntil Parliamentaryelectionshave beenheldwhich have beenthrice delayed and now are expectedby October 2003. Honduras, Honduras's economic reform program has beenoff-track since end-2001 owing to weak fiscal policy implementation, primarily due to an overrun inthe wage bill coupled with tax revenue shortfalls, and slow civil service reforms. Lower tax collections reflected weaknesses intax and customs administration whilst wage increases grantedto teachers andhealth workers contributed to the substantialgrowth inthe wage billto 10.7 percentof GDP, beyondthe 9.3 percentof GDP specified inthe PRGF-supportedprogram. Progress on civil service reform, a key structural reform measure since October 2000 was slow, and legislation presentedto congress at end-2001 didnot meet the conditions envisagedinthe program for strengtheningthe government's wage policy. The PRGF-supported programexpired at end-2002. The authorities intendto develop a strategyto achieve fiscal sustainability on the basis o f a social pact with political parties, labor unions, the private sector and civil society. Malawi. Malawi's PRGF-supportedprogram, approvedinDecember 2000, went offtrack in2001 before the conclusion ofthe first review because of increasing fiscal imbalancesmostly from policy decisions to support loss- making parastatals, augmentcivil servants'wages, increase other low-priority public spending, suchas travel and representation, and reduce income taxes. The slippages were also exacerbatedby a risinginterest bill and weak revenue collections. Remedial fiscal measures proposedto reduceexpenditure and enhance revenuethrough the remainderof 2001/02were not implemented andresulted ina further deterioration inthe fiscal situation. Program targets for the domestic budget deficit were exceeded by 3.5 percent and 7 percentof GDP in2000101 and2001/02, respectively.The authorities have embarkedon a strategy of measures to strengthenpublic expendituremanagement md a budget for 2003/04 consistentwith the macroeconomicframework and reform agenda. Sslo Tom6 and Principe. S%oTome and Principe's PRGF-supportedprogram, approved inApril 2000, went off kack during 2001because ofpoor governanceinpublic resourcemanagement, delays inimplementing structural *eformsincluding much neededreforms o f the civil service andthe utilities sector, and govemance problems inthe ilsector.Strongrevenuemobilizationwasoffsetbyexpenditureoverrunsrelatedtowageincreases,paymentofan 3il sector contract and extra budgetary expendituresand resulted in a primary budget deficit of 3.0 percent of GDP m2001 comparedto the targeted surplus of2.7 percentof GDP. Monetary targets (for net domestic assets and net internationalreservetargets) were not observed.Implementation ofthe subsequent IMF staff monitored program juring the first half of2002 was disappointing, as key programtargets for end-June 2002 were not observed. There lvere spendingoverruns owing to trade union wage demands, higher energy and utility costs and the legislative Aections of March2002. The staff monitored program was extendedthrough end-December 2002 leading to the eeestablishmentof a broadly satisfactory track record ofpolicy implementation. This laid the basis for discussions inan economic programthat could be supportedby aPRGF arrangement.The understandingsthat were reached Nithstaffon anew PRGF-supportedprogram inearly July 2003 will needto be reassessedinlight ofthe attempted :oup d'Ctat of July 16, 2003. Source: IMF country documents. -21 - 17. The HIPC Initiativehas built inflexibilityto preventprotracteddelays in macroeconomicprogramsimpedingcountriesfrom reachingthe completionpoint.Incases where a reviewunder a PRGF-supported program is delayed or the PRGF-supportedprogram is otherwise interruptedfor a period o f less than six months, the completion point could be reached at the same time that the PRGF review i s completed or a new PRGF arrangement i s approved. In the case of a delay or interruption o fa PRGF-supported program o fmore than six months, the country i s required to establish an uninterruptedtrack record o f satisfactory performance for at least six months immediately before the completionpoint.2oWhere PRGFprograms have either lapsed or beendiscontinued, IMF staff have sought to work with the respective country authorities to implement Staff Monitored Programs that would facilitate the resumptiono f financial support from the international community. Inprinciple therefore countries with protracted interruptions intheir macroeconomic programs could be back on track within a short period o ftime and reach the completion point providedother conditions are met. ImplementingPovertyReductionStrategies 18. The requirementto satisfactorilyimplementa PRSPfor one year will not,in itself, be a constraintto most HIPCs inthe interimperiod.21AmongHIPCs that haveprepared PRSPs, the implementation requirement could affect the timing o f the completion point inonly four cases. At the end o f July 2003, only four interimperiod HIPCs (the Democratic Republic o f Congo, Guinea-Bissau, SZo Tom6 and Principe, and Sierra Leone), some o f which faced serious internal political constraints, had yet to complete a full PRSP. Sierra Leone reached its decision point only in2002; preparations for the completion o f a PRSP are underway there. The Democratic Republic o f Congo reached its decisionpoint only inJuly 2003. O f the 15 HIPCs in the interimperiodthat had completed PRSPs, 11had implementedtheir PRSPs for more than one year. 19. Inmost HIPCs,preparationof PRSPsthrough a broadparticipatoryprocess has taken longer than initiallyanticipated.Most countries had expected to adopt full PRSPswithin a year o f adoption o f the Interim Poverty Reduction Strategy Papers (I-PRSPs). The actual time betweenthe I-PRSP and the full PRSP has averaged 1`/z to 2 years for HIPCs inthe interim 2o See IMF and World Bank, "Heavily Indebted Poor Countries (HIPC) Initiative: Status of Implementation," March 25,2002, SM/O2/94, httu:llwww.imf.ordexternalln~/hi~cldoc.htm, and March22, 2002, IDAISecM2002-0 155, httl3://www.worldbank.org/hiuc. "FloatingcompletionpointtriggersrequirethesatisfactoryimplementationofthePRSPforatleastoneyear.This requirementensures the PRSP's integration with the macroeconomicframework and the effective spending of debt relief. The framework does provide that those countries indicated as retroactive cases do not have the one-year satisfactory implementation requirement. See IMF and World Bank, "Heavily IndebtedPoor Countries (HIPC) Initiative-Strengthening the Link between Debt Relief and Poverty Reduction," August 26, 1999, EBS/99/168; SUP. 1, h~://www.imf.org/extenial/nu/iucldoc.htm,and August 26, 1999, IDNSecM99-545, httu:/lwww,worldbanl~orglhipc. - 22 - period (Table 4). A lesson that has emerged from PRSP reviews i s that initial timetables were overly ambitious.22 Table 4. HIPCs in the Interim Period: Time Taken from Interim PRSPto FullPRSP 1/ FullPRSP Prepared FullPRSP Not Yet (1to 1%years) (1%years to 2 years) (More than 2 years) Prepared The Gambia Ethiopia Cameroon Congo, Dem.Rep. of Guinea Malawi Chad Guinea-Bissau Guyana Senegal Ghana S%oTome and Principe Honduras Zambia Madagascar SierraLeone Nicaragua Rwanda Niger Source: IMFcountry documents. liTimetakeniscalculatedonthebasisofsubmissionofafullPRSPtotheBankandtheFund relative to the adoption of the Interim PRSP. 20. PRSPpreparationstatus reports provide some explanationsfor the delays. Fully engaging all stakeholders ina participatory process, collecting and analyzing data, establishing priority objectives and sectoral strategies and undertake their costings have taken longer than expected. Difficulties inestablishingpublic expenditure management systems and transparent mechanisms for monitoring the spending o f debt relief, as well as the lack o f institutional and humanresource capacity have constrained the timely preparation o fPRSPs inseveral countries inthe interim period (Table 5). 21. Delays in PRSP preparationhavebeen accompaniedby improvedcountry ownership and quality of the PRSPprocess. These developments have beenconsistent with prevailing views since the launching o f the PRSP approach. Authorities and stakeholders in HIPCs and the international community have emphasized the importance o f country ownership and the quality o f the PRSP process. The Boards o f boththe Fundand the Bank as well as development partners have stressed that ownership and quality should not be sacrificed for speed inreaching the completionpoint. Bankand Fundstaffhave beenworking with others to alleviate 22See IMF and World Bank "Review o f the Poverty Reduction Strategy Paper Approach: Early Experiencewith I-PRSPsand Full PRSPs," March 27, 2002, SMl02154, REV. 1, http:llwww,imf.orglextemalinpihipcldoc.htm, and March 26,2002, IDAlSecM2002-174, htto:llwww.worldbank.or~~lpovertylstrategies; and, "Poverty Reduction Strategy Papers-Progress inImplementation," August 8, 2003, SMl03i279, August 14, 2003, IDNSecM2003- 0468. - 23 - Table 5: HIPCs inthe Interim Period: Some FactorsDelayingPRSPPreparation Participatory Data Collection and Public Expenditure Costing and Other Process Monitoring Management 11 Prioritizing Cameroon Chad The Gambia The Gambia Cameroon21 Chad Cameroon Ghana Ghana Madagascar 31 Ghana The Gambia Malawi Madagascar Sierra Leone 41 Malawi Guinea Madagascar Zambia 51 Senegal Guyana Senegal SierraLeone Rwanda Zambia Zambia Source: PRSP PreparationStatus - Country Reports.Excludes The Democratic Republic of Congo. 11Includes improvingPERs, MTEFs, budget transparency and HIPC relieftracking systems, 21Neededmore time to preparethe medium to long-term macroeconomic framework. 31Change of government. 41 Shortage o f financial and lack of humanresourceandtechnical capacity. 51 Lack o f humanresourceandtechnical capacity. constraints facing countries inPRSP design and implementation. Recent PRSPs reveal a greater focus on improvingthe realism o f economic growth projections and the macroeconomic frameworks underpinning PRSPS.*~PRSP preparation status reports have helped identify bottlenecks and the need for technical assistance. More generally, PRSPs have increased the focus on public expenditure management although progress inthis area remains a challenge.24 22. Lookingahead, a number of countriesare well placedto reachtheir completion points in2003 or early2004. Interms of meetingthe conditions relatedto macroeconomic stability and the one-year satisfactory implementation o f a PRSP, twelve countries are either pursuingor making efforts to continue the implementationo fIMF-supported macroeconomic programs (Table 6). Ifthese efforts succeed and the countries remain on track, reaching the completion point ineither 2003 or early 2004 would be possible provided two other conditions are met: the Joint Staff Assessments report has beendiscussed at the Boards o f the Bank andthe Fund, and the countries successfully complete the predefined social and structural conditions. Progress toward implementing the predefined social and structural conditions is discussed further below. 23See IMF and World Bank, "Poverty Reduction Strategy Papers-Progress in Implementation," op. cit. 24See IMF and World Bank, "Actions to Strengthen the Tracking o f Poverty Reducing Spendingin HIPCs," March 22,2002, SMl02130, REV.2, htt~:llwww.imf.or~lexternallnplhipcldoc.htm, and March 20,2002, IDAISecM2002- 3012, h t t://www.worldbankorglhipc. ~ - 24 - Table 6. HIPCs inthe Interim Period: Status of MacroeconomicPoliciesand PRSPPreparation (As ofJuly 2003) Countries On Track With MacroeconomicPolicies Countries With MacroeconomicPoliciesOff Track PRSP Finalized Date Plus One Year I/ PRSPFinalizedin: Cameroon Am-04 Guinea Jan-03 Chad Jin-04 Honduras Aug-01 Ghana Feb-04 Malawi Apr-02 Madagascar Jul-04 Ethiopia Jul-03 Gambia, The Apr-03 Guyana NOV-02 Nicaragua Jul-02 Niger Jan-03 Rwanda May-03 Senegal21 Mar-03 Zambia Mar-03 PRSP N o t Finalized Sierra Leone Guinea-Bissau DemocraticRepublic of S%oTom6 andPrincipe Congo Source: IMF Staffestimates. 11Date i s one year after the submissionofthe full PRSP.Inaddition, the Joint StaffAssessmentswould needto be approvedby the Boardsofthe BankandFund. 21Senegalis a retroactivecase, not subjectto the one-yearsatisfactory implementationrequirement. - 25 - Satisfying Social and Structural Completion Point Triggers 23. Social and structural completion point triggers support pro-poor growth and poverty alleviation including a reorientation of public expenditures. One aim o f these triggers is to ensure the effectiveness of debt relief through the establishment and strengthening o f implementingagencies andpublic expenditure monitoring mechanisms. Another aim i s to ensure the use o f savings resulting from HIPC debt reliefi s usedto finance expenditures supporting poverty reduction and growth.25These measures are aligned with the framework o f the I-PRSP andpre-defined at the decisionpoint. Policy measures havebeensupported inthe areas o f governance, public expenditure management, fiscal transparency, financial restructuring andprivatization, health(including HIV/AIDS) and education, andrural and agricultural reform. Insome HIPCs, development ofa systemfor the tracking expenditureshas also beenrequired. 24. The enhancedInitiativeprovides flexibility inapplying these triggers.26The Executive Boards o fthe Fundand the Bank makejudgments at the completionpoint as to whether progress on individual triggers i s sufficiently satisfactory to indicate that the trigger has been met. Inaddition, the Board o f the Bank can take a broad view o f progress across triggers to reach overall conclusions o f whether they have beenmet; the Board ofthe Fundcan grant waivers as necessary where a particular condition has not beenmet or has been superceded by events, when the thrust o f the overall performance i s sati~factory.~~ 25. Progressin meeting these triggers varies across countries during the interim period. Although lack o f satisfactory progress inmeeting these triggers has not beenthe proximate cause for delay inreaching completionpoints, implementationhas generally been slower than envisaged. Inmany cases, progress i s broadly satisfactory. Ineight countries (Ethiopia, Ghana, Guinea, Honduras, Malawi, Rwanda, Si50 Tome and Principe, and Sierra Leone), progress in meeting the structural and social completion point triggers i s generally satisfactory or good, although a final determination can be made only at the time o f the completion point. Inthe remaining 11HIPCs inthe interimperiod no consistent pattern o f performance emerges- performance may be strong inseveral areas but not inothers. Inmany cases, within specific sectors such as health and education, performance on most triggers has beensatisfactory but one or more triggers may not have beenmet or insufficient information is available to make a determination (see Box 2). Difficulties with key triggers could prove to be obstacles to reaching the completionpoint inthe future though they have not been inthe past. 25Inthis context, the review by the World Bank's OperationsEvaluation Department highlighted the importanceof focusing on pro-poor growth and balancing suchdevelopmentpriorities relative to social expenditures. See World Bank, OperationsEvaluation Department,"Debt Relieffor the Poorest," op. cit. 26See IMF and World Bank, "Modifications to the Heavily Indebted Poor Countries (HIPC) Initiative," July 23, 1999, EBSl991138, httv:llwww,imf.orglexternallhplhipc, and July 26, 1999, IDNSecM99-475, htto:llwww.worldbank,orglhipc. 27To date the FundBoard has granted waivers to Mauritania and Tanzania. - 26 - Box 2: Examples of Structural and Social CompletionPoint Triggers Chad: Progress on meetingconditions inthe areas of governance, health(includingHIV/AIDS), education,and ruralinfrastructure hasbeenuneven, with continuousdeteriorationofsome indicators inthe healthsector.Overall, most indicators inthe social sectors and inruraldevelopmentremainfar fiom the target. This could delaythe completionpoint.Corrective actionsare beingplannedwithinthe framework ofthe preparationofthe 2004 program budgets. Ghana: Triggers have beenmet inthe areas o f educationand local-governmentservicebill. Progresshas also been madetowardmeetingtriggers inthe use of budgetarysavings, procurementreform, installationof a computer-based financial managementsystem, andelectricityandpetroleumpricing.Correctivemeasureswill needto be discussed for five pendingconditions: (i) staffing o f internalaudit functions, (ii) full monthly publishinginthe government gazette ofreportson cash expendituresandcommitmentsby ministrydepartments andagencies, (iii) development o f a districtcompositebudget, (iv) expandingrural water coverage to 46 percent, and(v) raisingrecurrenthealth expenditures at districtand lower-levelgovernmentsto 45 percentofthe totalhealthbudget. Niger: Most o fthe completionpointtriggers inthe areas of governance, education, andhealthhave beenmet. Corrective measureswill needto be discussed for five pendingconditions: (i) evaluatingthe impactofpublic spendingonthe poor inthe healthsector; (ii) the completion of a report on impedimentsto primaryschool enrollment; (iii)limiting grade 6 repetitionrateto at most 15 percent; (iv) adoptingaplanto improve the availability o f essentialdrugs inrural healthcenters; and(v) increasingnational immunizationratesof children aged 12-24 monthsfor DPT3 to 40 percent.An evaluationofthe impact ofpublicspendingonthe poor alsoremainsto be done. Source: Annex 111. B. ChallengesinReachingDecisionPoints 26. Domesticconflictis a dominantfactor in most HIPCsyet to reachthe decisionpoint (see Annexes I1and 111). Inmost o f these countries, continuing domestic conflict or unsettled transitions from post-conflict situations have hampered effective policy implementation and institutionbuilding.Last year a socio-political crisis interrupted progress toward reaching the decision point inCBte d'Ivoire. Preparationo f a preliminary HIPC document was derailed inthe Central African Republic by a resurgence o f domestic conflict. Elsewhere, a lack o f political consensus on important issues such as revenue sharing (Comoros) or lack o f effective implementation o f economic and financial policies has been a key impediment inreachingthe decision point. 27. In several countries,a periodof stabilizationhas beenfollowedby renewedconflict. As a result, efforts toward stabilizing domestic security conditions andestablishing a track record o f policy performance have been derailed. InBurundi, the Central African Republic and CBte d'Ivoire, for example, staff monitored programs or PRGF-supportedprograms were inplace or discussions on PRGF-supportedprograms had commenced but they were aborted as conflict reemerged. Domestic conditions need to stabilize and security conditions need to be maintained before pre-decisionpoint countries can move forward quickly toward the decision point. 28. Another potentialimpedimentis the settlementof protractedexternalpayments arrears, includingarrears to multilateralcreditors. Inseveral HIPCs, such as Liberia, Somalia and Sudan, a concerted international effort would be needed to resolve outstanding arrears. Such an effort appears to be emergingin Sudan(see Annex 111). Ina special meetingin February2003 to review arrears clearance arrangements inHIPCs, representatives o fmultilateral - 27 - development banks endorsed the principle o f providing positive or at least non-negative net resource transfers to HIPCs inarrears clearance operations inthe context o f the HIPC Initiative. They also agreed on a stronger process o f early consultationand communication. 29. The HIPC Initiative is open to all eligible countries that establish a performance record leading to the decision point by the end of 2004 when the sunset clause takes effect. The sunset clause stems from the 1996 Programof Action, which established atime limit in order to prevent the HIPC Initiative from becoming a permanent facility and to encourage HIPCs to adopt adjustment programs that could be supportedby the IMF and IDA.The Boards subsequentlyagreed to two-year extensions in 1998,2000, and 2002. Some HIPCs could start establishing a policy performance record before the sunset clause takes effect by the end o f 2004, inorder to reachthe decisionpoint. The approach to engagement inLICUS contained inthe World Bank Task Force Report on L o w Income Countries Under Stress (LICUS) may be useful insupporting HIPCs that face conflict-related, governance or capacity obstacles to reaching decision points2* Iv. OBSERVATIONS ON GOVERNANCE DEBTSUSTAINABILITY AND The international community has underscored the importance of good governance to achieving pro-poor growth in HIPCs. The current HIPCframework strongly supports improved governance, especially in strengtheningpublicfinancial management and is part of a broader framework of international assistance to improve governance in these countries. TheBank and Fund, together with developmentpartners, have organized a series of workshops on debt sustainability in the context of achieving the Millennium Development Goals (MDGs) in low- income countries, especially HIPCs. Stafls willprepare ajoint Boardpaper by the end of the year that will reflect many of the conclusions reached in these workshops. A. Governance 30. Governance is a key issue in the policy agenda in PRSPs which provide an overarching country-owned governance strategy that can be supported by the international community.29 Governance problems are wide-ranging, but nonetheless, some countries through the PRSP process havemade apromising start to addressthem. PRSPs provide a strategic framework for improved governance and enhance country ownership o f these reforms. ** See World Bank, "World Bank Group Work inLow-Income Countries Under Stress: A Task Force Report," July 8,2002, SecM2002-0367, httD://www.worldbank.ordoperations/licus. 29 Governance is the exercise o f economic, political, and administrative authority to manage a country's affairs through formal rules and processes. It comprises mechanisms, processes, and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences. Public sector governance includes government administration, civil service, decentralization, tax administration, legal andjudicial reform, anti-corruption, and public expenditure management. - 28 - 3 1. Public expendituremanagement(PEM) measures support efforts to improve governanceinHIPCs.PRSPs for HIPCs inmany cases reinforce these measures.The IMF and World Bank have supportedthe PRSP processthrough periodic assessments of each ofthese areas. A recent Bank-Fund review found that PEM reforms inHIPCs are increasingly being addressed inPRSPs. The average number of PEM measures rose from eight in2001 to over 16 in PRSPs produced during 2002-03. Further,the Bank and Fundhave had an on-going effort for the past 3 years to strengthenPEM inHIPCs. InFebruary 2002 staffassessments ofpublic expenditure management systems in24 HIPCs were reported, including development of action plans for impr~vement.~'Ofthe 24 countries includedinthe assessment, ninerequiresome upgrading to be able to track poverty-reducing spending satisfactorily, and the remaining fifteen require substantial upgrading. A more recent review examined country progressinimplementing action plans of 21 HIPCs to strengthenthe capacity to track poverty-reducing expenditure^.^^ The update found that more than three-fourths of measures inthe action planshave either been h l l y implemented or are under implementation. 32. Goodgovernancepracticesare supportedinHIPCsthroughstructuralbenchmarks inPRGFprograms,BankPovertyReductionSupportCredits and institution-building projects,and in most cases through social and structuralcompletionpoint triggers. Governance i s also an integral part of IDA's performance-basedallocation system. Good governancepractices (including those related to public expenditure management) are also supportedthrough multipledonor and creditor instruments. Structural completion pointtriggers have supportedgovernance reforms inHIPCs. For example, completion point triggers have required: (i) Most HIPCs to establish tracking systems to monitor the use of HIPC reliej (ii) Rwanda and Cameroon to implement an integratedjnancial management information system on a pilot basis; (iii)Establishment and implementation of anti-corruption strategies inBenin, Guinea, Cameroon, and Honduras; (iv) Reformofthepublic procurement system in Cameroon, Chad, Ghana, Guyana, Guinea-Bissau andNicaragua; and (v) reforms to Government audit oflce or national audit standards inGhana and SZio Tom6 and Principe. 33. Governanceis a process requiringcontinuedefforts by HIPCs as well as external support from the internationalcommunity.Governancewill continue to be a strong focus of the instrumentsandprograms ofthe Bank, Fundand international community. This focus extends beyond the HIPC Initiative. Staffs will continue to work to strengthenthe reporting on governanceof HIPCs at the completion point. 30See IMF and World Bank, "Actions to Strengthenthe Tracking of Poverty-Reducing Spending inHeavily IndebtedPoor Countries(HIPCs)," March 21,2002, IMF SM/02/30, http://www.imf.ordextemal/np/hipc/doc.htm, and March 22, 2002, IDA SecM2002-30/2, http://www.worldbank.oreihiacihi~c-review/hi~c-review.html. 31See IMF and World Bank, "Update on Implementation of Action Plans to StrengthenCapacity o f HIPCs to Track Poverty-Reducing Spending," March 7,2003, httu://www.imf.ordexternal/ndhipc/doc.htm, and March 7,2003 IDA/R2003-0043, http://www 1.worldbank.org/publicsector/pe/HlPCUpdate.pdf. - 29 - B. DebtSustainability 34. There is increasingappreciation inthe international community of the challenges of mobilizing the financing necessary to help achieve the MDGs in low-income countries while ensuring long-term debt sustainability. The global economic downturn, declines inmany international commodity prices, and additional debt accumulation have raised debt-burden indicators insome low-income countries, including HIPCs. This has occurred, regardless o f where HIPCs have been inthe debt-relief process. At the same time, there is a recognizedtension between the needto finance the MDGs inthese countries andthe needto avoid accumulating unsustainable external debt. These developments have ledthe Fund, the Bank, and other memberso fthe international community to initiate a process to assess the criteria and standards for evaluating debt sustainability as well as the policy implications for the countries themselves and for the international community. 35. There is also recognition by the international community that debt relief provided by the HIPC initiative can reduce the debt burdensignificantly but not guarantee debt sustainability. For debt to remain at sustainable levels requires continued efforts by creditors and debtors to ensure an appropriate level and concessionality of new resource flows, including through strengthening HIPC debt management capacity. Moreover, translating debt reduction into poverty reduction will require continued measures to use fiscal savings towards poverty-reduction and growth within the PRSP framework (See Box 3).32 36. The Boards of the Bank and Fundhave asked staffs to suggesta way forward in developing a framework for debt sustainability and development financing. Bank and Fund staffs have consulted through joint workshops with French, German, and Commonwealth Secretariat partners to explore long-term debt sustainability issues inlow-income countries.33 The results o fthese workshops and analysis have beenusedas inputsfor briefings to the IMF and World Bank Boards. A workshop sponsored by the Bank and Fundwill be heldin Washington on September 11-12 and a multilateral development bank workshop i s scheduled for late October. InDecember 2003 ajoint paper for the Bank and FundBoards will present proposals on policy and operational options on how to approach long-term debt sustainability in low-income countries. 32The World Bank Operations Evaluation Department review suggeststhat the focus of development priorities shouldbe more on pro-poor growth relative to social expenditures. See World Bank Operations Evaluation Department, "Debt Relieffor the Poorest," op. cit. 33The FrenchDevelopmentAgency organized a workshop inParis May 14,2003. The German agency InWEnt organizedaworkshop inBerlinMay 19-20,2003. The Commonwealth Secretariat organized a workshop inAccra, Ghana, June 9-1 0,2003. - 3 0 - Box 3: World Bank Operations Evaluation Department Review of the HIPC Initiative InFebruary2003, the World Bank OperationsEvaluationDepartmentreviewedthe HIPC Initiative inareport entitled "Debt Relief for the Poorest-An OED Review ofthe HIPC Initiative." The report found the HIPC Initiative highly relevant inreducing the excessive debt burden of qualifying countries, notingthat, "relative to past efforts, it is more concerted across creditors and more comprehensiveinits attempt to reducethe high external debt-including, for the first time, multilateral debt-ofmany ofthe poorestcountries. It has madethe processes surroundingthe sovereign debt regimemore open and accountable." (Executive Summary, p. xii) At the same time, the OED review found that the legitimizingprocessthat helpedmake the initiative areality also expandedits objectives - includingnotjust a `permanent' exit from debt reschedulingbut also promotionof growth, and releasingof resources for social expenditurestargetedat poverty reduction (See Forward, p. ix). The HIPC Initiative is a limited instrument, according to the OED review, and it now runsthe risk of promising morethan it can deliver by itself. Instead,the OED argues that the HIPC Initiative i s "an important but small part ofthe overall development assistance framework. Having provided the HIPCs with an opportunity for a `fresh start,' the international community still faces a challenge inhelping these countries set out on a sustainable path for growth and poverty-reduction. This requires actions by the HIPC govemmentsto adopt soundpolicy frameworks and a balanceddevelopment strategy. Italso requires actionsby the international community to assist the countriesto enhance their exports and buildneeded institutional capacities" (Forward, p. ix). The report therefore recommendsthe Bank to: (i) clarify the purposes and objectives ofthe Initiative, ensurethat its design is consistent with these objectives, and both the objectivesand how they are to be achievedbe clearly communicatedto the global community; (ii) improve the transparencyof the methodology and economic models underlying the debt projections andthe realism of economic growth forecasts indebt sustainability analyses; (iii) maintain the standards for policy performance,and when the establishedcriteria are to be relaxedthere shouldbe a clear and transparentrationale to ensure that the risks to achieving and maintaining the Initiative's objectives are minimized; and (iv) focus more on pro-poor growth andprovide abetter balance among development priorities relative to the current focus on social expenditures. Work is underway to implement these recommendationsby: (i) continuing to work with relevant stakeholders to clarify and communicatethe objectives ofthe HIPC Initiative by notingthat reductions inthe debt stock through the Initiative was expectedto contribute to a more comprehensivedevelopment effort but not to supplant it; (ii) working to improve the realism of growth projections and to apply stress tests that assess risks to baseline scenarios; (iii) continuing to ensure that policy performancestandards are maintained; and (iv) assistingHIPCs ensurethat the use of savings of debt reliefare allocatedto expendituresfor pro-poor growth consistentwith the PRSP framework (See Annex K). Source: World Bank, OperationsEvaluation Department, "Debt Relief for the Poorest," op. cit. 37. Key issues beingreviewedare the definitionof the debt burdenandwhen it is sustainable,the impact of volatility and shocks, andthe role of country-specificpoliciesand circumstances.There is agreement onthe needto base sustainability assessmentson a rangeo f indicators, to monitor and assess the level and composition o f both domestic and external public debt, andto adopt a country-specific approach. There has beensome debate over how to treat non-guaranteed state enterprise debt inthese calculations. There is also recognition o f the importance o f economic volatility and the prevalence o f exogenous shocks inlow-income countries. Staffs are evaluating the prevalence o f volatility, the severity and frequency o f shocks, economic growth and impact on debt sustainability o f each. Evenmore important, staffs are examininghow grants and other financing mechanisms could potentially be made more counter- cyclical, more predictable and better coordinated to address volatility. Staffs are also reviewing concessional lending instrumentsand strategies to help manage shocks. Finally, staffs are exploring how country-specific policies and circumstances have affected growth and debt sustainability . - 3 1 - V. CREDITORPARTICIPATION A. MultilateralCreditors:Costs, Commitmentsand Delivery 38. Costs attributableto multilateralcreditorsare littlechanged over the pastyear, while participationhas increasedwith almost all creditorsparticipating.InNPV terms, multilateral creditors accounted for US$19.0 billion, or 48 percent o f total HIPC costs for 34 countries o f US$39.4 billion (Appendix Table 8). This represents an increase o f US$O.l billion in2001NPV terms. Twenty-threeof 30 multilateral creditors have indicatedtheir intentionto participate inthe Initiative, representing more than 99 percent o f the total debt relief required. In October 2002, the EastAfrican Development Bank agreed to participate inthe HIPC Initiative andthe Arab Monetary Fundreconfirmed its participation inearly 2003, The large multilateral creditors, including the IDA, the IMF, the African Development Bank (AfDB), the Inter- American Development Bank (IDB), the EuropeanInvestment BaWEuropean Union (EIB/EU), and the Central American Bank for Economic Integration (CABEI) are providing reliefto most countries inthe interimperiod. So far multilateral creditors have delivered more than US$3.8 billion inrelief. 39. The total cost to the World BankGroup remainslargely unchangedsince September2002. The cost o fthe Initiative for 34 countries is estimated to be US$8.7 billionin 2002 NPV terms. The 27 HIPCs that have reached their decision points account for US$7.7 billion (NPV) o f this figure (US$12.4 billion innominal terms) (Appendix Tables 9 and As o fthe end of May 2003, the World Bankhad delivered a total o fUS$2.5 billion innominal terms to these 27 HIPCs. O f this, US$101 million innominal terms i s reliefto Cameroon and Honduras, two IDA-only countries with significant IBRDdebt outstanding. IDA debt relief under the HIPC Initiative to the 27 decision point HIPCs i s projectedto total more than US$400 million in2003 and the average for the period 2003-09 i s estimated to exceed US$500 million. Given average annual World Bank Group net transfers o f US$1.3 billion to these 27 countries during 1998-2002, the HIPC Initiative could, with sustained IDA flows, increase IDA'Snet transfers to HIPCs by more than 40 percent. IDA i s providing interimrelief to 17 o f 19 countries inthe interimperiod.3sItalso delivers irrevocable debtreliefto all eight countries that reached the completionpoint under the enhanced Initiative. 40. IDA's financingneedshavebeenmetthroughthe IDA-13 period. The HIPC Trust Fundhas two components. The first is the management o f funds to reimburse IDA for HIPC debt relief. The Bank has pledgedto provide US$2.15 billion (NPV) or US$2.4 billion (nominal) inIBRDnetincometransfers to the HIPC Trust Fundto reimburse IDA for HIPC debt relief. To date, US$I.64 billion o f such transfers has been approved. Covering IDA's costs through IDA- 13 would require estimated annual transfers o f US$240 million per year on average for this year and the following two years. This level of estimated transfers would fully utilize this pledge. Donors have reaffirmed that the cost o f IDA's debt relief, estimated to exceed US$500 million 34The figures include debt reliefon interestpaymentsrelatedto stockoperations. 35InCameroonandHonduras,the cumulative limit of one-thirdofthe totalNPV ofreliefhas beenreached.Senegal will reach the cumulative limit in September 2003 andThe Gambiawill do so inDecember2004. for a decade or more beyond IDA-13,should not be permitted to compromise IDA'Sresources. They agreed during the IDA-13 discussionsthat the financing of IDA'SHIPC debt reliefcosts would be addressedin2004 at back-to-back meetings with the IDA-14 replenishment discussions. 41. IDA debt relief grants and creditsare beingusedto finance debt relieffor Cameroonand HondurasbecauseIBRDnet income transfers to the HIPC Trust Fundcannot be usedto provide debt relief for these countries which have substantial levels of outstanding IBRDdebt.36These grants andloans were estimatedto total about US$333 millionat the time of their decisionpoints. Fundingfor this debt reliefwas provided as part ofthe IDA-13 funding arrangement. 42. Additional contributionshavebeenpledgedby donors to the IDA-administered HIPC Trust Fundfor Regionaland SubregionalCreditors.The secondcomponent ofthe HIPC Trust Fund supports the provisionof debt reliefto eligible HIPCs by regional and subregional multilateralcreditors using donors' funds (Appendix Table 13). InOctober 2002 donors made additional pledges of about US$850 millionto the HIPC Trust Fundto support the debt relief to be providedby eligible creditors. This brought total pledges to about US$3.4 billion. Severaluncertainties could affect future debt reliefcosts and corresponding HIPC Trust Fund financing requirements.They include the timing and levelof debtreliefthat will be requiredfor countries that havenot yet reachedtheir decision points, the level oftopping upthat may be approved and the potential eligibility of countries not currently included inthe costing estimates such as Sudan. Paid-in contributions reachedabout US$2.6 billion on June 30,2003. HIPC Trust Fundresourceshave helped finance the participation ofthe AfDB US$1,010.2 million, the IDB US$84.3 million, the CABEI US$81.9 million, the Corporacicin Andinade Foment0 (CAF) US$55.6 million, Banque OuestAfi-icaine de Developpement (BOAD) US$24.9 million, the Fundfor the Financial Development ofthe River Plate Basin (FONPLATA) US$18.7 million, the Nordic Development Fund(NDF)US$12.8 million, the International Fund for Agricultural Development (IFAD) US$9.7 million, and the Caricom Multilateral Clearing Facility (CMCF) US$2.5 million. 43. The costto the IMFfor 34 countriesis estimatedat US$2.9 billionin2002 NPV terms, little changed from previousestimates. Ofthis amount, US$2.7 billion inNPV terms have already beencommittedto 27 decision point countries, which i s equivalent to SDR 1.8 billion on a cashbasis, of which SDR 1.1billion has beendisbursed (Appendix Tables 11and 12). Based on current projections and the current methodology for calculating the IMF's share of HIPC Initiative topping up assistance, HIPC grant resources are estimated to be ~ufficient.~' 36CGte d'Ivoire was also identified as a country with substantialIBRDexposurewhere this modality would be applied. BecauseCGte d'Ivoire has not reachedthe decision point underthe enhanced HIPC Initiative, nor reached the completion point under the originalHIPC Initiative,the Bank has not yet providedany reliefunderthe HIPC Initiative. 37The implications for financing o fthe topping up assistance for the IMF are discussed indetail inIMF"Update on the Financing of PRGF and HIPC Operationsandthe Subsidization of Post-Conflict EmergencyAssistance," March 21, 2003, SMI031100, htt~:llwww.imf.orglexternallnpltrel~led~e/2003/023003/vdf. - 33 - 44. The IMFmay provideinterimassistance to HIPCs. IMF interimassistance is provided for a period of up 12 months at a time; additional tranches o f interim assistance can be provided ifthe conditions for interimassistanceare met(inparticular, performanceunderthePRGF arrangement i s satisfactory and financing assurance from other creditors are inplace). In2002, prolongedprogram interruptions prevented Guinea-Bissau, Honduras, and Malawi from receiving IMF interimassistance throughout the year, whereas the remaining HIPCs that hadnot yet reached the completion point benefitedfrom interimassistance. 45. The cost to the African DevelopmentBank(AfDB) of the 23 African countriesthat have reachedthe decisionpointis US$2.8 billionin2002 NPV terms. The AfDB has committed US$1.6 billion inNPV terms at the decisionpoint (US$2.2 billion innominal terms) to the 22 countries that have reached their decision oints inthe AfDB, o f which US$320 million (NPV) will be contributed from internal resources?'As of the end o f 2002, the AfDB had deliveredUS$493 million inrelief to 22 countries under the HIPC Initiative. It is delivering reliefto 14 of 15 HIPCs inAfrica inthe interimperiod. InSenegal, the AfDB delivered its cumulative limit o f 40 percent o f the total NPV duringthe interim period; Senegal i s therefore not receiving additional interimrelief. It i s anticipated that Cameroon, The Gambia, Guinea, Madagascar, and Zambia will also reach their cumulative limits for interim relief over the next six months. 46. The cost to the InterAmericanDevelopmentBank(IDB) of the four HIPCsinthe regionis USs1.3 billionin2002 NPVterms.Between1998 andthe end o f2002, IDBdelivered US$l11.3 million innominal terms under the original framework and US$150.5 million under the enhanced framework. IDBis delivering interimreliefto Guyana andNicaraguabut stopped providing interimrelief to Honduras in2002 when one-third o fthe total N P V o f reliefrequired had been delivered. 47. The 26 other multilateralcreditorsbear costs of US$2.8 billionin2002 NPV terms, US$2.4 billionofwhich goes to the 27 decision point countries(Appendix Table 8). Seven small creditors have not indicated a willingness to participate inthe Initiative due mainly to financial constraints. Providing HIPC reliefhas posed a substantial challenge to some multilateral creditors, including some that are participating fully. Such creditors have found it difficult to reconcile their interest inparticipating inan international initiative with the need to maintaintheir financial integrity. Insome cases, multilateral creditors have also had difficulties ensuringthat the amount o frelief provided is sufficient to meet the NPV reduction required. B. OfficialBilateralCreditors:Costs, Commitmentsand Delivery 48. Since September2002, ParisClub creditorshaveagreedto stock-of-debtoperations on Cologne terms for Beninand Maliat their completionpointsand flow reschedulingsfor Nicaraguaand The Gambia(Cologneterms), andthe DemocraticRepublicof Congo (Naples terms). The flow rescheduling for the Democratic Republic of Congo was instrumental inclearing arrears to external creditors. Inaddition, many Paris Club creditors offeredterms for 38The Executive Board ofthe AfDB has not yet met to decide on its modality for delivering HIPC assistance to the DemocraticRepublic o f Congo. - 34 - the arrears clearance that went beyondNaples terms.The Paris Club agreed to consider topping- upthe Naples flow reschedulingamounts to Cologne terms once the Democratic Republic of Congo reaches the decision point, which would reduce the country's debt-service obligations by another 70 percent. 49. Most of the costs attributableto officialbilateralcreditors are borne by members of the Paris Club. Paris Club creditors account for US$15.2 billion, or 39 percent ofthe total HIPC costs of US$39.4 billion for 34 countries in2002 NPV terms. All Paris Club creditors have committed to deliver their share o f HIPC reliefto the 27 countries that have reached the decision point totaling about US$12.5 billion in2002 NPV terms (AppendixTables 14 and 15). Many Paris Club creditors are providing interimrelief and relief over and above that required under the HIPC Initiative (Appendix Table 16). 50. The participationof non-Paris Club bilateralcreditors has improvedsince September 2002. The fifty-one non-Paris Club official bilateral creditors account for US$3.4 billion o f HIPC relief costs to 34 countries in2002 N P V terms (Appendix Tables 17 and 1S), of which the costs for the 27 decision point countries represent US$3.3 billion (Appendix Table 8). InSeptember 2002 Libya agreed to fully participate inthe Initiative and deliver US$225 million (in2002 NPV terms) inHIPC relief to 16 countries.39InJune 2003 India announced its decision to write off all claims on HIPCs, thereby benefiting Ghana, Guyana, Mozambique, Nicaragua, Tanzania, Uganda, and Zambia. 51. Deliveryof relief by non-ParisClub officialbilateralcreditors canbe fully measured only after their debtors reachthe completionpoint. Because non-Paris Club bilateral creditors typically deliver relief only after the completion point, delivery o frelief becomes an issue only once countries to which they have outstanding loans reach the completion point. O f the 51 non- Paris Club bilateral creditors, 13 have indicated commitments to deliver full debt reliefunder the HIPC Initiative framework and 14 have made commitments to deliver HIPC relief on some but not all claims on HIPCs. Twenty four non-Paris Club creditor countries representing about 21 percent of the total cost attributable to this group have not yet agreed to deliver HIPC relief. 52. InMarch2003 the Boardsof the Bank and the Fund reviewedmeasures to provide reliefby HIPC creditorsto HIPC debtors.40Based onthe inputreceived from the Board discussion staffs have beenworking with bilateral creditors and donors to further explore options to resolve this issue. ~ ~ ~~ 39Libya has also agreedto participate inthe enhancedHIPC Initiative. Staff estime that traditional debt relief, i.e. a stock-of-debt operation on Naples terms, could cost aroundUS$900 million in2002 NPV terms. 40See IMF and World Bank, "Enhanced HIPC Initiative-Creditor Participation Issues," February 28, 2003, SMl03l82, http:llwww.imf.oralexternal andFebruary 28, 2003, IDAlSecM2003-092, httv://www .worldbank.ore/hipc. - 35 - C. CommercialCreditorsand CreditorLitigation 53. The size of commercialdebt owed by HIPCs has already been substantiallyreduced as a result of the Debt ReductionFacility for IDA-onlyCountries.HIPC relieffrom commercial creditors requiredunder the Initiative accounts for about 5 percent of HIPC relief. In some HIPCs, however, commercial creditors account for a significant proportion of outstanding debt. Encouraging commercial creditors to deliver HIPC reliefis complicated by their limited interaction with the World Bank and the IMF.As discussedinthe September2002 report, although the claims of commercial creditors are small inNPV terms, they are nevertheless a cause of concern because debtors fear the impact of litigationand impairmentof creditor-debtor relationships. 54. In a number of cases commercialcreditorsand some non-ParisClub bilateral creditorshave resortedto threats of or actuallitigationas a means of debt recovery.The Boards of the IMF and World Bank asked staffs to further monitor creditor litigationagainst HIPCs. Staffs have conducted a follow-up onthe August 2002 survey of the 28 HIPC governments for countries that have had Boarddocuments prepared. Table 7 below was updated basedon informationprovidedby 20 respondents. Of 28 HIPCsthat have hadBoard documents prepared, 12 indicated that they were not facing any lawsuits. Ninerespondedthat they were facing litigationon credits heldby commercial creditors and Iraq. Although inmany cases debtors have not remittedpayments after creditors have receivedjudgments, in some cases debtors have made payments inexcess of that requiredifthe creditor hadprovidedHIPC relief. Pending litigationand outstanding courtjudgments also preventHIPCs from regularizing financial relationships with the international community. -36 - Table 7. Creditors Involved in Litigation against HIPCs Creditor 11 Domicile of AIPC Debtor OriginalClaim Status of Legal Action Judgmentfor Creditor 21 (millionof Creditor (millions SalahTurkmani Bolivia u.5 Pending. WinslowBank Bahamas Cameroon 8.9 Action institutedby Cameroonto appeal lowercourt ruling. DelFavaro Spa Italy Cameroon Sub-total 9.2 RedMountain U.S. Congo, Dem. 8.6 Resolved. 25.4 Rep.of ENERGOINVEST Congo, Dem. 30.2 Judgment issuedby InternationalCourt of Reo.of Arbitration inParis. Sub-total 38.8 Yugoimport Former SFR Ethiopia 122.7 Yugoslavia Kintex Bulgaria Ethiopia 8.7 Sub-total 131.4 LaboratoriosBaco Argentina Honduras 3.5 Pending. LNC Investments U.S. Nicaragua 26.3 Judgment pronounced. 87.1 GP HemisphereAssociates Nicaragua 30.9 Judgment pronounced. 126.0 VanEck EmergingMarkets U.S. Nicaragua 13.0 Judgment pronounced. 62.5 Sub-total 70.2 275.6 BanqueBelgolaise France Niger 31 4.2 Legalaction inprocess. EximBank Taiwan, Provinceof Niger 31 60.0 Judgementto pay. 72.3 China Sub-total 64.2 J&S FranklinLtd UnitedKingdom SierraLeone 1.2 Action institutedin the High Court of England;independent of court action, SierraLeone has paid US$1.7 million. UMARCO France Sierra Leone 0.6 Action institutedinthe HighCourtof England; independentofcourt action, SierraLeonehas paidUSSO.1 million, ExecutiveOutcome, Intemational UnitedStates SierraLeone 19.5 Action institutedinthe High Court of Inc. England; independentofcourt action, Sierra Leone has paidUS$0.7million. ChateletInvestmentLtd.. Sierra Leone SierraLeone 0.4 Action institutedin the HighCourt of England. IndustrieBiscotti Italy SierraLeone 5.3 Action institutedinthe High Court of England. ScancemInternational Norway Sierra Leone 3.7 Action institutedinthe HighCourt of England; independentof court action, Sierra Leonehas paidUS$0.6 million, Sub-total 30.7 BancoArabe Espanol Spain Uganda 1.0 Judgment to pay. 2.7 TransroadLtd. UnitedKingdom Uganda 5.6 Resolved 9.4 Industryof ConstructionMachinery Former SFR Uganda 8.4 Resolved 8.9 and Equipment Yugoslavia Sours FabFamous Rz Promet FormerSFR Uganda 1.4 Resolved 1.4 Yugoslavia IraqFundForExternalDevelopment Iraq Uganda 4.6 Appeal in progress. 6.4 ShelterAfrique Kenya Uganda 0.9 Out of court settlement. 0.1 Sub-total 21.9 28.9 Total 370.1 402.2 Source : HIPC country authorities The following exchangerateswere usedinthe cases where amountswere not given in US dollars; 1Euro=$l.134USD;l CHF=$0.7271USD. The following 12 countries havereportedto haveno creditor lawsuits:Benin, Chad, Cote d'Ivoire, Ghana, Guyana, Madagascar,Malawi, Mauritania, Mali, Rwanda, SBo Tome & Principe,andTanzania. Note: The following 8 countries have not providedupdatedinformationsince September,2002: BurkinaFaso, Gambia, Guinea, Guinea-Bissau,Mozambique, Niger, Senegal,andZambia. 11Either originalcreditor or holder ofcurrentclaim. 21 Excludesaccumulatedinterest and charges. 31Dataobtainedfrom September 2002, Status of ImplementationReport,Table 8. -- Notavailable. - 37 - VI. ISSUES FORDISCUSSION 55. Progressin reachingthe completionpoint.Do Directors agree that although interim period HIPCs are taking a longer time than envisaged to reachthe completion points, attaining macroeconomic stability, satisfactorily implementingPRSPs and meeting other social and structural completion point triggers, are nevertheless critical towards realizing the objectives o f the HIPC Initiative? Do Directors have suggestions on how staff could work withthe authorities to: (i) facilitate the completion of a full PRSP inthe few HIPCs that have yet to do so; (ii) help bringmacroeconomicprograms back ontrack; and (iii) satisfy the remaining social and help structural completion point triggers? 56. Decisionpointeligibility.Do Directors agreethat while several countries could establish a track record before the sunset clause takes effect at the end o f 2004, that substantial challenges remain inarriving at the decision point, notably the need to stabilize security conditions and to resolve protracted arrears? 57. Governance.Do Directors agreethat the emphasis on governance under the HIPC Initiative i s appropriate and complements other instruments that are supportive o f good governance inHIPCs? Do Directors agree that good governance practices require the concerted and continued efforts of country authorities inaddition to the IMF and World Bank and the intemational community? - 38 - ANNEX I CountryCoverage,Data Sources, andAssumptions for the HIPC CostingExercise CountryCoverage The costing analysis is based on 42 HIPCs: Angola, Benin, Bolivia, BurkinaFaso, Burundi, Cameroon, the Central African Republic, Chad, Comoros, Democratic Republic of Congo, Republic of Congo, C6te d'Ivoire, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Lao PDR, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, S5o Tom6 and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Yemen, and Zambia. Lao PDR was excluded from the costing exercisebecause reliable debt data were not available. Yemenwas excluded from the costing exercisebecause its debt levels were found to be sustainableafter traditional debt relief, based on the latest debt sustainability analysis. Angola, Kenya, and Vietnam were excluded because their debt levels are expectedto be sustainableafter application of traditional debt-relief mechanisms. As inthe past, Liberia, Somalia, and Sudanwere excluded becauseofweaknesses inthe data and or the uncertainty over the time requiredto resolve their arrears problems, andhence, the timing of the decision point. Data Sources 0 Enhanceddecisionlcompletion point documentshave beenpresentedto the Boards of the Bank andthe Fundfor the following 27 countries: Benin, Bolivia, Burkina Faso, Cameroon, Chad, the Democratic Republic of Congo, Ethiopia, The Gambia, Ghana, Guinea, Guinea- Bissau, Guyana, Honduras, Madagascar, Malawi, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, S3o TomC and Principe, Senegal, Sierra Leone, Tanzania, Uganda, and Zambia. 0 Recently collected debt figures were usedto update the potential cost estimates for Mali and the Democratic Republico f Congo. Assumptions for the HIPC CostingExercise 0 Calculations of total costs include costs under the original and enhancedHIPC Initiative frameworks, including assistance that has already beendelivered. 0 Before becoming eligible for assistanceunder the enhancedHIPC Initiative, countries must make full use of traditional debt-relief mechanisms(i.e., a stock-of-debt operation that provides a 67 percent reduction inthe NPV of eligible debt from the Paris Club and - 39 - ANNEX I comparable treatment by non-Paris Club bilateral and commercial creditors), Cost estimates are based on data after full use o f traditional debt-reliefmechanisms. All eligible countries are assumed to request assistanceunder the enhanced HIPC Initiative. Each country-specific Debt Sustainability Analysis (DSA) i s based on macroeconomic assumptions about exports and fiscal revenues developed by Bank and Fundstaffs in consultation with country authorities. The total cost o f assistance for Burkina Faso includes topping up o f debt relief (US$129 million in2001 NPV terms), assumed to have beendelivered the same year it reached its completion point (2002). Updateof Cost EstimatesinNet PresentValue Terms 0 The cost of HIPC assistance is calculated inNPV terms at the time o fthe decision point. This cost was increased each year after the decision point year by a factor that i s estimated as the average interest rate applicable for relief to be committed. This rate was estimated as 6.0 percent for 2000 and 2001. Inthe costing exercise for the end o f 2002, this factor was adjusted from 6.0 percent to 5.45 percent for 2000 and 2001 and a 5.45 percent rate was applied to increase costs from the end o f 2001 to the end o f 2002. The 5.45 percent rate corresponds to the implicit long-term interest rate o f currencies that comprise the SDR for the 36 monthly periods from end-1999 to end-200241.It was calculated as a weighted average o f the average Commercial Interest Reference Rate (CIRR) for the period2000-02, weighted by the participation o fthe currencies inthe SDR basket. The effect o fthe change inthe rate applied to increase costs from the end o f2001to the end o f 2002 is small, reducing costs in2002 NPV terms by about US$230 million. 41The currency composition o f the SDR was used as a proxy of the currency composition o f the assistance under the HIPC Initiative. - 40 - Annex 11.HIPC Initiative: Progressin Implementation by Country Statusas of July 2003 Actual/ Country Progress in developmentand implementationof Actual/ PRSP Performance under PRGFsupported programs ExpectedDP ExpectedCP Date 11 Date 1121 I I I I Countries that have already reached the Completion Point t was approved in July 2003 or early 2004 Countries behveenDecision and Completion Point Comeroo" The full PRSP was submittedto the Bank and Fundin The 3rd reviewwas completedin September 2002 Completion Oct-00 Q2 2004 April 2003 and endorsedbythe two Boardsat end- of the 4th reviewof the PRGFarrangementby the Fund July 2003 ExecutiveBoardis still pending, while Fund staffseeks clarification on the fiscal outturn inthe first months of 2003. Chad The full PRSP was delayedbecauseof the time Performanceunder PRGF has been satisfactory since 2000.The May-Ol Q2 2004 neededto conductthe participatoryapproachand 5th reviewunderthe PRGFarrangementwas completedin July prepare the macroeconomlcframework It was 2003 finalized and submittedto the Fund and Bank In lune 2003 Congo. Dem. Rep. of The I-PRSPwas presentedin lune 2002 The full A PRGFarrangement was approvedin lune 2002. The 1stand Jul-03 03 2006 PRSP is expectedinthe third quarter of 2005. 2nd reviews ofthe PRGF supportedprogram were completedin March 2003 and July 2003, respectively. Wiopio The full PRSPwas completedin August 2002. The The 3rd reviewunderPRGFwas completedin September 2002. Nov-Ol QI 2004 1stannual progress reportexpectedin the fall of 2003 A Boarddlscussionon the 4th review ofthe PRGFIS scheduled in August 2003, following adelay in completing afinancial audi of the Commerclal Bank ofEthiopia. Gambia,The The full PRSPwas finalized in April 2002 and A PRGFwas approvedin July 2002 The 1stReview expected Dec-00 QZ 2004 presentedto the Boards in August 2002 The 1st in December2002 has been delayedbecauseoffiscal and annual progress report IS expected in August 2003 monetarypolicy slippages Follow up misslon in July 03. Ghana The full PRSP was finalized in February2003 and The PRGFexpiredinNovember 2002 without afinal review. A Feb-02 Q2 2004 presentedto the Bank and Fund inMay 2003 The 1st newPRGFwas approvedin May 2003 annualprogressreportcould be completedbyMarch 2004 Guinea 5/ The full PRSPwas completedinJanuary 2002 and The PRGFwent off track as of end-2002 becauseof fiscal and Dec-00 Q4 2004 endorsed by the Boards in July 2002. A PRSP monetaryimbalances.The staff is currently informally progress report is under preparationand is expectedby monitoring economic performance,to set the groundfor an S M P end 2003. in early 2004, and, provideda track recordis establishedunder the SMP, to lead to anewPRGF inthe second halfof 2004. Guinea-Bissau5/ Progress toward the full PRSP has beenslow A draft The PRGFwent off track in 2001 and the SMP that followed Dec-00 Q2 2005 was A45availablein April 2003 but detailedcostings incurreddifficulties because of recurringfiscal policy slippages. and a review by donors are requiredbefore Completion ofdiscussions on an SMP for 2003 has been delayed finalization becausethe governmentwas dismissedin November 2002 Electionsare scheduledfor October 2003 Guyana Y The full PRSPwas publishedinNovember2001 and a A PRGF arrangement WBS approvedin September 2002.The 1st Nov-00 Q42003 . macroeconomicaddendumto it was completedin review under the PRGFarrangement has been delayedbecause April 2002 A progress reportis expectedto be of fiscal and structuralreformslippages Prior actions for the preparedby the second quarterof2004 completion ofthe 1st revieware expectedto be fulfilled by end- August 2003. - 41 - Annex I1(continued). HIPC Initiative: Progress in Implementation by country Status as of July 2003 Country Progressin development and implementation of PRSP Performance under PRGFsupported programs I Actual/ ExpectedDP ExpectedCP Date I/ Date 1/21 I Actual/ Honduras 5, PRSPcompletedin August 2001,The 1stannual PRGFoff track since December2001 mainly due to fiscal policy Jul-00 02 2004 progress report expectedby the fourth quarter of 2003. slippages Discussionson anew PRGF could continue in the fall of 2003, dependingon progress with the authorities'strategyfor achievingfiscaland financial sustainability. Madagascar The full PRSPwas delayedfor about 6 months in The 3rd reviewunderthe PRGF was completedin June 2003 Dec-00 Q3 2004 2002 due to political crisis The full PRSPwas An agreementwas reached ad referendumto extendthe PRGF by submittedin July 2003. The 1stannualreview ofthe 9 monthsto November2004 to allow for the time missed PRSP could be completedby end-July 2004 becauseofthe electioncrisis in 2002 Malowi 3/ A full PRSP was finalized in April 2002 and the first PRGF review havebeendelayedsince 2001 becauseof fiscal Dec-00 Q3 2004 annualprogress repon is beingprepared. policy slippages The 1streview is expectedend-September 2003 Nicaragua 5/ EarlierPRGF went off -track. A new PRGFwas approved in Dec-00 QI 2004 The full PRSP was presentedto the Boardsin December2002. The 1stand 2nd (quarterly)reviewswere September 2001 andthe Ist annualPRSPProgress completedon June 18,2003. was presentedto the Boardsin December2002 Niger Y The full PRSP was submittedin January 2002 A 1st Despitesome budgetslippagesearlier, overall performancehas Dec-00 Q4 2003 PRSP Progress Report has been preparedand could be been Satisfactory The 4th review ofthe PRGFarrangementwas presented to the Fund and Bank in October 2003 completedin April 2003 Rwanda The full PRSP was finalized inJune 2002. The 1st A newPRGFarrangement was approved in July, 2002 The 1st Dec-00 Q4 2003 annualprogressreport was issuedinJune 2003 reviewwar completedin June 2003. Sbo Tome andPrincipe 51 A full PRSPis expectedto be submittedto the Bank The PRGFarrangement went off track in 2001 because of fiscal Dec-00 44 2004 and Fund in the fourth quarter of2003 and structural reformslippages.Implementationofthe SivlF' in 2002 was broadlysatisfactoryand negotiationsare expectedto be concluded soon for anew PRGF I I i I Senego1 3/51 IFull PRSP discussedby the Boards inDecember / APRGFarrangement expiredin April 2002, without the 1 lun-00 1 Q42003 2002 The 1stannual PRSP progress report is conclusionofthe last review,as fiscal imbalancesreemergedas a expectedto be preparedinthe fourth quarterof 2003 resultofproblems in public enterprises,and the implementation of agreedStNCtUralreforms fell short of target A new PRGF arrangement was approvedin April 2003, Sierra Leone The full PRSP, expectedby mid2003, has been A PRGFarrangement was approved in September 2001.The 3rd Mar-02 delayedpendingthe demobillration of rebels, reviewofthe PRGFwas successfully concludedin April 2003. resettlementof the populaceand parliamentaryand presidentialelections The full PRSP IS expectedby June 2004 The 1st PRSPprogress report IS expected to becompletedbyJuly 2005 Zambia PRSPwar subminedin Aprd 2002 and endorsed by The PRGF supportedprogramwas broadly on track but expired Dec-00 Q2 2004 the Boards ofthe Fund and Bank in May 2002 The before the completlonofthe final review becauseof delays in the 1stannual progressreport is likely to besubmittedin privatization of the National CommercialBank The programhas September 2003. sincegone off track due to largewage bill overruns. Burundi ThePRSP process was launched in July 2000. Post-confllctassistance approvedby Fund in October 2002 IDA Progress In finalizing the final I-PRSP is expectedby providessupport underEconomicRehabilitation Credit, July 2003 Programon track and asecond requestfor post conflict emergency assistancewas been approved inMay 2003 CenrralAJncan Republic 6/ TheI-PRSP was presentedin Jan 2001 The timing of An SMP producedsatisfactory results in 2002 A Meeting war the full PRSP is uncertain.The delay is due to the held in Parisin March 2003 with the CAR authoritiesto update need to adress the weaknesses observedin the the conclusions ofthe 2003 Article N discussions,but I preparationofthe I-PRSPand to the issue of discussionswere overtakenbya coup d'etat At present,the recognition of the newauthorltiesfollowing the coup financing prospects for anewprogram are very difficult. notably d'etat in March 2003 becauseof the arrears situation. Comoros 2002 However,the conflict betweenunion and islandshas impededthat Comoros advancesinthe PRSP-HIPCagenda. An I-PRSPcould be presented in early 2004 but would depend on (i)developmentsin the country andthe (11)design ofthe Bank'sLICUS Strategy - 42 - Annex I1(concluded). HIPC Initiative: Progressin Implementation by country Status as of July 2003 I I I I Countty ProgressIn developmentand Implementation of Actual/ ActunV PRSP Performance under PRGF supported programs ExpectedDP ExpectedCP Date 1/ Date 1/ 2/ Countries still to beconsidered Congo,Rep. of The I-PRSPIS expected to be completed by October Satisfactoryresultsduring the SMP period (January-June 2003). 2003 The timing ofa possiblePRGFarrangement and preparationof a HIPC preliminarydocumentwill depend on progress in the I implementationthroughend-September2003 and normalization of relationswith externalcreditors. Cote d'lvolre A first draft ofthe full PRSPwas prepared in The PRGF arrangement, approvedin March 2002 is off-track. Ai September 2002.The preparationofthe full PRSPand issue is the incompletestructuralreformprogram,together with implementationof anti-poveny measuresare currently fiscal slippagesand the accumulationof new extemalarrears as on hold becauseof civil strife the resultof the socio-political crisis. Additionally, the HIPC decisionpoint WBS not reached in 2002 as initially expected. Lao PDR TheI-PRSP was discussed by the Boardsin April The FundBoardapprovedaPRGFarrangement in April 2001 2001. The final PRSPis expectedby end-September The 2nd reviewunderthe PRGF was completedin August 2002 2003. The 3rd review is delayed and is expectedto take place inthe beginningof August 2003. Libena 6/ Engagement remainson hold pendingthe liftingofsanctions imposedby the UNinMay 2001.Liberia has accumulated arrearsto the World Bankand to the Fund Myanmar 6 i Without an activeengagementwith the World Bank No Fund-supportedprogramsince 1982or Bank lending since and Fund,MyanmarIS not engaged in a processto 1987 Myanmar is in arrears to the Bank, as well as other proceedwith preparingin InterimPRSP multilateral and bilateralagencies Somalia 6: Somalia not engaged in aPRSP process IS In partnershipwith UNDP and with the collaborationofother developmentpartners,the Bank has developeda reengagement strategy Sudan 61 Guvemment is currently preparingan I-PRSP in The Bankhas developeda reengagement strategy SMP consultationwith other stakeholdersand with continuedto be in placeduring 2002 and 2003. technicalassistancefrom the Bank and the IMF Togo 6/ The draft I-PRSPwas issuedin November2002 The An SMP coveringthe periodApril-December 2001 was Boards would not discuss it due to the absence ofa establishedbut performancewas mixed No PRGF IS scheduled stablemacroeconomicframework and arrears situation inthe near term. with the Bank Potentially sustainablecases 7/ Angola A new draft ofthe PRSP is expectedto be discussed The Bank has aTransitional Support Strategyin place. The with the donor community in mid-August2003 Govemmentformally requestedan SMP, and the IMFBoard broadlysupportsthe idea, with prior actions to be defined I I I I Kenya 11-PRSPpresentedAugust 2000. Yiernom IPRSPpresentedJuly 2002. [Board reporton eligibility to assistance under the HIPC Initiatlvel I expectedshortly. Yemen,Rep. of PRSPpresentedinJune 2002 and discussed by the The debt sustainabilityanalysisdonefor Yemen inJune 2000, Boards in August 2002. indicatedthat the country would haveasustainabledebt burden after applicationof traditional debt relief mechanisms.The Paris Club providedastock of debt operationon Naplesterms in July 2001,DSA indicatedasustainabledebt burdenwith application of traditional relieffor 2000. I/ReferstotheEnhancedHIPCInitiative 2; Basedon staffs' judgment of progress towards the decision/completlonpoint 31Countries that are considered retroactive. not subject to the requirementto haveaPRSP under implementation for at leastone year under the enhanced framework 4; Completionpoint for Mali was approved by the World Bank and I M F ' s ExecutiveBoardson March 6, 2003 Si Countries reported in the Fall 2002 Progress Reportas havingencountereddifficulties in the implementationof their macroeconomic programs, 6; Countries in non-accrual status with World Bank disbursementssuspended 7iThesecountriesare expectedto achievedebt sustainabilityafter receivingdebt reliefprovided under traditional mechanisms -43 - ANNEX111 EnhancedHIPC Initiative:CountryImplementationStatusNotes I.IMPLEMENTATIONSTATUSOFHIPCSINTHEINTERIMPERIOD (AS OF THE ENDOF JULY2003) Cameroon PRSPStatus:A full PRSP was presented to the donor community and civil society between December 2002 and March 2003 and endorsed by the World Bank andthe FundBoards at the end o f July 2003. The authorities intendto produce a progress report on PRSP implementationby mid2004. The document, built on a large consultative andparticipatoryprocess, provides an adequate framework for guidingthe implementationo f a credible poverty reduction strategy. The final PRSP i s based on several strong elements including: (i) breadth and depth o f poverty the analysis; (ii)an approach for projecting the macroeconomic framework and costing the sectoral strategies, combining the "requirement approach" (thebudget cost o f reaching the sectoral and MDGtargets) andthe "availability approach"; (iii) quantified targets that use the MDGs clearly as benchmarks, with explicit timetables for achievement; (iv) a comprehensive development framework for sustainable growth and poverty reductionbased on in-depth analysis on the source o f growth; and (v) careful identification o f the mainpriorities o f the regional integration agenda. PolicyPerformance:The thirdreview o fthe 2000-2003 PRGF-supported program was completed in September 2002. The fourth review underthe PRGF arrangement has been delayed due to difficulties inreconciling fiscal data andweak fiscal performance inearly 2003. All quantitative performance criteria for the end o f September 2002 (the end o f the second annual program) were observed, except for net bank credit to the central government, which was missed by 0.7 percent o f GDP due to a higher thanprogrammed repayment o fpublic domestic debt. Only one out o f the five structural benchmarks for the end o f September 2002 (Le., implementation o f the action plan for value-added tax credit reimbursement) was met as scheduled. However, the four missed structural benchmarks were all observed by mid-November 2002. Fiscal performance, other economic developments, and policy implementation during the first semester o f 2003 are scheduled to be assessedby a staff visit to Cameroon inlate August/ early September 2003, which could pave the way for the conclusion o fthe fourth review o fthe PRGF-supported program, dependingupon progress made by the authorities. Social and StructuralCompletionPoint Triggers: Completion point triggers (inaddition to macroeconomic performance) are inthe areas o f forestry reform, transport, governance, health (including HIV/AIDS), and education. Significant progress has been made instructural reforms includedunder the World Bank-supported Structural Adjustment Credit 111, the closing date o f which has beenextendedto December 2003. Important progress has been made inparticular in the areao fthe social sectors, the implementation ofthe port reform andthe public procurement reform. Greater effort will be needed for (i) the satisfactory implementation o f the forestry reform especially the functioning o f the newly created ANAFOR(Agence Nationale d'Appui au Development Forestier) and the enforcement o f sanctions against illegal logging; and (ii) the completion o f the budgettracking and beneficiary assessment survey inthe social sectors. The - 44 - ANNEX111 newlycreated inter-ministerialcommittee incharge o fmonitoring progress inthis area is expected to continue to play a key role. Decisionand CompletionPoints:The decision point was reached inOctober 2000. Cameroon could reach the completion point duringthe second quarter o f 2004. Creditor Participation:Cameroonhas received financing assuranceso ftotal HIPC debt relief from creditors holding more than 98 percent o f its debt. For commercial debt, agreement was reached on May 24,2002 on a debt buyback operation supported by the World Bank. The operation was approved by the Board on a non objection basis inJune 2003. Paris Club creditors, the World Bank,the Fund, the AmB, the European Commission, andthe Islamic Development Bank (IsDB) are providing interimassistance. So far, only Saudi Arabia has not yet committedto provide full HIPC relief. Bilateral agreements have been signedwith Kuwait andChina. Chad PRSPStatus:The PRSP was delayed becauseofthe time neededto conduct the participatory consultations and to prepare the macroeconomic framework. The PRSP was submitted to the Fundandthe World Bank on June 6,2003, and is expected to be followed by a donor roundtable inGenevainNovember 2003. The first annual PRSP implementationreview could becompleted bythe end ofJune 2004. PolicyPerformance:A PRGFarrangement was approved inJanuary 2000 andextended to January 2004 following the completion o f the fifthreview inJuly 2003. Performance under the program has been broadly satisfactory. All quantitative benchmarks and performance criteria for September and December 2002 have been observed, except for the continuous performance criteria on the nonaccumulation o f extemal payment arrears and the benchmarks relating to spendinginhealthand education. Performance regarding structural conditions was less satisfactory, with one performance criteria and two benchmarks that were missed. GDP growth was strong as a result o f accelerated investment inthe oil sector, but inflationary pressures have had a negative impact on external competitiveness. Social and StructuralCompletionPointTriggers: Progress on meeting conditions inthe areas o f govemance, health (including HIV/AIDS), education, and rural infrastructure has been uneven, with continuous deterioration o f some indicators inthe health sector. Overall, most indicators inthe social sectors and inrural development remain far from the target. This could delay the completion point. Corrective actions are beingplannedwithin the framework o f the preparation o f the 2004 program budgets. Decisionand CompletionPoints:Chadreachedthe decisionpoint inMay 2001. It i s expected that the completion point could be reached by the end o f June 2004. CreditorParticipation:Chad has received assurances of debt relieffrom creditors accounting for 93 percent o f its debt at the decisionpoint. Bilateral creditors including Cameroon; China; CBte d'Ivoire; Israel; Kuwait; Saudi Arabia; Senegal; Taiwan, Province o f China; and Togo have not yet signed agreements to provide HIPC relief but presumably will do so after Chad reaches - 45 - ANNEX111 the completionpoint. Chad continues to receive HIPC interimassistance from the Bank, the Fund,the AfDB, the European Commission, the IsDB,the OPEC Fund, andParis Club creditors. The Arab Bank for Economic Development inAfrica (BADEA) granted interimassistanceinthe form o f concessional rescheduling o f arrears after the decision point. DemocraticRepublicof Congo PRSPStatus:The I-PRSP was completedinJune 2002, and completion o fa full PRSP is expected inthe third quarter o f 2005. A JSA (Joint Staff Assessment) on the progress made in completing the PRSP was approved by the Boards o f the Fundand the World Bank inJuly 2003. Social sector spending i s targeted to increase from 7 percent o f primary expenditure (0.5 percent o f GDP) in2002 to about 16 percent in2003 (about 2 percent o f GDP) to remedythe poor quality of and access to social services. The first annual review o f PRSP implementation could be completed inthe third quarter o f2006. PolicyPerformance:A PRGF-supported programwas approvedinJune 2002. For the first time inthirteen years, real GDP growth was positive (3 percent) in2002, andthis trend is projectedto continue in2003. The first review under the PRGF arrangement was concluded inMarch 2003, following broadly satisfactory performance inthe economic reform program, under which public finances have been significantly strengthened, the cycle o f hyperinflation and currency depreciation has been broken, major economic distortions are being removed, and significant improvements have been made inthejudiciary and regulatory environment. The second review under the program was completed inJuly 2003. Decisionand CompletionPoints.The Democratic Republic o f Congo reached the decision point inJuly 2003. It i s expected that the completion point could be reached inthe third quarter o f 2006. Creditor Participation:The Democratic Republic of Congo has received assuranceso fdebt relief from creditors holding 94 percent o f its debt at the decision point. Ethiopia PRSPStatus:The full PRSP, completed inJuly 2002, builds on a broad-based participatory process and a sound poverty diagnosis. It focuses on promoting agriculture-led, rural -based growth, while improvingthe environment for exports and private sector growth. It recognizes the needto shift expenditures from military outlays toward social spending. The near-term goal is to reduce poverty from 44 percent in 1999/2000 to 40 percent by 2004/2005. The first annual progress report i s expected inSeptember 2003, The World Bank's strategy for supporting the PRSP i s addressed inthe Country Assistance Strategy for fiscal 2003-05, discussed by the Board inApril 2003. PolicyPerformance:A PRGF-supported program was approved inMarch2001. A third review o fthe PRGF arrangement was completed inSeptember 2002. Recent economic developments have been affectedby a severe drought. Real GDP in2002/2003 i s estimated to have declined by - 46 - ANNEX111 3.8 percent reflecting a 12percent drop inagricultural production. All quantitative performance criteria through December 2002, as well as the indicative targets for end-March 2003 were met. Some progress was made inmeeting the structural benchmarks and performance criteria through January 2003, The introductionof the value-addedtax, a structural benchmark and completion point trigger was carried out on time. However, two structural benchmarks (and completion point triggers) related to improvements inpublic expendituremanagementhave been delayedprimarily because of ongoing decentralization of fiscal powers to districts. The fourth reviewunderthe PRGF arrangement was postponed becauseof a delay incompleting a financial audit of the Commercial Bank of Ethiopia (CBE). The audit hasbeenfinishedand Boarddiscussion ofthe fourth reviewis scheduledinAugust 2003. Social and StructuralCompletionPointTriggers: Implementation of other completion point triggers on financial restructuring, health and HIV/AIDS are broadly on track although there are some delays ineducation and agriculture. Decisionand CompletionPoints:Ethiopiareachedthe decision point inNovember 2001. Itis expectedthat the completion point could be reachedinthe first quarter of 2004. Creditor Participation:Creditors holding 91percent ofEthiopia's debt have agreedto provide HIPC debt relief. Paris Club creditors agreed inApril 2002 to provide interimrelief on Cologne terms. The Bank, the AfDB, the Fund, the European Commission, and the OPEC Fundare providing interimHIPC assistance. The Gambia PRSPStatus:A full PRSP was completed inApril 2002 andpresentedto the World Bank and Fund Boards inJuly 2002. The PRSP focuses on promotion of growth and employment; improveddelivery of social services, stronger gender, HIV/AIDS,andenvironmental policies. Social spending increasedfrom 5 percent in2000 to about 6 percent of GDP in2002, and it is projected to reach 6.3 percent of GDP by 2006. The first annual PRSP implementation report i s expectedto be ready inAugust 2003. PolicyPerformance:A three-year PRGF arrangement was approved inJuly 2002, building on broadly encouraging economic performance under the previous arrangement. The first review of the PRGF, which was expectedto be completed inDecember2002, was delayed becauseof fiscal and monetary slippages. Performance criteria related to the government's primary balance were lower than targeted; they were accommodatedby exceeding targets for domestic financing. Targets for international reserves and net domestic assets of the central bank were not met. Corrective fiscal measureswere institutedfrom October, andmost of the fiscal targets were achievedby the end of December 2002. The fiscal outlook for 2003 has deteriorated substantially. A financial safeguards assessment, requiredfor the first review, was not concluded because ofthe failure of the central bank to provide audited financial accounts for 2001. One of the Bank's six active projects (Poverty Alleviation and Capacity Building) is currently ratedas unsatisfactory because o f poor execution arrangements. - 47 - ANNEX111 Social and StructuralCompletionPointTriggers: There i s a significant risk that the completion point will be further delayed due to lack o fprogress inmaintaining macroeconomic stability, as evidenced by current difficulties with the PRGF program. Satisfactory progress has beenmade inimplementingconditions inhealth and education, but delays have beenexperienced intrackingthe use ofHIPC reliefandpromoting private sector development. Recent progress was made on the triggers for structural reforms (establishing the Multi-Sector Regulatory Agency and privatizing groundnutprocessing plants), but progress on these triggers continues to lag. Donors, including the World Bank, have indicatedthat continued efforts on structural measures are needed. Inaddition to the structural triggers, hlfillment o f triggers related to PRSP implementation, the restructuringo f the Central Statistics Department, and the allocation o f recurrent budgetfor primary secondary health care are still pending. Decisionand CompletionPoints:The Gambiareachedthe decision point inDecember 2000. The enhanced HIPC completionpoint i s unlikelyto be reached bythe thirdquarter o f 2003, as earlier anticipated, given the interruptions inmacroeconomic performance. A revised completion point target date has been set for the second quarter o f2004. Creditor Participation:Creditors holding about 81percent of Gambia's debt have agreedto provide HIPC debt relief. China; Kuwait; and Taiwan, Province o f China, accounting for about 19percent o f HIPC relief, have not yet signedagreements to provide reliefbut could do so after the completionpoint. Paris Club creditors agreed inJanuary 2003 to provide interimreliefon Cologne terms. The Bank, the AfDB, the Fund, the EuropeanCommission, the IsDB, and the OPEC Fundare providing interim HIPC assistance. Among multilateral creditors, only the Economic Community o f West African States (ECOWAS) has not yet committed to participate inthe enhanced HIPC Initiative. Ghana PRSPStatus:The full PRSP was publishedinFebruary2003 and subsequentlyendorsed bythe World Bank and FundBoards. Poverty-related spending is projectedto increase to 6 percent of GDP in2003, from 5.6 percent o f GDP in2002. The first annual progress report i s under preparation and could be completedby March2004. PolicyPerformance:Followingmixedprogramimplementation in2002, policy performance has improvedbut remains tenuous. Insupport o fthe government's efforts, the FundBoard approved a new PRGF arrangement inMay 2003 and the World Bank Board approved a Poverty Reduction Support Credit a month later. The February 2003 spike ininflationdue to price liberalizationhas been contained, and underlyinginflation since has been inline with program projections. Goodprogress i s being made inrebuildingthe Bank o f Ghana's official reserve position-consolidating gains achieved in2002-as donor support has beenforthcoming and because o f a stronger than expected cocoa harvest. Moreover, the implementation inearly 2003 o f some key structural reforms-in particular implementation o f an automatic adjustment formula for retail petroleum prices and an automatic tariff adjustment mechanism for electricity tariffs-will substantially contain the subsidy burden on the budget.However, implementation o f other structural reforms, including the privatization o f the Ghana Commercial Bank andthe - 48 - ANNEX111 NationalHealth InsuranceLevy, i s beingprotracted to gather the necessarypolitical consensus to move forward. Social and StructuralCompletionPointTriggers:Triggers have been met inthe areas of education and local-government service bill. Progresshas also beenmade toward meeting triggers inthe use of budgetary savings, procurement reform, installation of a computer-based financial managementsystem, and electricity andpetroleumpricing. Corrective measures will needto be discussed for five pending conditions: (i) staffing of internal audit functions, (ii) full monthly publishing inthe government gazette of reports on cash expenditures and commitments by ministry departmentsand agencies, (iii) development of a district composite budget, (iv) expanding rural water coverageto 46 percent, and (v) raising recurrent health expenditures at district and lower-level governments to 45 percent of the total health budget. Decisionand CompletionPoints:Ghanareachedthe decisionpoint inFebruary 2002. If policies remain on track and PRSP implementation is satisfactory, the completion point could be reachedinthe second quarter of 2004. Creditor Participation:Creditors holdingabout 89 percent of Ghana's debt have agreedto provide HIPC debt relief. The Bank, the Fund, the AfDB, the European Commission, andParis Club creditors are delivering interimrelief. Other multilateral creditors will provide relief only at the completion point. Among non-Paris Club bilateral creditors, agreementshavebeensigned with China, the Kuwait Fundfor Arab Economic Development, and the Saudi Fundfor Development. Indiaannouncedthat it would cancel debt owed by Ghana. The Republic of Korea indicated its willingness to provide relief, but no agreement is inplace. The participation of commercial creditors remains an issue. Guinea PRSPStatus:A full PRSPwas completed and adoptedbythe Council of MinistersinJanuary 2002 and endorsed by the Fundandthe World Bank Boards inJuly 2002. Social andpoverty- reducing spending has increasedwith the use of interimassistance.The authorities organized regional consultations to update the full PRSP. Those consultations revealedthat, while the strategy as laid out inthe PRSP was appropriate, some regions faced uniquepoverty-related problems, stemming from location and resource endowments. The regional poverty reduction strategies, conceived as subsets of Guinea's PRSP, are expectedto be finalizedby September 2003. The regional consultative processwas deemed satisfactory, andprogressinimplementation has been good. The first annual PRSP ProgressReport is under preparation and i s expectedby the endofDecember2003. PolicyPerformance:A PRGF-supported program was approved inMarch2002. A first review of the PRGF was concluded inJuly 2002 after the authorities took measures inthe first quarter of 2002 to correct weaknesses inrevenuemobilization (particularly non-miningrevenues) andto improve budgetary management, includingthrough a better allocation o f resourcesto priority sectors. Since thenperformance has beenless than satisfactory, largely due to budget overruns in nonpriority sectors and excessive bank financing. The program went off track inDecember 2002 - 49 - ANNEX 111 because o f fiscal and monetary imbalances. Negotiations on a SMP began inJanuary 2003. The SMP could not be finalized because expansionary fiscal andmonetary policies continued inthe first quarter o f 2003, reducing the likelihood that targets for the year would be achieved. Discussions are envisaged on a six-month SMP that could start inJanuary 2004. Provided a track record o fpolicy performance i s established under the SMP, a newPRGF arrangement could be put inplace inthe second halfo f2004. Social and StructuralCompletionPointTriggers: Despite some early delays, good progress has been made inreaching completion point triggers inthe areas o f governance, regulatory framework for microfinance institutions, health, and education. Decisionand CompletionPoints:The completionpoint could be reached inlate 2004 provided that Guinea performs satisfactorily under a PRGF that could be inplace as indicated above. CreditorParticipation:Guineahas receivedsatisfactory assurancesof debt relief from creditors holding 85 percent o f its debt at the decision point. The World Bank, the Fund, the AfDB, the EuropeanCommission, and Paris Club creditors hadbeen providing interim assistance since 2001. However, inlight o f the poor implementationo f the PRGF-supported program, some o f the interimassistance has expired. Assistance from the Paris Club expired April 30,2003, and the Fund's tranche o f interimassistance expired June 30, 2003. Among non-Paris Club creditors, Egypt, Kuwait, andMorocco have indicated a willingness to provide HIPC relief. The others- Bulgaria, Iraq, Romania, Saudi Arabia, and Thailand-have not indicated a willingness to provide HIPC relief but could do so after the completion point. Guinea-Bissau PRSPStatus:Reflecting the difficult political circumstances and severe technical weaknesses, progress toward a full PRSP has been slow. A draft o f the PRSP became available inApril 2003, based on broad-based consultations with the administration, civil society, and other stakeholders and incorporating the results o f the 2002 Small Poverty Assessment Survey. Finalization i s planned for later in2003, after detailed costings o f proposed policies are completed and discussions are heldwith donors. As a result o f severe financial difficulties, social sector spendingremains low, at about 3 percent o f GDP for 2002. PolicyPerformance:The PRGF-supported programwent offtrack immediately after it came into force at the end o f 2000. The authorities have not been able to correct the situation, despite several efforts, including two short-term macroeconomic programs in2001and 2002. Completion o f discussions on an extended Staff-Monitored Program for 2003, which beganat the end o f 2002, has been delayed by the dissolution o f Parliament and the dismissal o fthe government inNovember 2002. Legislative elections are now scheduledfor October 2003 but may be postponed again. Recurring fiscal policy slippages are associated with heavy defense spending, increases inthe wage bill, and political interference inpublic financial management. Ad hoc expenditure policies and general weakening of government finances contributedto a substantial decline ineconomic activity, with real GDP estimated to have declined by 4.2 percent in2002. - 50 - ANNEX111 O fthe four IDA-financed projects, two-the Basic Education Project and the Economic RehabilitationandRecovery Credit-are currently rated unsatisfactory. Encouraging, albeit slow, developments have occurred inaddressing structural and social issues, including demobilization, public procurement reform, privatization, private sector development, and HIV/AIDS. Inorder to keep its reform agenda on track, the government has requested a restructuring o f the IDA portfolio, with amendments to the Development Credit Agreements of the Basic Education and Private Sector Rehabilitation Projects. The restructuringpackage is currently beingreviewedby Bankmanagement. Two floating tranches remainto be disbursed under the Economic Rehabilitation and Recovery Credit, one with conditionality relatedto the government's demobilization program and the other with conditionality related to the government's domestic arrears settlement program. All specific conditions for release o f bothtranches have beenmet, butthe tranches have not beenreleasedbecauseofthe unsatisfactory macroeconomic situation. Social and StructuralCompletionPointTriggers:Progress on completion point triggers in education and governance has been slow; some progress i s noted inhealth. The 2003 school year was launched after a four-month delay inJanuary 2003 and has been disruptedby frequent work stoppages by teaching staff and administrative personnel. The Ministry o f Education has not reported any data on enrollment or internal efficiency inprimaryeducation since 2001. Despite severe constraints on public financing, the Ministryi s very much engaged inimproving the performance o f the health sector. Progress i s noted inhealth services indicators, inparticular increases inimmunization coverage rates and decreasesinchildhood malaria cases. A national strategic HIV/AIDSplanwas issued inMay 2002 and adopted inJune 2002. A national interministerial committee was created inDecember 2002. An HIV/AIDS project i s under preparation. Governance remains extremely fragile. Public expenditure management remains a central focus of concern, as the current caretaker government has been unable to restore proper and transparent institutional arrangements for the budgetary process. Inthis context, the government is operating without an approved budget for 2003. Expenditure allocations are currently beingmade on the basis o f the previous year's budget and resource availability rather than expenditureprioritization and performance. With declining tax revenues due to deteriorating economic activity and increased debt-service obligations, basic public services are operating at minimumcapacity. Most public sector employees have not beenpaidfor the last sevenmonths, with the exception of the ministry o fhealthemployees, for whom salary arrears stand at two months. Some progress has taken place inthe demobilization program. The first phase o f the program, involving the demobilization o f about 4,000 militaryand paramilitarypersonnel, was completed inSeptember 2002. The second phase, which covers reinsertionactivities, is ongoing. The third phase, launched inMarch 2003, covers reintegration activities and i s expected to be concluded in June 2004 with the demobilization, reinsertion, and reintegration o f 11,300 ex-combatants. Decisionand CompletionPoints:Guinea-Bissau reached its decisionpoint inDecember 2000. Completing the PRSP and building a track record before the completion point remains a challenge. As a consequence, the earliest possible date for reaching the completion point i s estimated as mid-2005. - 5 1- ANNEX111 Creditor Participation:Creditors holding more than 81percent o f Guinea-Bissau's debt at the decisionpoint have agreedto provide HIPC relief. The Bank, the Fund, the European Commission, the AfDB, the International Fundfor Agricultural Development (IFAD), and Paris Club creditors agreed to provide interimassistance. China and Cuba have written off their claims. Agreements to reschedule arrears have beenconcluded with a number o f multilateral creditors, but because o fthe continuing political and economic problems, they have not been implemented for the most part,Inview o f continuing nonperformance under the PRGF- supported program, the Fund suspended its interim assistance at the beginningo f 2002, and Paris Club creditors decided inJanuary 2003 to stop applyingthe agreement on providing interimdebt relief for 2002 and 2003. Guyana PRSP Status:A PRSP was publishedinNovember 2001. Itwas discussed, together with a macroeconomic addendum, by the Boards o f the World Bank and the FundinSeptember 2002. A progressreport is expected to be prepared over the next year. Poverty-reducing spending- spendingon education, health, housing, water, and other poverty alleviation programs-has increased substantially since 1997, inboth real and relative terms. It grew by an annual average o f 5.9 percent inreal terms between 1997 and 2002, faster than GDP growth (0.4 percent). As a share o f GDP, poverty-reducing spending increased from 15 percent in 1997 to 20 percent in 2002. To support Guyana's poverty reduction strategy, two World Bank credits were approved in December 2002, a Poverty Reduction Strategy Credit and a Public Sector Technical Assistance Credit. PolicyPerformance:The PRGFwent offtrack in2001, due to slippages infiscal policy and stalled structural reforms. A newthree-year PRGF-supported program was approved in September 2002 but the first review has been delayed because o f slow implementation o f agreed structural reform actions and difficulties in agreeing on measures to contain a significant deterioration inthe fiscal deficit. Critical among the latter were limitsto the public sector wage bill and an action planto address weaknesses inthe tax system.Policy implementation has progressed inthe context o f a deteriorated political and domestic security situation that adversely affected growth. All end-2002 quantitative performance criteria o f the PRGF have recently been met, except for the Bank o fGuyana's NDA andNFA limitsowingto delays inprogrammed World Bank disbursements resulting from earlier policy slippages. Most o fthe structural performance criteria will have been met by the time o f IMF Executive Board consideration o fthe first review (possibly at end-August2003). Macroeconomic performance in2003 remains consistent with recent understandings reached betweenthe authorities and IMF staff. Overall assessment o f the World Bank's portfolio i s satisfactory, but problems and delays have occurred. As a result, the Poverty Reduction Support Credit, which was approved inNovember 2002, has yet to become effective. The two key outstandingissues are a satisfactory macroeconomic framework and Parliament's approval o f a satisfactory newprocurement law (the law passed inJune 2002 had serious deficiencies). InJuly 2003 Parliament enacted a new law, prepared inconsultation with the World Bank, that represents a major improvement over the - 52 - ANNEX I11 previous law and, for the most part, reflects the agreement reachedby the government of Guyana and the Bank. Social and StructuralCompletionPointTriggers: Triggers are inthe areas of governance, civil service reform, education, privatization, and private sector development. The authorities are requestingthat a pending completion-point trigger covering civil service downsizing be waived basedon the sizeable employment reductions that have occurred inthe public sector since the Decision Point. Another pending trigger (submissionto Parliament o f satisfactory investment legislation) is expectedto be completed around mid-August 2003. Decisionand CompletionPoints:Guyanareachedits decision point under the enhancedHIPC initiative inNovember 2000.The completion point couldtake place inthe fourth quarter of 2003 iftheremaining completion pointtriggers are metandthe PRGFreviewiscompleted. Creditor Participation:Creditors holdingabout 91percent of Guyana's debt indicated at the decision point their intentionto deliver debt relief. Fund interimrelief lapsed at the end of 2001 butresumedinSeptember 2002. The Bank, the IADB ,andthe European Commission are providing interimHIPC assistance. Argentina has begun negotiations with Guyanato provide relief, Brazil has already delivered HIPC relief, and Indiahas announced its decision to write off all claims on Guyana. China, Kuwait, the People's Democratic Republic of Korea, the United Arab Emirates, Venezuela, and the Former SFR Yugoslavia have not signed agreementsto provide HIPC reliefbut could do so after Guyanareachesthe completionpoint. Honduras PRSPStatus:A PRSP was completed inAugust 2001, and a first annual progress report is under preparation. Civil society was consulted on a draft progressreport inApril and May 2003, Public expenditures on poverty-reducing projects appear to have beenbelow PRSP targets: spendingof 3.2 percent of GDP in2001 was below the 5.4 percent target, and spending of 2.5 percent of GDP in2002 was below the target of 5.9 percent envisagedunder the PRSP. Poverty-reducing spendingis programmed to increaseto 3.7 percent o f GDP in2003, PolicyPerformance:A PRGF arrangementwas approved inMarch 1999, andthe thirdreview under the program was completed inOctober 2001. The PRGF-supported program went off track at the end of 2001,due mainly to fiscal policy slippages associated with a continued increase inthe government wage bill andweak tax collection. The programexpired at the end of 2002. Since then the authorities have begunto develop a strategyto achieve fiscal sustainability and strengthenthe financial sector, which they intend to develop with broad participationof society and which would form the basis of a newPRGF arrangement. Congress approved a tax reform to raise revenues by 2.5 percent of GDP inApril 2003, and the authorities are preparing measures to reform the civil service, contain the deficits of public enterprises, and strengthenthe financial system. On this basis, discussions on a new PRGF arrangement could continue inthe fall of 2003. World Bank-funded operations (seven active projects) are currently rated as satisfactory. - 53 - ANNEX111 Social and StructuralCompletionPointTriggers:The authorities have beenmakinggood progress inimplementing other reforms and incomplying with completion point conditions, which are inthe areas o f governance, health, education, safety nets, social security, and financial sector reform. For example, inthe governance area, an anti-corruption strategy was prepared and publishedinconsultation with civil and donor community.Schools with community participation have been created, and the rate o f student enrollment is more than satisfactory. The delivery o f a package o f health services has been delayed, but an action plan to meet the target has been agreed on. Decisionand CompletionPoints:Honduras reachedthe decision point inJuly 2000. Ifa new PRGF-supported program i s put inplace by the end o f 2003, the completionpoint could be expected by the end o f June 2004. Creditor Participation:Creditors holding 93 percent o f Honduras' debt have indicated their intention to deliver debt relief. The Paris Club and major multilateral creditors delivered interim relief in2000 and 2001. However, interimrelief from the World Bank andIDB ended in July 2002, because both institutions had reached the cumulative ceiling for interim relief. Interim relief from the Fundexpired in October 2002, when the first tranche o f assistance was fully exhausted. The agreement with Paris Club creditors expired inApril 2002. Costa Rica, Mexico, andVenezuela have not yet agreed to provide HIPC reliefto Honduras but could do so after the completion point. Madagascar PRSPStatus:Madagascar submitted its full PRSP to the Fundand the World BankinJuly 2003. The interim PRSP was presented to the Boards inDecember 2000, but the preparationo fthe full PRSP took significantly longer than hadbeenexpected due to the political crisis inthe country, which paralyzed political and economic life duringmost o f 2002. The final PRSP, which will be discussed by the Boards inthe fall 2003, i s markedly different from the pre-crisis PRSP, partly due to the social impact o fthe crisis necessitating emergency social policy actions. The government asked each sector ministry to formulate a mission statement and articulate how sectoral actions would contribute to poverty reduction. These new objectives form the backbone o f Madagascar's PRSP. Budgetary allocations to priority social sectors have increased inrecent years, with the budget allocation for education increasing from 3.0 percent o f GDP in 1999 to 4.5 percent in2003 and health spending rising from 1.2 percent o f GDP in 1999 to 2.5 percent in 2003. The first annual review of the PRSP could be completed by the end o f July 2004. PolicyPerformance:A PRGFarrangement was approved on March 1,200 1,and the first review under the program was completed inDecember 2001. The political crisis o f the first half o f 2002 severely affected economic activity, andreal GDP in2002 dropped by 12.7 percent. The almost complete shutdown o f the export-processing sector increasedunemployment,and blockagesin the transportation network impaired the marketing o f agricultural output, causing a fall inreal income. Since July 2002 the authorities have moved to ameliorate the situation by introducing various temporary tax measures to promote economic recovery and financial support measures designedto alleviate the impact o fthe crisis on the most vulnerable social groups. Policy - 54 - ANNEX111 implementation and performance, including performance on these measures, resulted ina satisfactory second PRGF review inDecember 2002. The third review o f the PRGF-supported program was satisfactorily concluded inJune 2003. Inresponse to the crisis, the World Bank restructured its Second Structural Adjustment Credit inOctober 2002 based on the newpolicy reform priorities for public finance and anti-corruption. The adjustment program i s now fully disbursed.The World Bank also approvedan emergency credit (fully disbursed as of July 2003) to protect the most vulnerable and helprelaunchthe private sector. The Bank envisages a new Poverty Reduction Support Credit infiscal year 2005. Social and StructuralCompletionPointTriggers:Since the crisis ended inthe fall o f 2002, several HIPC supervisionmissions have taken place, jointly conducted by the Fund, the Bank, the European Commission, the AfDB, and UNDP. Progress on several sectoral reforms and actions inthe health and transport sectors i s satisfactory, as are some reforms pertainingto fiscal management (strengthening control organs, improving treasury operations, preparingbudget execution laws). However, several reforms have only recently commenced, including those related to (1) establishing monitoring systems for the budgetary cycle inat least six ministries, including the ministries of basic education and health; (2) producing biannual reports on education and health sector activities at the central and decentralized level, including budgetary allocation, expenditure execution, andphysical achievements; and (3) designing a transparent public information system on granting o f licenses (beneficiary list, geographical zone, amount) in the mining,forestry, and fishing sectors. Although the government has hired 3,500 teachers, as stipulated inthe education sector trigger, it has not provided information indicating whether these teachers were hired in(previously) disadvantaged schools. The government needs to include discussions o fthe use of HIPC funds inbiannual PRSP discussions, as stipulated inthe decision point document. Decisionand CompletionPoints:Madagascar reachedthe decisionpoint inDecember 2000. The completion point could be reached by the end o f July 2004. CreditorParticipation:At decisionpoint, Madagascar has received satisfactory assurances o f debt relief from creditors holding 91 percent its total debt. It continues to receive interimHIPC assistance from the World Bank, the Fund, the AfDB, the European Commission, and Paris Club creditors. So far, except China and Libya, none o f Madagascar's non-Paris Club bilateral creditors has agreedto provide HIPC relief, but could do so after the completion point is reached. Malawi PRSPStatus:The PRSP launchedinApril 2002 articulates a well-developed and sound strategy. Thereare detailed actionplans to generate growth, improve social sector outcomes, protectthe vulnerable, and improve governance. The resources made available from interimdebt relief have been usedto fund an expansion inpro-poor spendingprograms, including the health and education expenditures identified inthe PRSP as primarily benefiting the poor. Spending on more broadly defined social programs i s estimated at 8 percent o f GDP in2002. The first annual PRSP progress report i s under preparation. - 55 - ANNEX111 PolicyPerformance:A PRGF-supported programwas approved inDecember 2000. The program went off track before the completion of the first review, because of slippages infiscal policy resulting from decisions to bail out parastatals, augment civil servants' wages, increase nonpriority spending, and reduce income taxes. Overall, program fiscal targets over the past two years were exceededby 11percent of GDP. The situation was exacerbatedby one ofthe worst droughts inrecent history, which adversely affected agricultural productionand substantially slowed economic activity. Duringthe first five months of 2003, significant progress was made in reducing inflation and implementing structural reforms. Fiscal targets for the end of March2003 were met, andprospectsfor meetingend-June targets are encouraging. Substantial progress needs to be made on monetary targets, which were missedat the end of June 2003. Givenrecent indications of performance, the first review could be completed by the end of September 2003. The World Bank has 11active credits inMalawi, one ofwhich (the Regional Trade Facility) has an unsatisfactory rating. Social and StructuralCompletionPointTriggers:Good progresshas been made toward meeting the completion point triggers ingovernance and public expenditure management, education, health, landand credit reform, and development of social safety nets. Decisionand CompletionPoints:Malawireachedthe decisionpoint inDecember 2000. The completion point could be reachedby the third quarter of 2004 ifMalawi completes its first reviewof the PRGF andprogress is madeto satisfy the few outstanding triggers. CreditorParticipation:Malawi is receiving interimreliefunder the enhancedHIPC Initiative from the Bank, the AfDB, and the European Commission. Fund relief for 2002 and 2003 is pending conclusion ofthe first PRGF review, as well as the second and thirdphasesofthe Paris Club agreement signed inJanuary 2001. With respect to non-Paris Club creditors, SouthAfrica has written off its debt; no agreement has yet beensigned with Taiwan, Province of China. Nicaragua PRSPStatus:A full PRSP was presentedto the Fundand World Bank Boards inSeptember 2001,and the first annual PRSP Progress Report was completed inNovember 2002. Implementation of the PRSP has progressedsince the decision point (December 2000), despite political difficulties. Relative to pre-Hurricane Mitch levels, poverty-reducing expenditures are projectedto increase by about 4 percent of GDP by 2004-05. A mechanism for tracking the use of HIPC debt relief and poverty spending, designedin2002 with Bank assistance, could become fully operational inearly 2004. PolicyPerformance:Nicaragua's 1998-2002 PRGF-supported program experienced policy slippages inearly 2001,particularly inthe fiscal and monetary areas. Discussions for a third annual arrangement could not be completed during the first part of 2001, and the authorities requested a SMP for July-December 2001. The SMP was not successful. The new government that took office inJanuary 2002 reinedingovernment spending through administrative means andareduction inthe budget.Basedon this renewedcommitment, inDecember 2002 the Fund Board approved a new three-year PRGF arrangement. Despite the difficult political situation, the authorities have perseveredinimplementingthe program. Nicaragua's NationalAssembly - 56 - ANNEX111 approved the first stage o f a comprehensive tax reform inAugust 2002 and the second stage in April 2003. To reduce financial sector vulnerabilities, the authorities havebeen implementinga recovery planfor assets o f failed banks; the first and main auction took place inMay. First and second reviewsunder the PRGF arrangement were concluded inJune 2003. As of September 2002, all 15 projects inthe World Bank's active portfolio were rated satisfactory. Social and StructuralCompletionPointTriggers:Most measures inthe remaining completion point triggers related to governance, social protection and human capital development, privatization and divestiture, and the pension fund systemhave been partially implementedor are beingprepared.A draft civil service law satisfactory to IDA was presented to the National Assembly in 1999 but has not beenapproved yet. Progress has been made on social protection: a pilot social protection program was completedin2002, and a draft conceptual framework for designinga social protection was presentedinDecember 2002. The privatizationo fthe telephone company, ENITEL, i s underway. Forty percent o f its shares and a management contract were awarded to a private entity in2001, and another 11percent o f shares were divested by the end o f 2002. The power-generating operations of the electricity company, ENEL, have been assigned to four successor companies, two o f which have either been sold or are being operated by the private sector and two of which will be divested in2003-04. Decisionand CompletionPoints:Nicaraguareachedthe decision point inDecember 2000 and could reach the completion point inearly 2004. Creditor Participation:At decisionpoint, Nicaragua has received assuranceso fHIPC assistance from creditors holding 86 percent o f its debt at the decisionpoint. Inprinciple, all multilateral with the exception o f FOCEM (Fondo Centroamericano de EstabilizacionMonetaria, to which a small debt i s owed, and Paris Club creditors agreed to participate, as did the following non-Paris Club creditors: Bulgaria, Costa Rica, the Czech Republic, Guatemala, Honduras, Hungary, India, Libya, Mexico, and the Slovak Republic. Iran i s also considering to participate. Algeria; China;; the People's Democratic Republic o f Korea; Peru; Poland; Taiwan, Province o f China; Venezuela; and the Former SFR Yugoslavia have not yet agreed to provide HIPC relief but could do so after the completion point is reached. Interimreliefis beingprovided bythe Bank, the Fund, the IADB ,the CABEI, the OPEC Fund, and Paris Club creditors. Niger PRSPStatus:A full PRSP was submittedto the Boards ofthe Fundandthe World Bankin January 2002. It foresees an increase insocial spending from 5 percent o f GDP in2001 to 7 percent through 2005 to improve poor social indicators. The first annual PRSP progress report, reflecting comments o f the World Bank and Fund staffs, i s to be finalized by mid-August2003. Together with thejoint staff assessment, it i s expectedto be presented to the FundBoard inthe context of the fifth PRGF review and the World Bank Board inthe third quarter o f 2003, together with the HIPC completionpoint document. PolicyPerformance:A PRGFarrangement was approvedon December 14,2000. A fourth reviewwas completed inApril 2003. The broadly satisfactory implementation o fthe program at the endofDecember 2002 has continued, withthe observance o f all quantitative performance - 5 7 - ANNEX111 criteria and indicative targets at the end o f March2003, except for the indicative target on revenue. The fifth review of the programi s expected to be completed inOctober 2003. Social and StructuralCompletionPointTriggers:Most o fthe completion point triggers inthe areas o f governance, education, and healthhave beenmet.Corrective measures will need to be discussed for five pending conditions: (i) evaluating the impact o f public spending on the poor in the health sector, (ii) completing a report on impedimentsto primary school enrollment, (iii) limiting grade 6 repetition rate to 15 percent or less, (iv) adopting a planto improve the availability o f essential drugs inrural health centers, and (v) increasingnational DPT3 immunization rates o f 12- to 24-month-old children to 40 percent. An evaluation o fthe impact o f public spending on the poor also remains to be done. Decisionand CompletionPoints:Niger could reachthe completion point duringthe fourth quarter o f 2003. Creditor Participation:Niger has receivedfinancing assurances o fHIPC assistance at the decision point for about 80 percent o f its debt. Most non-Paris Club official bilateral creditors (Algeria; Iraq; Libya; Saudi Arabia; Taiwan, Province o f China; and the United Arab Emirates) have not yet signed debt relief agreements but could do so after the completion point. China grantedpartial debt cancellation, and the Kuwait Fundrecently provided a stock-of-debt rescheduling. Niger received adverse judgment ina U.S. court for claims by Taiwan, Province o f China. ECOWAS has not agreed to participate inthe HIPC Initiative. IFAD has committed to full debt relief at the completionpoint. TheAfDB, the BADEA,the Bank,the Fund,the IsDB, the European Commission, the OPEC Fund,the West African Economic and Monetary Union (WAEMU), and Paris Club creditors have provided interimassistance. Rwanda PRSPStatus:A PRSP was completedinJune 2002 anddiscussed by the Boards ofthe World Bank and the Fund.The PRSP identifies six broad areas as priorities: (i) development and rural agricultural transformation, (ii) development, (iii) human economic infrastructure, (iv) good governance, (v) private sector development, and (vi) institutional capacity building. Spending in social sectors has been steadily increasing, and the trend i s projectedto continue. Such spending stood at 3.9 percent o f GDP in 1999 androse to 5.3 percent in2001; it is projected to rise to 6.2 percent by 2003 and 6.4 percent by 2005. The first annual progress report was issued inJune 2003. A draft has beensubmitted for consultations and will be presented to the Fundand World Bank Boards together with ajoint staff assessment at the completion point. PolicyPerformance:The 1998-2002 PRGF-supported program expired inApril 2002 without completion o fthe final review. The first review o f the new PRGF arrangement, approved inJuly 2002, was concluded inJune 2003. Real GDP growth in2002 i s estimated at 9.4 percent, with strong performance inagriculture, manufacturing, construction, transportation, and communication. Performance was also satisfactory with respect to fiscal revenue collection, inflation, and the level o f gross reserves. - 58 - ANNEX111 Social and StructuralCompletionPointTriggers:Progress inmeeting the triggers inthe areas of tracking HIPC expenditures, privatization, education, health, and gender has been satisfactory. All triggers related to HIPC expenditures, education, and gender have beenmet, andadvances on the outstandingtriggers have beensignificant. Decisionand CompletionPoints:Rwandareachedthe decision point inDecember2000. The completion point i s expectedto be reachedinthe fourth quarter of 2003. CreditorParticipation:Rwandahas received financing assurances ofHIPC assistance from creditors holding 95 percent of its debt at the decision point. Interimassistancehas beenprovided by the AfDB, the Bank, the Fund, the European Commission, and the Paris Club. BADEA and IFAD have agreedto provide HIPC relief at the completion point. The OPEC Fundhas already disbursedits share of debt relief. Non-Paris Club creditors (China, Kuwait, Libya, SaudiArabia, andthe UnitedArab Emirates) have not signed agreementsto provide HIPC debt relief, but they could do so after the completion point is reached. Sgo Tom6 andPrincipe PRSPStatus:A full PRSPis expectedto beready inthe thirdquarter of 2003 andcould be submitted to the World Bank and FundBoards inthe fourth quarter of 2003. The first annual progressreport is expectedto be producedby October 2004. Five pillars would have been identifiedfor the PRSP: (i)reformingpublic institutions, buildingcapacity, and promoting good governance; (ii) fostering growth; (iii) creating opportunities to increaseand diversify income for the poor; (iv) developing humanresource and access to basic social services; and (v) adopting mechanismsto monitor, assess, andupdatethe strategy. PolicyPerformance:The 2000-2003 PRGF-supported program went offtrack in2001 dueto fiscal and structural reform slippages, compoundedby oil sector govemance concerns. Implementation of,thesubsequent FundSMP during the first half of 2002 was disappointing, as key quantitative benchmarks for the end of June 2002 were not observed. Spending overruns were tied to trade unionwage demands,higher energy and utility costs, and the legislative elections inMarch2002. The SMP was extendedthrough the end of December 2002 to enable reestablishmentof a track record of policy implementation. Program implementation inthe secondhalf of 2002 and January-May 2003 was broadly satisfactory. A newPRGF arrangement was agreedto inearly July, but political instability (a short-lived coup d'etat followed by efforts to form a new democratic government) has placed the program on hold. Social and StructuralCompletionPoint Triggers: Significant progresshas beenmade toward meeting the completion point triggers inthe areas of education andhealth. Progresshas been made on triggers on govemance, except as regards the tribunal of arbitration inbusiness and contract matterswhich i s not yet operational. Ineducation, schools construction is inprogress. Immunization rates for childrenhave increased. Decisionpoint and completionpoint:Silo Tome andPrincipe reachedthe decisionpoint in December2000. The completion point, originally expectedfor the end of 2003, could be reached - 59 - ANNEX111 by end -2004, provided a PRGF program is inplace andhas been satisfactorily implemented and a satisfactory PRSP reviewi s completed. Creditor Participation:At decisionpoint, Silo Tom6 and Principehas received financing assurances o f HIPC relief from creditors holding about 85 percent o f its debt. Interim assistance i s being provided by the Bank, the AfDB, and the European Commission. The Fundi s not providing assistance, because it had no claims at the decisionpoint. The OPEC Funddelivered its full share o f debt relief inMarch 2003. Paris Club creditors have provided interim assistance, but due to track record interruptions, only the first phase o fthe May 2000 agreement was implemented.Non-Paris Club bilateral creditors (Algeria, Angola, Cape Verde, and China) have not signed agreements to provide HIPC relief but could do so after the completion point. Senegal PRSPStatus:A full PRSP, discussed by the World Bankand FundBoards inDecember 2002, is organized around the themes o f wealth creation, humandevelopment, macroeconomic stability, and improved public expenditure management. Expenditures ineducation declined slightly, from 3.5 percent o f GDP in2000 to 3.4 percent in2002. Expenditures inthe health sector remainedat about 1percent over the period. A donors conference on the PRSP took place inParis inearly June 2003. The first annual PRSP progress report i s expected to be prepared inthe fourth quarter o f 2003. PolicyPerformance:The 1998-2002 PRGF-supported program expired inApril 2002 without the conclusiono fthe last review.At issue were problems associated with the operations ofthe electricity and groundnut enterprises, which weakened public finances; and the implementation o f reforms inthe pension system. A new PRGF arrangement was put inplace inApril 2003. The World Bank has 21 active credits in Senegal, four o f which (Quality Education for All, Urban Mobility, Transport 11, and Information Systems Modernization) are currently rated unsatisfactory. The dialogue with country authorities has been continuing on the basis o f the reform strategy outlined inthe PRSP. Social and StructuralCompletionPoint Triggers: Progress inmeeting the completion point triggers inprivatization, education, health, and privatization has been slow. Technical problems have limitedprogress inthe health sector. Implementation inthe education sector has improved recently, and most of the triggers have now been met. Decisionand CompletionPoints: Senegal reached the decision point inJune 2000. Itcould reach its completion point inthe fourth quarter o f 2003 ifthe PRGF i s successfully implemented and adequateprogress i s made inmeeting poverty triggers. Creditor Participation:Senegal has receivedfinancing assuranceso ftotal HIPC debt relief from creditors holding about 79 percent o f its debt .Non-Paris bilateral creditors (Algeria, China, Iraq, Kuwait, Oman, Saudi Arabia, andthe United Arab Emirates) andtwo multilateral creditors (BCEAO, ECOWAS) have not yet agreed to provide debt relief. All remaining creditors have committed to provide debt relief. The Bank, the AfDB, the European CommissiodEuropean Investment Bank (EIB), the Banque Ouest Africaine Ddveloppement - 60 - ANNEX111 (BOAD), the Fund, and Paris Club creditors have provided interim assistance. The OPEC Fund delivered its full share o f debt relief inNovember 2002. The Fundresumed the delivery o f interim assistance inApril 2003. Sierra Leone PRSPStatus:An I-PRSP was completedinSeptember 2001. The final PRSP was originally expected by mid-2003, but it was delayed pending the full disarmament and demobilization o f Revolutionary UnitedFront rebels; the resettlement and reintegration o f intemally displaced persons, refugees, and ex-combatants; and the holding o f presidential and parliamentary elections. Administrative and financing difficulties also delayed the final PRSP. Despite these delays, significant progress has beenachieved inestablishing governance and institutional arrangements. Participatory data and information collection has commenced (an HIV/AIDS surveywas conducted, for example). Some sector reviewshave been completed (Transport Sector Strategy), others are beingprepared (Rural Sector Review) or are plannedfor key sectors (education, infrastructwe).The final PRSP i s expected to completed by June 2004; the first PRSP annual reviewi s expected to be completed by July 2005. Policyperformance:Satisfactory progress has beenmadeunder the PRGF arrangement approved in September 2001. The third review was successfully completed inApril 2003. The improved political and security situation has strengthened confidence and helped sustain the economic recovery. Structural reforms have been strengthened, and presidential and parliamentary elections were heldpeacefully inMay 2002. A consultative group meeting took place inNovember 2002. Donors agreed to provide financial andtechnical assistance to consolidate the peace process. A Third Economic Rehabilitation and Recovery Credit was approved by the World Bank's Board inMay 2003 to support the government's updated agenda for postconflict reconstruction and poverty reduction presented at the Consultative Group meeting. Social and StructuralCompletionPointTriggers: Progress inimplementingthe five remainingtriggers inhealth, education, governance and public expenditure management, and privatizatiodmining has been satisfactory. Decisionand CompletionPoints: Sierra Leonereached the decision point inFebruary 2002. The completion point is expected by the end o f 2004, once a full PRSP has beenprepared and implementedsatisfactorily for one year. Creditor Participation:At decisionpoint, Sierra Leone has received financing assuranceso f HIPC assistance from creditors holding 84 percent o f its debt. One non-Paris Club official bilateral creditor, Morocco, has announced its intention to cancel all claims on Sierra Leone. Two non-Paris Club creditors (China and Saudi Arabia) agreed to deliver debt relief, but the amounts fall short o f what is required under the HIPC Initiative. Another non-Paris Club creditor, Kuwait, has not signed an agreement to deliver debt reliefbut could do so after the completion point. Most multilateral creditors (the Bank, the Fund, the AfDB, the European CommissiodEIB) and Paris Club creditors are providing interimassistance. IFADand BADEA startedproviding -61 - ANNEX111 assistance inthe form o f arrears clearance and will provide the rest o fthe assistance at the completion point. Zambia PRSPStatus: A full PRSP was receivedinApril 2002 and endorsed bythe World Bank and FundBoards inMay 2002. It aims to promote growth and diversification inproduction and exports, to improve delivery o f social services, and to foster appropriate policies for HIV/AIDS, gender, and the environment. Poverty-reducing spendingwas lower than programmed, due to initial difficulties inestablishing an accounting framework and lack o f implementation capacity. Priority poverty-reducing programs amounted to 1.1percent o f GDP in2000,2.1 percent in 2001,and about 2.2 percent o f GDP in2002. Preparations are underway for the progress report detailing the first year o f implementation o fthe PRSP inclusive o f an updated macro framework. PolicyPerformance:The fifthreview o fthe 1999-2003 PRGF-supported programwas successfully completed inNovember 2002, notwithstandingcapacity constraints and an adverse external environment, particularly inthe copper sector. The government's financial policies in 2002 allowed for a reorientation o f public expenditure toward the social sectors. Despite a wage bill overrun, the overall fiscal target for 2002 was on track. The privatization o fthe Zambia National Commercial Bank was delayed to allow for more public debate and to strengthen ownership o f the reform program; while the strategy to privatize the Zambia Energy Supply Company was revisedto one o f commercialization. As a result, the previous arrangement expired without the final PRGF disbursement. Since then, a significant overrun o fthe wage bill has emerged, necessitating discussions on corrective actions. Social and StructuralCompletionPointTriggers.Completion point triggers on PRSP implementation, HIVIAIDS, and health have been met. However, the following completion point triggers have not beenmet: (i) commercialization o f the Zambia Energy Supply Company (ZESCO), (ii) implementation o f an IntegratedFinancial Management Information System (IFMIS), and (iii) increasing discretionary budget share of educationto 20.5 percent. Decisionand CompletionPoints:Zambia reached the decisionpoint inDecember 2000. The completion point, initially envisaged for the end o f 2003, i s now expected by mid-2004. Creditor Participation:At decisionpoint, Zambia has receivedfinancing assurancesofHIPC assistance from creditors holding about 97 percent o f its total debt. The Bank, the Fund, the AfDB, the EuropeanCommission, andParis Club creditors have provided interimrelief. So far, Bulgaria, China, Iraq, Romania, and Saudi Arabia have not signed agreements to provide HIPC reliefto Zambia but could do so after the completion point. India has announced its decision to write off all claims on Zambia. - 62 - ANNEX111 11. COUNTRIESTHAT COULDREACHTHE DECISION POINTAFTERJULY2003 This sectionprovides informationonthe statusof 11HIPC-eligible countries that could reach their decisionpoints after July 2003. Itdoes not include HIPCswhose debtburdenis expectedto be sustainable (Angola, Kenya, Vietnam, and Yemen). One country (Cote d'Ivoire) has hada preliminary document submittedto the Fundand World Bank Boards. Burundi PRSPStatus: Nineteenpolitical parties signedapeace agreement inAugust 2000 inArusha, Tanzania, inan attempt to bring the civil conflict to an end. Agreement was reachedinJuly 2001 on the installation of transitional institutions for athree-year periodto leadto full democratization. The transitional arrangementsculminated inthe installationof an inclusive transition government inNovember 1,2001, andthe installation o fthe transition Parliament and Senate inJanuary 2002. Political cooperation with the transition government continued with the successful handover of power from a Tutsi to a HutupresidentinApril 2003. Burundilaunched its PRSPprocess in July 2000, and a draft I-PRSP was discussedby donors at a thematic roundtable meeting inApril 2002. The civil conflict has continued, despitethe bestefforts ofthe international community to mediate. Burundi authorities are incorporating comments provided by development partners, andthe World Bank and Fundprepared ajoint staff assessment ofthe final I-PRSP inthe secondquarter of 2003. The World Bankhas beenproviding assistanceinconsultation andparticipatory diagnostic analysis. Burundiauthorities recently requestedfurther assistanceinthis area, within the context ofpreparingthe full PRSP. PolicyPerformance:InJuly 2001 agreementwas reachedon a SMP covering the period July 1-December 31,2001. InOctober 2002 the Fund Boardapproved a postconflict assistance facility for Burundi.This program, as well as Bank support under the Economic Rehabilitation Credit, is expectedto be a catalyst for donor assistance.At the end of Marchtargets under the program were observed and inMay 2003 the FundBoard approved a secondrequest for post conflict emergency assistance. Indications are that performance related to the end of June targets i s also satisfactory. Giventhese developments, the Fundhad initiateddiscussions on a medium- term program that could be supported by a three-year PRGF arrangement. The Bank i s currently supporting Burundiwith the Economic Rehabilitation Credit and a number of other projects planned inthe context of the Transitional Support Strategy. That strategy, approved bythe World Bank BoardonMarch7,2002, underpinnedIDA assistanceto Burundiduring fiscal 2002-03. In addition to the Economic Rehabilitation Credit, it envisagesexceptional Bank assistanceto Burundi for HIV/AIDS,capacity building, health care, demobilization and reintegration, and social action. Creditor Participation:Preliminaryanalysis indicates that Burundihas a heavy debt burden.It has managedto remain current inits debt-service obligations to the World Bank andthe Fundbut i s in arrears to the AfDB. A MultilateralDonor Trust Fundhas been set up to help Burundi clear - 63 - ANNEX111 its arrears and pay its debt to its multilateral creditors duringthe periodleading to the enhanced HIPC Initiative. A number o f donors have already contributed to the trust fund. CentralAfricanRepublic PRSPStatus:An I-PRSP was presentedto the Bank and FundBoards inJanuary 2001. It emphasized the importance o f rapid and broad-based economic growth, accompanied by a stable macroeconomic framework as prerequisites for poverty reduction. However, the I-PRSP did not set poverty reduction goals along the lines o f MillenniumDevelopment Goals and did not discuss a macroeconomic framework beyond 2001. The JSA o f the I-PRSP stressed that the PRSP would needto address weaknesses inthe preparation o fthe I-PRSP. Inparticular, the work leadingto the preparation o fthe PRSP would needto improve the statistical database; strengthen the participatory process; better prioritize the objectives for poverty reduction; clearly define quantitative targets for poverty reduction inthe context o f a detailed costing and financing exercise; and design an effective system for monitoring progress inreducing poverty, including the tracking ofpoverty outlays. Inview o fthe fact that the issue o frecognition ofthe new authorities (following the coup d'dtat inMarch 2003) i s yet to be resolved, the timing o fthe full PRSP i s uncertain. PolicyPerformance:InOctober 2001 the authorities agreedwith Fundstaff on a six-month SMP. The successful completion o f the program inJune 2002 ledto an agreement with the Fund on a three-year program to be supported by a PRGF, but the authorities' request could not be presentedto the FundBoard becauseof a coup attemptand an outbreak o fcivil conflict in October 2002. Discussions with the authorities to conclude the 2003 Article IV consultations were overtaken by the coup d'dtat inMarch 2003. Currently, the financing prospects are uncertain, with increasing arrears to multilateral creditors, notably the IDA andAfDB. The Central African Republic has beeninnon accrual status with the World Bank since June 2002. Following the coup inMarch 2003,the donor community essentially suspended development assistance to the CAR. The World Bank was preparing a Country Reengagement Note under the LICUS framework before the events o f October 2002. Inlight o f the change ingovernment in March 2003, the Bank i s continuing with planned analytical work and discussing with the IMF, the EUand other donors on the appropriate timing and modalities for re-engagement inCAR, which will be determinedlargely by progress ingovernance andnational reconciliation issues. In light ofthe uncertainty regarding re-engagement, the timingo fthe HIPC decision point is uncertain. Comoros PRSP Status: The PRSP process was initiated in March 2002, when the country was in the process o f overcoming its secessionist crisis. Since then the reconciliation process has regressed substantially. The bottleneck remains the sharing o f resources and the competencies o f elected institutions of the Union and the islands. The PRSP process has proved to be a useful tool to facilitate discussions between the conflicting parties. The PRSP process, however, has lost some o f its dynamic since mid-2002. An I-PRSP was updated and discussed through participatory - 64 - ANNEX111 workshops in May 2003 and could be presentedto the boards o f the Bank and the Fundin early 2004. Policy Performance:Disputes between Union and island governments over competencies and revenue sharing led to suspension o f the Fund SMP in July 2002. Discussions are ongoing, but after a Fundmission in June 2003, there are few chances that a new SMP could be institutedin 2003. As a result, prospects for debt relief under the HIPC Initiative will be delayed, at least until the end of 2004. Congo, Republicof PRSPStatus: With the assistance o fthe World Bank and other active donors inthe country, including UNDP, France, andthe EuropeanUnion, the government o f the Republic o f Congo i s improving the content and the participatory process o f the I-PRSP, taking into account comments on an early draft circulated to development partners in2002. The I-PRSPi s expected to be completed by October 2003. PolicyPerformance:The Republic o f Congo receivedFundsupport under anemergency post conflict assistance program inNovember 2000. Performance under two successive SMP through 2002 was disappointing, as most fiscal and structural targets were missed. The public finances deteriorated, reflecting a combination o f expenditure overruns and a drop innon-oil revenue collection. Significant improvements inpolicy implementationand structural reforms were registeredinthe fourth quarter o f 2002, following the appointment o f a new government in August 2002. Preliminary information on the execution ofthe third SMP (covering January-June 2003) indicates the continuation o f this positive trend. As a result o f this satisfactory performance under the current SMP, the Fundhas initiated discussions on a medium-term programthat could be supported by a three-year PRGF. The timing o f a possible three-year PRGF arrangement and preparationo f a HIPC preliminary document will depend on progress inthe implementation o f reforms through end-September 2003, with a focus on improved fiscal performance, progress intransparency inthe oil sector, and normalization o f relations with external creditors. The Republic o f Congo cleared its arrears to the Bank on August 8,200 1,paving the way for the disbursement o f already approved credits and new Bank lending. On July 31,2001,the World Bank Board approved a Post Conflict Economic Rehabilitation Credit and an Emergency Demobilization, Disarmament, and Reintegration Credit. Inaddition, a recently approved Governance and TransparencyCapacity BuildingProject i s financing the external audit o fthe national oil company (SNPC). An audit o f the entire oil sector will be undertaken at a subsequent date. - 65 - ANNEX111 C6te d'Ivoire PRSP Status:The Fundandthe World Bank Boardsendorsedthe I-PRSP inMarch2002. A first draft of the full PRSP was preparedinSeptember2002 andreviewedby BankandFundstaff. The intervening conflict, however, delayedcompletion of the PRSP and implementation of anti- poverty measures.Social sector spendingby the central government fell slightly, from 4.6 percent of GDP in2000 to 4.4 percent of GDP in2001. It had been projected to increaseto 5 percent in2003, but with the crisis extending into 2003, it i s unlikely that this will be achieved. The PRSP processwill be reactivated once the sociopolitical situation has fully stabilized. Policy Performance:InMarch 2002, the Fundandthe World Bank Boards discusseda preliminary HIPC document, and a three-year PRGF arrangement was approved following the successful implementation of a SMP. Progressmade toward fiscal consolidation during the first eight months was derailed by the outbreak ofthe crisis. The primary surplus andoverall deficit fell short oftargets, reflecting expenditure overruns on defense spending and slippages inthe wage bill, despite better than anticipated revenueperformance. Budgetary and external payments arrears also increased. Since August 2002, external payment arrears have increased from CFAF 91 billionto CFAF 427 billion at end-May 2003. Inaddition, there were considerable delays in the implementation of structural measuresprior to the crisis and sincethenmost ofthose measures have beenput on hold. The incomplete structural reformprogram, together with the accumulation of new external arrears, signals that the 2002-04 program is off track. Given these developments, the HIPC decision point was not reachedin2002 andcannot be envisagedbefore 2004. Lao PDR PRSPStatus: The Bank and FundBoards consideredthe country's I-PRSP inApril 2001. The first draft of the PRSP was delivered by the Lao authorities at the end of May 2003, andthe final PRSP is expectedby the endof September2003. Policy Performance: In April 2001, the Fund Board approved a new three-year PRGF arrangement with Lao PDR. The first review of the program was completed in February 2002, the second review in August 2002. The third review is currently delayed, pending measures by the authorities to prevent a recurrence of misreporting and measures to get the fiscal program back ontrack. The thirdreview is expectedto take place inAugust 2003. The Bank Financial Management Adjustment Credit, a US$17 million-equivalent IDA credit, builds on and supports the implementation of Lao PDR's current reform program. Approved in June 2002 and signed in mid-August, the credit was declared effective in December 2002. The first tranche was disbursed in January 2003. Release of the second tranche, originally scheduled for March 2003, has been extended to December 2003, pending measures by the authorities in the areas ofpublic expendituremanagement,financial sector and state-ownedenterprises. - 66 - ANNEX111 HIPC Status: Fundstaff conducted a preliminary debt sustainability analysis in2002. Agreement on the value and terms o f debt has yet to be reached with one of Lao's bilateral creditors. Liberia Policyperformance:Liberiacontinues to strugglewith the loss o f economic infrastructureand the humancosts resulting from the ongoing civil war. In2001 Liberia's relations withthe international community deteriorated sharply after allegations o f human rights abuses, support for an armed insurgency inSierra Leone, and widespread government corruption. Liberian authorities hadadopted a SMP with the intent o f establishing a record o f policy performance. Although some advances were made under the SMP, the policy performance record was not sufficient to proceed with a PRGF. Article IV consultations were held inDecember 2001 and most recently inDecember 2002. Liberia i s inarrears to the Bank andthe Fund. InMarch2003 the Fund's Board found that Liberiahadnot adequately strengthened its cooperation with the Fundinterms o fpolicy performance and payments and, therefore voted to suspend Liberia's voting and related rights. HIPC Status:The stock o f Liberian public sector debt amounted to about US$3.1 billion (550 percent o f GDP) at the end o f 2002. At the end o f 2002, Liberia was estimated to hold US$2.8 billion inextemal debt; domestic debt was estimated at US$0.32 billion as o f September 30, 2002. External arrears at the end o f 2002 amounted to US$2.5 billion, of which 27 percent was to the Fund, 14percent to the Bank, 7 percent to the AfDB, 26 percent to other multilateral creditors, and 26 percent to official bilateral creditors. Domestic arrears were estimated at more than US$0.3 billion. Myanmar Policyperformance:Myanmar has not had a Fund-supportedprogram since 1981/82. Fund relations with Myanmar have been limitedto annual Article IV consultations. The last consultation, concluded inOctober 2002, indicates that Myanmar's macroeconomic situation has deteriorated. The fiscal deficit spiked in2000/01 and, despite declines in2001/02, remains unsustainable. Low and declining revenueand spending allocations that favor defense have resulted inwidespread poverty. Central bank financing o fthe deficit has produced a surge in inflation and a sharp depreciation inthe parallel market exchange rate. The low import cover o f reserves and continuing accumulation o f arrears indicates a precarious external position. The deteriorationinthe institutional infrastructure, declines invarious aspects of human capital, and governance problems continue to erode Myanmar's potential. The World Bank has approved no new lending since 1987 and does not have an active program inMyanmar. HIPC Status:Myanmar is inarrears to the World Bank andto other multilateral andbilateral agencies. Poor debt statistics make assessment o f the debt burdendifficult. Highlytentative estimates indicate that Myanmar's debt ratios exceed the HIPC thresholds. GivenMyanmar's poor relations with the international community and the lack o f economic reforms, there i s little - 67 - ANNEX111 prospect for moving beyond Fundsurveillance at this stage. Without an active engagement with the Bank and Fund, Myanmar is not engagedinaprocessto proceed with preparing anI-PRSP or working to develop a track record o f economic performance to receive HIPC relief. Somalia Underthe auspices o fthe IntergovernmentalAuthority on Development (IGAD), a national reconciliation conference on Somalia opened inOctober 2002. The peace talks have reachedthe third and final phase, inwhich power-sharing arrangementsare being discussed with a view of establishing an interimauthority. Duringthe second phase o f the peace process, which examined key reconciliationissues, the World Bank provided technical expertise to the committee on economic recovery and trade. The Bank i s an active member o f the Somalia Aid Coordination Body (SACB), which provides a framework for UNagencies, international and Somali NGOs, and donors to develop a common approach for the allocation of internationalaid to Somalia. PolicyPerformance:The World Bank has not had anactive lendingprogram inSomalia since 1991because o f an unstable security situation and lack o f recognition o fthe current interim government. Significant arrears have accumulated on past debt-servicing obligations. A joint World Bank/UNDP Country Reengagement Note was elaborated for Somalia and approved by the Board inJune 2003. Underthe Country Reengagement Note, the following strategic entry- points will be implemented: (i) support to macroeconomic data analysis and dialogue; (ii) creation o f an enabling environment for the livestock and meat industry; (iii)coordinated action planto address HIV/AIDSissues; and (iv) capacity-building for skills development and training centers. Through a Post Conflict Grant o f US$4.6 million, the Bank's will support the proposed Country ReengagementNote interventions. Insupport o fthis Note, a first Bank missionwas sent to Somalia inJune 2003. Somalia is inarrears to the Fund. PRSPRRGFand HIPC Status: Given the lack o factive engagement with the World Bank and Fund,the security situation, andthe lack o frecognition ofthe current interimgovernment, Somalia i s not expected to proceed with preparing inI-PRSP. It i s working to develop a track record o f economic performance. Sudan PRSPStatus: Peacetalks betweenthe government of Sudanand the Sudan People's Liberation Movement/SudanPeople's Liberation Army are broadly on track, with significant support from international mediators. Discussions are continuing on political power and resource sharing, and on security issues. The two parties have expressed hope for a final agreement in2003. The government i s currently preparing an I-PRSP incollaboration with civil society. PolicyPerformance:Sudan's economic performanceunderthe 2002 SMP was satisfactory, with all quantitative benchmarks and almost all structural benchmarks implemented. The government agreed with Fundstaff on a SMP for 2003. FundDirectors considered the 2003 SMP, like the 2002 SMP, to be o f comparable strength to a Rights Accumulation Program (RAP). Ifthe peace - 68 - ANNEX111 process advances andprogress with reform continues, a RAP may be inplace by the fall o f 2003. Some work has been completed inrecent months to lay the groundwork for a possible arrears clearance for Sudan inthe event that conditions improve sufficiently to allow for reengagement by the international community,' Preliminary estimates suggestthat the nominal amount o f Sudan's debt will be about US$21 billionat the end of2003, o fwhich about US$18 billionwill be inarrears. Around 70 percent o fthis debt is owed to non-Paris Club bilateral, commercial and multilateral creditors. The financing o f these arrears may prove challenging for creditors, including the Fund.2The additional resource requirementsfrom the Fundfor clearing arrears, deliveringHIPC relief, and resuminglending on highly concessional terms are estimated at more than US$1 billion. The Bank has developed a reengagement strategy, including options for the clearance o f arrears, which stood at US$256 million at the end o f June 2003. The Reengagement Note was discussed with the Bank's Board inearly July 2003. Togo PRSPStatus: Presidentialelections were heldinearly June 2003, leadingto the reelectiono fthe incumbentpresident. Firstreactions by donors to the elections indicate that an immediate resumption o f financial assistance is unlikely.Preparation o f an I-PRSP was initiated in2002 and i s expected to be finalized inthe second half of 2003. However, as long as Togo has no stable macroeconomic framework and i s on non-accrual status with the Bank, formal discussion of the I-PRSP by the World Bank and FundBoards i s not possible. PolicyPerformance:Togo has not hada Fund-supported program since mid-1998. An enhanced Staff Monitored Program (SMP) was implementedduringthe period April-December 2001. However, performance was mixed and no agreement could be reached on an extension o fthis SMP. Subsequently, the authorities started implementation o f a stabilization program, which was prepared incollaboration with Fund staff inthe context o f the April 2002 Article IV discussions. The programaims to demonstrate the authorities' commitment to stabilizing public finances, continuing the ongoing privatization of state-owned enterprises, and normalizing relations with external creditors. The Fundplans to assess performance o f this program through an Article IV consultationplanned for the second half o f 2003. The World Bank released the final tranche of its last adjustment credit to Togo inMay 1998. Accumulation o f arrears with the Bank ledto the suspension o f disbursements on Bank investment operations betweenNovember 2000 and mid- August 2001. Following a further accumulation o f arrears, Bank disbursements to Togo have beensuspended since January 2002. As o f June 30,2003, Togo's arrears with the Bank stood at US$26.6 million. The U.K.Departmentfor International Development organizedan informal workshop on Sudan's externaldebt problems inLondon inMay 2003. See IMF "Update on the Financing of PRGF and HIPC Operations and the Subsidization of Post-Conflict EmergencyAssistance" March 21,2003, SM/03/100, http:llwww.imf.or~lexternaVnultrelr,ledsel20031023003lpdf. - 69 - ANNEX111 111. COUNTRIESTHAT HAD REACHEDTHE COMPLETION POINT BY THE ENDOF JULY2003 This section provides information on the status o f the eight HIPC countries that reached their completion points before the end o f July 2003. Benin ExternalDebtIndicatorsafter HIPC DebtRelief Benin reached its completionpoint in March 2003. HIPC assistance amounted to US$265 million. At the completionpoint, the net present value o f the debt-to-exports ratio was projected at 161percent in2003, but i s expected to fall below 150percent in2005. At completion point, the net present value o f debt-to-exports ratio deteriorated by about 30 percentage points relative to decision point projections (after accounting for a delay inthe expected completion point). The decline was due primarily to lower exports associated with depressed cotton prices, lower discount rates at the end o f 2001 relative to the base year, andhigherthan projected new borrowing. However, the debt-service ratio i s expected to average around 7 percent for the 2002-1 0 period, inline with earlier projections. PRSPStatus:The authorities developed a full PRSP through a broad-based participatoryprocess at the national and regional levels that was finalized inDecember 2002. InMarch 2003 the Fund and Bank Boards concludedthat Benin's PRSP contains a credible poverty reduction strategy. The PRSP is accompanied by a detailed Medium-TermExpenditureFramework that buildson detailed program budgets for priority sectors (basic education, health, safe water, environment, rural development, and transportation) that link quantitative result targets, policies and actions, and expenditure (investment and recurrent costs). Underthat framework, budget allocations for priority sectors will increase to 12.4 percent o f GDP on average over 2003-05, up from 8.7 percent in 1996-99, and their share o f total government expenditure will rise from 63.5 percent to 72.6 percent. An effort has also been made to better balance investment and recurrent costs in priority sectors. The fight against HIV has intensified, with a 2000-05 strategy to fight HIV/AIDSpresented to the National Assembly. A roundtable is scheduled later in2003 to elicit donor support. PolicyPerformance:The three-year PRGF arrangement was approved bythe FundBoard in July 2000. InJuly 2002 the Board approved the extension o f the arrangement to March2004. Benin's macroeconomicperformancewas strong andbroadly inline with the program established for 2002. As a result, the fourth review o f the PRGF-supported program was completed inMarch 2003. All performance criteria and structural benchmarks established for the end o f September and the end o f December 2002 were met. However, spending on health and education remained below quantitative benchmarks. All performance criteria and structural benchmarks established for end-September were met. There was progress inthe implementation of structural reforms, particularly those regarding governance, the liberalization o fthe cotton sector, divestiture o fpublic utilities, and the involvement o f the private sector inthe management o f the port. However, civil service reform continued to stall, as the National Assembly did not vote on the legislation regardingthe new compensation system for the civil service. - 70 - ANNEX111 Creditor Participation:Creditors holding98.8 percent of Benin's debt at the completion point are providingHIPC relief. Interimassistance has beenprovided by the major multilateral creditors andthe Paris Club. InApril 2003 Paris Club creditors agreedto implement a stock-of- debt reduction of US$60 million innet present value terms, and all multilateralcreditors have indicatedtheir commitment to provide the debt relief required. Ofthe seven non-Paris Club bilateral creditors, China, Kuwait, and Libya have indicatedtheir intentionto provide HIPC relief. Debt owed to Argentina as well as commercial debt was settled through buyback operations. Bolivia ExternalDebtIndicators after HIPC DebtRelief:Boliviareachedits completion point under the enhanced HIPC Initiative inMay 2001. Innet present value terms, HIPC assistance amounted to US$448 millionunderthe original framework andto US$854 million under the enhanced framework, At the completion point, the net present value of debt-to-exports ratio after bilateral assistance beyondHIPC assistancewas projected to remain well below the 150percent throughout the projection period (2002-20). However, Bolivia's external debt indicators have deterioratedsince its completion point underthe EnhancedHIPC Initiative. According to the baselineprojections under the Stand-By Arrangement, the net present value of debt-to-exports ratio would peak at 145 percent in2004, falling to 137percent by 2007. These projections are subject to risks, including Brazil's desire to renegotiateits contract to buy Bolivia's natural gas exports and delays inreaching agreement over the project to export liquefied natural gas to California. PRSPStatus:The PRSPwas completed inMay 2001, andthe first progressreport is being prepared.Tracking of poverty-related expenditure requires improvement, especially at the local- government level. Social spending reached 12 percent of GDP in2002 and i s projected to increaseto 13 percent in2003. PolicyPerformance:The PRGF arrangement expired inJune 2001. A StandBy Arrangement was approvedinApril 2003 covering the periodthrough April 2004. The core elements of the economic program are fiscal consolidation, strengtheningofthe banking and corporate sectors, andprotecting and making more efficient social safety net spending. Real growth inBoliviahas beenweak for the past four years, averaging 1.75 percent ayear. Adverse shocks includedthe impact of coca eradication on incomes, the impact of low metal export prices on mining output and foreign direct investment, and contagion from the regional financial and economic developments. The economy's vulnerabilities have beenheightened by fiscal imbalancesand highly dollarized financial and corporate sectors. CreditorParticipation:Creditors holding about 95 percent of Bolivia's debt, includingall multilateral creditors, have been delivering debt relief, andvirtually all Paris Club creditors have providedreliefbeyond HIPC. O fthe four non-Paris Club creditors, assurances of debt relief have not beenprovided by China and Taiwan, Province of China. Brazil committed to deliver its share of assistance when it participated to the April 2001 Paris Club Agreed Minute,but the bilateral agreementhas not been signed yet. - 71 - ANNEX111 BurkinaFaso ExternalDebt Indicatorsafter HIPC DebtRelief:BurkinaFasoreachedits completionpoint inApril 2002. Innetpresent value terms, HIPC assistanceamountedto US$229 millionunder the original HIPC framework andto US$195 million under the enhancedframework, ofwhich US$26 million additional assistance at completion point. At completion point, projections for the net present value of the debt-to-exports ratio were significantly higher than anticipated at the decision point. The increase was due to new borrowings in2002-04 to finance public infrastructure and poverty alleviationmeasures; lower than projected export performance, resulting from a fall inexport volumes (due to the impact of white fly) ;a decline inthe international price of cotton and gold exports; and the adverse effects of tensions inC6te d'Ivoire on other categoriesof exports . Topping up assistancewas providedat the completion point to mitigate the adverse effect on BurkinaFaso's debt ratios resulting from exogenous shocks. At completion point, the net present value of debt-to-export ratio was projected at 190percent, gradually decreasingto less than 150percent by about 2016. Despite the humpof debt stock indicators, debt-service indicators are sustainable. At the completion point, the debt-service-to- exports and debt-service-to-revenues ratios were projected to average 7 percent during 2002-21. PRSPStatus:The secondprogressreport on the implementation ofthe PRSP was finalized in September 2002 and discussed by the Boards of the World Bank and the FundinNovember 2002. Overall, the government has made goodprogressinfighting poverty, increasing social expenditures significantly in2002. Total poverty-reducing social expenditure increasedfrom 5.3 percent of GDP in 1999to 7.5 percent of GDP in2002. Regarding education, school enrollment improved. Inthe area of health, progress was made with regardsto raising immunization coveragerates, increasing health center staffing and lowering the price of drugs and services. PolicyPerformance:The FundBoard approved anewthree-yearprogram supportedunderthe PRGF inJune 2003. Implementation of the earlier PRGF-supported program (September 1999- December 2002) was largely satisfactory. At the end of March and the endof June 2002, quantitative performance criteria, benchmarks, and indicators were met, except for the indicator on net budget financing andthe government expenditure ceiling. On the basis of satisfactory implementation of the PRSP, the Bank Boardapproved a third consecutive poverty reduction support operation inJuly 2003. As regards HIPC-financed social spending, there was amarked acceleration inthe commitment o f resourcesin2002 to make up for previous spending delays, with a further catching up of spending expectedin2003. Creditor Participation:Creditors holding 88 percent of BurkinaFaso's debt have agreedto provide enhancedHIPC relief. Financing assurances for topping up at the completion point have beenobtained from the Bank, the AfDB, the Fund,the BOAD, the EuropeanUnion, andParis Club creditors, whichtogether constitute 74 percent of total topping up assistance. Of the seven non-Paris Club creditors, Kuwait has committed to deliver its share of HIPC assistance. Saudi Arabia has not yet agreedto deliver assistance.The OPEC Fund, the IsDB, and BADEA have committed to deliver debt relief, but agreements are still pending. ECOWAS has indicated that it will not provide its share of assistance. - 72 - ANNEX111 Mali ExternalDebt Indicatorsafter HIPC DebtRelief Malireachedits completion point inMarch 2003. Assistance was US$121 million at the end of 1998 innet present value terms under the original framework andUS$417.3 million in 1998 netpresent value terms underthe enhanced framework. The net presentvalue of debt-to-exports ratio at the completion point was lower than projected at the decision point, due to higher volumes of gold exports. It i s projected to be 119 percent in2003 after full delivery o f HIPC assistance andbilateral debt relief beyond HIPC assistance and to remain below 150percent throughout the projection period(2002-21). The debt-service-to-exports ratio is projected to remainbelow 10 percent. PRSPStatus:The full PRSPwas consideredby the Bank and Fund Boards inMarch2003. Delays inthe completion of the full PRSP were due mainly to the following three factors (i)the longer than anticipated participatory process; (ii) time requiredfor the new administration to the review and endorse the PRSP during the summer of 2002; (iii) andthe mismatch betweenthe PRSPmacroeconomic framework preparedinMay 2002 andthe updated framework underpinning the October 2002 budget. Budgetary allocations to priority sectors have increased steadily inline with the I-PRSP. Social expendituresincreasedfrom 4.4 percent of GDP in2000 to 4.8 percent of GDP in2002. They are projectedto decline to 4.3 percent of GDP in2003 (due mainly to slower than anticipated implementation of the health sector program) andto reach4.9 percent of GDP in2006. PolicyPerformance:The PRGF-supported program, approvedAugust 6, 1999, was extendedby one year. It has beenon track since Mali reachedthe enhancedHIPC decision point, in September 2000. The fifth reviewunderthe PRGF arrangementwas completed inFebruary 2003, andthe sixth and final review was completed inJuly 2003. Economic growth was strong in2002, as a doubling of cotton output boostedreal GDP growth by 9.7 percent. The annual fiscal program was on track at the end of December2002, andpublic resource management has been strengthened. Implementationof the reform of the cotton sector remains difficult. The crisis in C8te d'Ivoire has hit Mali's economy severely since September 2002. As a result and owing to lower rainfall, growth is projected to decline by 1percent in2003 andthe fiscal positionto weaken. Creditor Participation:Malihas receivedfinancing assurances ofHIPC assistance from creditors holding 93.5 percent of its total debt . Some non-Paris Club bilateral and commercial creditors and three multilateral creditors (BCEAO, ECOWAS, andthe Foundation for Sustainable Development) have not yet agreed to provide debt reliefto Mali. IDA, the Fund, the AfDB, the EuropeanUnion, and Paris Club creditors haveprovided interimassistance. Mauritania ExternalDebtIndicatorsafter HIPC DebtRelief:Mauritania reachedits completion point in June 2002. HIPC assistance amounted to US$622 million innet present value terms. Debt indicators were slightly worse than projected at the decision point, due to higher newborrowing - 73 - ANNEX111 and lower exports thanprojected (as a result o f external shocks to the price and demand for iron ore) and changes indiscount and exchange rates. At the completion point, the net present value o f debt-to-exports ratio was projected to be 157 percent in2003, but it should decrease to less than 150 percent in2006. The net present value o fthe debt-to-revenue ratio i s currently at about 200 percent, well below the HIPC threshold o f 250 percent. Debt-service ratios have improved significantly with HIPC assistance. The debt-service-to-exports ratio was 36.4 percent in 1999 before HIPC assistance and i s projected at 11.3 percent in2003. The debt-service-to-revenues ratio was 44 percent in2002 before HIPC assistanceand i s expected to average about 14 percent o f government revenue after HIPC assistance for the remainder o fthe decade. Mauritania's government-revenue-to-GDPratio is highand is projected at 30 percent in2003. PRSP Status:The PRSP was finalized inearly 2001 and endorsed by the Boards ofthe World Bankandthe Fund; the first PRSP progress report was endorsed by bothBoards inJune 2002. A second PRSP progress report was presented to and approved by the Boards inJuly 2003. Social and poverty-reducing spending has increased with the use o f domestic resources and interim assistance. However, more work needs to be done to improve expenditure tracking (with technical assistance from the Fundand the World Bank), and implementation capacity needs to be strengthened to allow hlluse o fthe resources freed up by HIPC relief. Nevertheless, evenif progressremainto be made, the quality o freports on the execution o f projects financed with HIPC assistance has improved, particularly regarding their likely poverty and social impact. Social indicators have improved. The two HIPC floating completion point triggers that were not met at the completion point have beenmet since: the child vaccination rate reached 82 percent in 2002 (exceeding the 70 percent target), and the secondary school enrollment rate increased to 24 percent in2001, up from 20 percent in2000. Incontrast, the retention rate fell to 48 percent in 2002, down from 55 percent in2000 and 51 percent in2001. PolicyPerformance:The sixth review underthe PRGF program was completedinNovember 2002, basedon Mauritania's strong economic performance. A new PRGF arrangement was approved by the Board o f the FundinJuly 2003. Economic growth has been robust, albeit lower than projected in2002, due to drought and declines inexports o f iron ore and fish. Inflation has beenunder control, andthe externalposition has improved, despite the increase inthe trade deficit that was mainly due to higher imports o f oil machinery. Structural reforms have also intensified,creating an environment conducive to foreign and domestic investment. The country remains vulnerable to downside risks that could undermine its external position. Creditor Participation:Mauritania has receivedsatisfactory financing assurances o fHIPC assistance from creditors holding more than 80 percent o f its debt. InJuly 2002 Paris Club creditors agreed to deliver a stock-of-debt reduction o f US$188 million innet present value terms. The authorities have written to all non-Paris Club creditors to secure comparable treatment. O f the seven non-Paris Club creditors, Kuwait and Saudi Arabia have begun negotiations with Mauritania to deliver their share o f HIPC assistance. Paris Club creditors have committed to deliver additional voluntary debt relief that would bringdown the net present value of debt owed to them after HIPC assistance from US$320 millionto US$6 million. - 74 - ANNEX111 Mozambique ExternalDebtIndicatorsafter HIPCDebtRelief: Mozambique reached its completionpoint inSeptember 2001.HIPC assistanceamounted to US$1,7 16millionunderthe original framework and to US$306 million under the enhanced framework. At completion point, debt and debt-service ratios were better than projected at the decision point, reflecting inlarge part stronger than expected export performance. Inthe completion point document, the net present value o f debt-to-exports ratio was projected to remain well below 150 percent throughout the projection period (2001-2020), falling from 94 percent in2003 to 40 percent in2020. The debt- service-to-exports ratio was projected to remain below 5 percent, while the debt-service-to- revenues ratio was projected to decrease from 10.5 percent in2003 to 5.4 percent in2020. The country has been largely spared from the effects o f the global economic slowdown, and its export base i s expected to benefit from the Mozal aluminum smelter and will benefit from further mega- projects as well as from its large agricultural potential. PRSP Status:The PRSP, endorsed by the Boards o fthe World Bank andthe FundinSeptember 2001, has been central in guidingthe government's efforts to improve social welfare conditions and track poverty-reducing expenditures. HIPC-financed spending i s being allocated to priority areas identified inthe PRSP. Action Plans for Reducing Absolute Poverty (PARPA) priority sectors are ineducation, health (including HIV/AIDS), infrastructure, agriculture, and governance. Recent developments in social spendingcontinue to be favorable. Such expenditures reached 9 percent o f GDP in2002 and are expected to remain at about that level through 2005. The first PRSP progress report was prepared inFebruary 2003. A JSA was presented to the Boards inJune 2003. PolicyPerformance:A PRGFarrangement was approvedby the FundBoardinJune 1999. The fifthreviewunderthe PRGFarrangement was satisfactorily completed inJune 2003. All quantitative and structural performance criteria and benchmarks were observed, with the exception o fthe performance criterion on domestic primary deficit. The macroeconomic outlook for Mozambique remains positive. Preliminary estimates indicate that GDP growth was 8 percent in2002. For 2003-04 GDP growthis expected to reach 7 percent. Inflationfor 2002 is estimated at 9 percent, well below the 2001 level of 21.9 percent. Creditor Participation:Creditors holding about 88 percent of Mozambique's debt committed to provide debt relief. O f the sixteen non-Paris Club official bilateral creditors, Algeria, China, Kuwait, and South Africa have signed agreements to provide HIPC assistance. Agreements with India and Poland are expected shortly, but further negotiations are needed to finalize the agreements. Tanzania ExternalDebt Indicatorsafter HIPC DebtRelief Tanzania reached its completionpoint in November 2001. HIPC assistance amounted to US$2,026 million innet present value terms. Based on a debt sustainability analysis update conducted mid-2003, the net present value o f debt- to-exports ratio i s projected to be lower than completion point projections, mainly because o f an - 75 - ANNEX111 upward revision inexports. The debt ratio for 2003/2004 i s projected at about 127percent, down from 137 percent at the completion point. Dueto a larger than expected depreciationo f the shilling, government revenues are lower thenprojectedat the completion point, with the net present value o f debt-to-revenues projected at about 162percent for 2003/2004, 13 percentage points higher than projected at the completion point. Potential risks for the debt outlook are the lack o f diversification o f the export base and the dependence o f the economy on donor support. International prices for traditional exports, especially coffee and cashew nuts, are projectedto remain low. PRSP Status:The Poverty Reduction Strategy enjoys broad support and ownership. Tanzania presentedits second annual PRSP progress report inMay 2003, Expenditures onhealthand education have been rising since 1999/2000. New education, agriculture, and rural development strategies target high-priority areas of the PRSP. Policyperformance:The sixthandfinal reviewunder the 2000-03 PRGF-supported program was completed inJuly 2003. The PRGF focuses on revenuemobilization, public financial management, and financial intermediation. Tanzania has made substantial progress in macroeconomic stabilization and has achieved rising real annual growth rates o f about 5 percent since 2000. Progress under the PRGF has beensatisfactory, with the exception o f structural reforms (clearance o f audited arrears and use o f land as collateral for bank loans), which suffered from some delays. Poverty-reducing spending has increased inline with the Poverty Reduction Strategy, and a national debt strategy has beendeveloped to ensure long-term debt sustainability. A new PRGF was approvedbythe Board inJuly 2003. Creditor Participation:Tanzania has receivedfinancing assurances o fHIPC assistance from creditors holding about 90 percent o f its total debt, Multilateral and Paris Club creditors committed to deliver their share o f HIPC assistance. InJanuary 2002 Paris Club creditors agreed to deliver their assistance through a stock-of-debt reduction o f US$737 million innet present value terms; some Paris Club creditors indicated that they would provide additional bilateral debt relief. As o f July 2003, only Japan and Brazil have yet to sign bilateral agreements. O fthe twenty non-Paris Club creditors, China, India, Kuwait, and Libya indicated their intention to provide debt relief. Limitedprogress was made insecuring debt relieffrom other non-Paris Club creditors. Uganda ExternalDebtIndicatorsafter HIPC DebtRelief:Ugandareached its completionpoint under the enhanced HIPC Initiative inMay 2000. Innetpresent value terms, HIPC assistance amounted to US$347 million under the original framework and to US$656 million under the enhanced framework. Uganda's external debt sustainability indicators have worsened since the completion point. The main factors underlyingthe deterioration o fthe debt sustainability indicators are the unanticipated 66 percent decline inthe world price o f coffee (Uganda's principal export) since 1999 and newborrowing between June 1999 and June 2001that, though included inthe decision point macroeconomic framework, was not included inthe net present value o f debt projections in the decision point document. As a consequence, the net present value o fthe debt-to-exports ratio - 76 - ANNEX111 rose from 150 percent at the completion point, assuming the full delivery o f HIPC assistance, to 188 percent at the end o f June 2002. This ratio i s projectedto peak at 193 percent in2003, before gradually declining to 150 percent over the next ten years. The introduction o f IDA grants to Ugandaunder IDA-13 arrangements i s projectedto help Ugandareachthe 150 percent target. Despite the decline inexports, HIPC assistancehas reduced the debt-service-to-exports ratio to sustainable levels, at about 8 percent in2002/2003. PRSP Status:The full PRSP was presentedinMarch2000. The first PRSP Progress Report, presented to the Boards o fthe World Bank and Fundinthe spring o f 2001, noted that the incidence o f poverty fell from 56 percent in 1992 to 35 percent in2000. The second PRSP Progress Report and the JSA were presented to the Board o fthe World Bank inJuly 2002. They were presented to the FundBoardinSeptember 2002. The third PRSP Progress report is to be presentedto the Board o fthe Bank inSeptember 2003 and the PRSP is scheduled to be revised later in2003/04. Policy Performance:A new PRGF arrangement for 2002/2003-2004/05 o f SDR 13.5 million (7.5 percent o f quota) was approvedby the Fund's Board inSeptember 2002, andthe first review under the programwas concluded inJune 2003, Uganda's macroeconomic performance has been broadly satisfactory. A gradual fiscal consolidation to improve sustainability without jeopardizing poverty reduction programs i s the centerpiece o f the medium-term macroeconomic framework. Revenue collections have generally been on target, and expenditures limits are expected to have been respected in2002/2003. Despite a sharp deterioration inthe terms o f trade inrecent years, Uganda's externalpositionhas begunto recover, including solid growth inexport earnings andrising international reserves. CreditorParticipation:Thirty-one o fUganda's forty four creditors have agreedto provide HIPC relief equivalent to about 96 percent o f the total required.These include the governments o f India, Libya, Pakistan and the Republic o f Korea, which have recently pledgedto provide debt relief on official debt. The East African Development Bank, the Easternand Southern African Trade and Development Bank (PTA Bank), Shelter Afrique, Burundi, Iraq, Nigeria, the People's Democratic Republic o f Korea, and the UnitedArab Emirates have not yet committed to provide debt relief. The courts have granted awards totaling US$28.9 million, including interest charges and legal fees, to five creditors (Iraq and commercial creditors from Spain, the UnitedKingdom, and the Former SFR Yugoslavia). The Ugandanauthorities paid out US$14.5 million through 2002/03 to creditors from Spain and the Former SFR Yugoslavia but are appealing the awards to the remainder. . - 77 - Table 1. Enhanced HIPC Initiative: Committed Debt Relief and Outlook I/ Status as of July 2003 (In millions of US dollars, in NPV terms in the year of the decision point) Original Enhanced Original Enhanced Total Date of Initiative HIPC Initiative Initiative HIPC Initiative Total Approval Countries that have reached their Completion Points (8) TOTAL 2,862 5,470 8,333 5,730 8,965 14,695 Benin 0 265 265 0 460 460 Mar-03 Bolivia 448 854 1,302 760 1,300 2,060 Jun-Ol BurkinaFaso 2/ 229 324 553 400 530 930 Apr-02 Mali 121 417 539 220 675 895 Mar-03 Mauritania 0 622 622 0 1,100 1,100 Jun-02 Mozambique 1,717 306 2,023 3,700 600 4,300 5ep-01 Tanzania 0 2,026 2,026 0 3,000 3,000 n0v-01 Uganda 347 656 1,003 650 1,300 1,950 May-00 Countries that have reached their Decision Points (19) TOTAL 256 22,496 22,752 440 35,999 36,439 Cameroon 0 1,260 1,260 0 2,000 2,000 Oct-00 Chad 0 170 170 0 260 260 May-Ol Congo, Dem. Rep. of 0 6,3 I 1 6,3 I1 0 10,389 10,389 JuI-03 Ethiopia 0 1.275 1,275 0 1,930 1,930 n0v-01 Gambia, The 0 67 67 0 90 90 Dec-00 Ghana 0 2,186 2,186 0 3,700 3,700 Feb-02 Guinea 0 545 545 0 800 800 Dec-00 Guinea-Bissau 0 416 416 0 790 790 Dec-00 Guyana 256 329 585 440 590 1,030 Nov-00 Honduras 0 556 556 0 900 900 Jul-00 Madagascar 0 814 814 0 1,500 1,500 Dec-00 Malawi 0 643 643 0 1,000 1,000 Dec-00 Nicaragua 0 3,267 3,267 0 4,500 4,500 Dec-00 Niger 0 52I 52I 0 900 900 Dec-00 Rwanda 0 452 452 0 800 800 Dec-00 SBo Tome and Principe 0 97 97 0 200 200 Dec-00 Senegal 0 488 488 0 850 850 Jun-00 Sierra Leone 0 600 600 0 950 950 Mar-02 Zambia 0 2,499 2,499 0 3,850 3,850 Dec-00 Countries still to be considered (11) CBte d'lvoire 31 345 ... 345 800 ... 800 Burundi ... ... ... ... ... ... Central African Republic ... ... ... ... ... ... Comoros ... ... ... ... ... ... Congo, Rep. of ... ... ... ... ... ... Lao PDR ... ... ... ... ... ... ... Liberia ... ... ... ... ... Myanmar ... ... ... ... ... ... Somalia ... ... ... ... ... ... Sudan ... ... ... ... ... ... Togo ... ... ... ... ... ... Memorandum item: Debt relief committed 3.463 27,966 31,428 6.970 44.964 51.934 Sources: HIPC country documents; and World Bank and IMF staff estimates. I/Commiteddebtreliefundertheassumptionoffullparticipationofthecreditors. 2/ The assistance under the enhancedHIPC Initiative includesthe topping up with the NPV calculated inthe year of the completion point, 3/ Preliminary document issued. - 78 - VI 0 N d 0 N m 0 N N 0 N 0 N 0 0 N 0. 0. 2 0O 2 m - 79 - APPENDiX Table 3. Debt Service by Individual HIF'Cs that Have Reachedthe Decision Points -by Country (In million of US dollars, unlessotherwiseindicated) 1998 1999 2000 2001 2002 2003 2004 2005 Actual Projections Benin Debt service paid 64.1 66.0 54.5 36.2 33.0 Debt service due after enhancedHIPC Initiative relief I/ 30.9 30.3 33.5 Debt serviceiexports(in percent) 16.1 17.1 15.8 10.0 8.7 6.8 6.0 6.0 Debt serviceigovemmentrevenue(in percent) 17.1 17.3 14.6 9.4 7.2 5.9 5.3 5.3 Debt service/GDP(in percent) 2.8 2.8 2.4 1.5 1.2 1.0 0.9 0.9 Bolivia Debt service paid 390.0 249.4 268.3 248.3 253.4 Debt service due after enhancedHIPC Initiative relief I/21 279.3 294.2 327.3 Debt serviceiexports(in percent) 28.6 19.0 18.3 16.3 16.3 16.7 16.1 16.7 Debt serviceigovernmentrevenue(in percent) 19.2 12.7 13.7 13.4 14.4 15.8 15.2 16.2 Debt serviceiGDP(in percent) 4.5 3.0 3.2 3.1 3.2 3.6 3.8 4.1 Burkina Faso Debt service paid 57.1 60.6 48.2 32.9 42.1 Debt service due after enhancedHIPC Initiativerelief I/ 25.5 26.5 27.3 Debt serviceiexports(in percent) 17.7 23.9 23.4 14.7 17.8 8.6 8.3 8.0 Debt serviceigovernmentrevenue(in percent) 15.7 15.8 15.6 10.6 11.3 5.3 4.7 4.3 Debt serviceiGDP (in percent) 2.0 2.2 1.9 1.2 1.3 0.6 0.6 0.6 Cameroon 31 41 Debt servicepaid 401.0 401.0 437.2 260.9 232.7 Debt service due after enhancedHIPC Initiative relief I/121 288.5 295.5 288.8 Debt serviceiexports(inpercent) 18.0 14.6 16.0 9.6 8.9 9.8 10.5 10.4 Debt service/governmentrevenue(in percent) 28.0 24.1 26.3 14.8 12.0 12.3 12.0 11.2 Debt serviceiGDP(in percent) 4.0 4.4 4.9 3.1 2.3 2.4 2.3 2.1 Chad 4/ Debt service paid 26.0 29.6 32.3 17.6 29.1 Debt service due after enhancedHIPC Initiative relief I/ 40.2 44.0 46.7 Debt serviceiexports(in percent) 8.0 12.3 13.9 7.7 12.5 9.8 2.5 2.3 Debt service/governmentrevenue(in percent) 20.0 24.0 28.7 14.0 18.4 18.3 11.3 10.0 Debt serviceiGDP(in percent) 2.2 1.9 2.3 1.1 1.5 1.5 1.0 1.0 Democratic Republic of Congo 5/ Debt service paid 1.o 2.7 0.0 0.0 34.2 Debt service due after enhancedHIPC Initiative relief I/ 149.8 220.5 256.0 Debt serviceiexports(in percent) 0.1 0.3 0.0 0.0 2.9 15.6 22.9 21.5 Debt serviceigovernmentrevenue(in percent) 0.4 1.4 0.0 0.0 7.4 24.8 28.6 24.6 Debt serviceiGDP(in percent) 0.0 0.I 0.0 0.0 0.6 2.7 3.7 3.9 Ethiopia 4/ 61 Debt service paid 101.0 127.0 112.0 197.0 149.0 Debt service due after enhancedHIPC Initiativerelief I/ 88.0 89.0 88.0 Debt serviceiexports(in percent) 9.7 13.9 11.4 20.6 15.1 9.2 9.3 8.2 Debt serviceigovernmentrevenue(in percent) 8.6 11.0 9.7 16.4 12.3 6.2 6.0 5.3 Debt serviceiGDP(in percent) 1.5 2.0 1.7 3.0 2.5 1.3 1.2 1.1 Gambia, The 41 Debt service paid 26.1 19.6 12.6 16.0 15.9 Debt service due after enhancedHIPC Initiative relief li 15.5 10.1 11.0 Debt serviceiexports(in percent) 12.4 15.0 11.9 13.8 12.3 11.4 7.2 7.6 Debt serviceigovernmentrevenue (in percent) 12.4 25.5 16.2 26.3 26.5 26.5 19.8 20.5 Debt serviceiGDP(in percent) 6.2 4.5 3.0 4.3 4.5 4.9 3.6 3.8 Ghana 4/71 Debt service paid 560.1 521.5 533.2 242.6 267.0 Debt service due after enhancedHIPC Initiative relief li 163.5 103.6 111.6 Debt serviceiexports(in percent) 22.1 21.1 21.9 10.1 10.2 5.6 3.3 3.4 Debt serviceigovernmentrevenue (in percent) 41.0 53.4 78.1 25.7 39.1 17.3 10.0 7.9 Debt serviceiGDP(in percent) 7.5 6.7 10.7 4.6 4.3 2.3 1.3 1.4 Guinea 41 Debt service paid 128.2 131.5 143.8 75.3 85.2 Debt service due after enhancedHIPC Initiativerelief li 89.2 78.9 68.5 Debt serviceiexports(in percent) 15.5 17.6 19.6 9.2 10.9 10.4 8.6 7. I Debt serviceigovernment revenue(in percent) 33.5 35.3 45.5 22.2 22.0 23.3 19.5 15.4 Debt serviceiGDP(in percent) 3.6 3.8 4.6 2.5 2.7 2.7 2.3 1.8 - 80 - APPENDIX Table 3 (continued). Debt Service by Individual HIPCs that Have Reached the Decision Points -byCountry (In million or US dollars, unlessotherwise indicated) 1998 1999 2000 2001 2002 2003 2004 2005 Actual Projections Guinea-Bissau 41 Debt service paid 7.0 6.0 13.1 0.4 5.I Debt service due after enhanced HIPC Initiative relief I/ 5.I 5.6 3.6 Debt serviceiexports (in percent) 23.5 10.7 19.1 0.7 7.7 7.7 7.7 4.4 Debt serviceigovernment revenue(in percent) 62.6 15.5 31.6 1.2 12.0 12.0 13.6 7.5 Debt serviceiGDP (in percent) 3.4 2.7 6.0 0 2 2.0 2.0 2.0 1.2 Guyana 4/81 Debt service paid 130.8 70.0 78.0 528 5 9 0 Debt service due after enhanced HIPC Initiative relief 1 465 3 7 9 3 6 2 Debt serviceiexports (in percent) 19.0 10.4 11.2 8 0 8 8 6 8 5 4 5 2 Debt service/govemment revenue(in percent) 65.5 35.0 34.4 2 4 0 2 5 4 18 8 140 12 9 Debt service/GDP (in percent) 18.2 10.1 11.0 7 6 8 2 ___-6 3 5 1 4 8 Honduras 91 Debt service paid 311.2 239.8 137.5 1359 2206 Debt service due after enhanced HIF'C Initiative relief I/ 2344 1976 1979 Debt serviceiexports (in percent) 12.6 10.6 5.5 5 6 8 9 9 7 8 3 8 0 Debt serviceigovernment revenue(in percent) 31.6 23.0 13.1 120 189 17 1 134 1 2 6 Debt service6DP (in percent) 5.9 4.4 2.3 2. I 3.3 3.4 2.7 2.5 Madagascar 41 Debt service paid 166.1 1063 64.9 44.9 50.5 Debt service due after enhanced HPC Initiative relief 1: 53 6 72.5 72.7 Debt serviceiexports (in percent) 20.6 11.7 5.5 3.4 6.6 5.2 6.4 5.9 Debt serviceigovernment revenue(in percent) 41.7 25.0 14.3 9.7 15.4 10.4 12.6 11.2 Debt service/GDP (in percent) 4.3 2.8 1.7 1.0 1.1 1.1 1.4 1.3 Malawi 11101 Debt service paid 90.1 64.6 102.7 74.1 47.2 Debt service due after enhanced HIPC Initiative relief I/ 66.9 38.9 50.6 Debt service/exports (in percent) 15.6 13.0 23.0 15.4 9.9 13 6 7.5 9.3 Debt serviceigovernment revenue(in percent) 21.9 20.5 34.5 23.8 14.1 18.9 9.6- 11.7 Debt service:GDP (in percent) - 5.1 3.6 6.0 4.4 2.5 3.8 2.0 2.4 Mali Debt service paid 74.0 83.6 79.0 54.6 66.8 Debt service due after enhanced HIPC Initiative relief li 59.5 63.0 66.1 Debt serviceiexports (in percent) 11.5 12.3 12.2 6.2 6. I 5.0 4.9 4.8 Debt serviceigovernment revenue(in percent) 17.4 19.6 20.8 12.7 11.9 8.4 8.I 7.7 Debt serviceiGDP (in percent) 2.8 3. I 3.2 2. I 2.1 1.6 1.5 1.5 hlauritania Debt service paid 88.0 81.4 87.2 74.2 74.1 Debt service due after enhanced HIPC Initiative relief l i 54.1 60.0 60.8 Debt serviceiexports (in percent) 22.0 22.4 23.0 19.2 19.4 13.7 14.1 13.4 Debt serviceigovernment revenue(in percent) 35.0 30.4 36.1 36.6 19.9 16.6 17.7 17.0 Debt service/GDP (in percent) 10.0 8.5 9.I 7.5 7.5 4.9 5.0 4.7 Mozambique Debt service paid 104.0 60.2 18.0 27.1 42.0 Debt service due after enhanced HIF'C Initiative relief I/ 47.1 50.9 57.3 Debt serviceiexports (in percent) 41.0 9.4 2.5 2.7 3.5 4.0 3.0 3.0 Debt serviceigovernment revenue(in percent) 23.2 12.3 4.1 6.7 8.3 8.0 7.6 7.5 Debt serviceiGDP (in percent) 2.5 1.5 0.5 0.8 1.2 1.1 1.0 1.1 Nicaragua 41 111 Debt service paid 231.4 169.1 184.7 153.3 158.0 Debt service due after enhanced HIPC Initiative relief li 118.1 95.3 105.1 Debt serviceiexports (in percent) 8.2 20.3 19.3 16.7 17.2 11.7 8.4 8.5 Debt servicelgovernment revenue(in percent) 43.2 29.7 31.9 27.7 26.9 17.3 12.8 13.3 Debt serviceiGDP (in percent) 10.5 12.5 7.6 6.0 6.1 4.4 3.4 3.5 Nicer 41 - Debt service paid 17.0 18.9 22.4 34.1 53.0 Debt service due after enhanced HIPC Initiative relief I/ 26.0 28.8 29.0 Debt serviceiexports (in percent) 5.0 5.9 7.9 12.5 17.5 7.3 7.9 7.6 Debt serviceigovemment revenue(in percent) 9.0 10.6 14.3 19.1 21.4 9.4 9.7 9.0 Debt sHviceiGDP (in percent) 1.3 0.9 1.2 1.8 2.4 1.o 1.o 1.0 - 8 1 - APPENDIX Table 3 (concluded). Debt Service by Individual HIPCs that Have Reached the Decision Points -by Country (In million dUS do1l.n. u d i i i aihemhr lndlc.ird) 1998 1999 2000 2001 2002 2003 2004 2005 Actual R O , ~ t , M . Rwanda 4/ Debt service pud 180 3 7 0 373 II7 127 Debt service due after enhancedHlPC lninanve relief I/ 130 1 5 5 147 Debt scrvicdexpons (in percent) 300 390 249 7 5 9 6 9 1 100 8 8 ___- Debt servicdgavemment revenue (m percent) 160 230 234 6 2 6 4 5 8 6 4 56 Debt servicdGDP (in percent) 2 0 2 4 2 1 0 7 0 7 0 8 0 9 0 8 S l o Tome and Pnncipe .I/ Debt sernce pud 6 6 2 0 4 0 1 9 2 0 Debt service due after enhancedHlPC Inioative relief I1 3 2 2 1 II Debt serncdexpons (inpercent) 550 1 1 8 255 Ill 101 137 8 2 4 1 Debt serncdgovemment revenue(m percent) 841 214 424 179 159 2 3 1 107 4 5 Debt s ~ M c ~ G D(inPpercent) 163 4 1 8 5 4 0 3 7 5 4 3 0 1 3 Senega1 Debt service pud 2070 1780 I 6 4 7 1377 1646 Debt service due after enhancedHlPC Inioaove relief I/ 1464 1414 1387 Debt serncdexpons (m percent) I S 0 120 126 9 8 107 8 8 7 9 7 3 Debt serncugovemment revenue(m percent) 260 220 2 0 1 170 164 133 I 1 8 107 Debt semcuGDP (Ln percent) 4 0 4 0 3 8 3 0 3 2 2 s 2 2 2 0 Sierra Leone.I/ Debt service pud 8 9 365 320 947 210 Debt sernce due after enhancedHlPC Inioanve relief I! 164 289 239 Debt serncdexpom (in percent) 9 4 396 293 743 147 104 I 4 6 9 9 Debt semcdgovemmcnt revenue(m percent) 182 774 444 886 1 8 4 1 2 8 280 137 Debt servxcGDP (in percent) __ 1 3 5 5 5 1 111 2 7 3 0 40 2 2 Tanzania 6/ 111 Debt sernce pud 2240 1930 I 5 4 4 920 1090 Debt s e n x e due after enhvlced HlPC lninanve relief I/ 999 1286 1484 Debt servicuexponr (m percent) 207 162 1 1 6 6 3 7 1 5 8 6 8 7 3 Debt SeMcsgovemenl revenue(in percent) 160 8 5 9 9 8 3 9 5 100 Debt S~MCVGDP percent) (m ~ _ _2908 _ _1982 _ _ _7_ _ 2 _ 2_ 1 I O I 2 11 1 3 I 4 Lganda61 Debt sernce pad 1100 980 910 7 2 0 600 Debt sernce due after enhancedHlPC lmtiaove relief I! 998 1286 1484 Debt SeMCdexpO~(m percent) I S 0 1 1 8 139 108 8 6 I 2 4 149 163 Debt scrncdgovemmnt revenue(in percent) 160 I 2 9 136 II7 8 4 133 164 173 Debt rervceCDP_(m percent) 1 7 1 7 IJI3 I O 1 6 2 1 2 3 Zambia 4/ I21 Debt sernce pud 1473 1260 139 I 142 I 1227 Debi service due after enhancedHlPC lmtiative relief I! 1072 2225 2104 Debt servw'expons (m percent) 160 I 4 9 159 134 114 143 155 127 Debt servicdgovemment revenue(m percent) 243 229 296 217 200 2 7 2 313 275 Debt semcdCDP (in percent) 4 s 4 0 4 3 3 9 3 1 4 7 5 3 4 7 Total debt serv~cepaid 4l 36960 31793 30725 21260 2384 3 Total debt senice due l/ 24474 25109 26236 Rana or debt iemice l o cipons (in percent) Simple average 1 8 1 I 5 9 1 5 2 123 103 9 1 9 1 8 4 Weighted average 175 147 136 9 8 9 9 9 1 8 3 8 0 Ratio or debt iewtcc lo goiernment revenue (In percent) Simple average 291 2 4 0 2 5 0 184 I 5 9 147 135 119 Weighted average 273 214 222 1 5 8 149 133 123 1 1 8 Rsho of debt sem~ccto CDP (in percent) Simple aversee 5 0 3 7 4 1 3 1 2 8 2 7 2 4 2 2 Weighted average 4 1 3 4 3 4 2 5 2 4 2 2 2 1 2 1 Sources HlPC country documents and IMF staffesumates Note Debt sernce figures for 1998 and 1999 reflect debt relief already provided to Bolivia Guyana, Mozambique, and Uganda under the ongmal framework I/DebtserncedueaRer thefulluseof oadinonaldebtrelief mechanismandassistanceundertheenhancedHlPCuutiaove ForBolina,Mauritaniaand Uozambique. these figures are also after addinonal bilateral assistancebeyond HlPC For Burkma Faso. topping-up of debt reliefis taken into account 21Debt service IS hqher than anhcipated at the complenm point pmly of because ofhgher new bonowmg than prewously projected I!June2003thepresentanonhasbeenchangedfromfiscaltocalendaryearsDebtsernceduein2003includesbuybackofcommercialdebtfromtheLondonClub In Debt service paymentsfor 2004 and 2005 have been revised upwards to reflect results from an updated DSA 4iThe debt s e n m figures for 2000 largely reflect pre-HIPC reliefdebt service because these countries did not reachtheir decision point unnllate VI 2000 or later Thus. the full impact ofrelief for did not take effect unnl2001 and thereafter 51The Democranc Republic ofCongo reachedits decision pomt in July 2003. and debt sernce numbers for the premousyears reflect pre.HIPC debt service payments The increasein debt service payments in 2W3 and beyond IS panly due to debt semce payments followng arrears clearanceoperanon, 61 On fiscal year b a s . e 2000 column shows F Y 199912000 i 71Debt service paymentsin 2002 include arrear payments 81Debt service m 2002 IS higher than anocipated at the decision point because the complenon pomt has beendelayed 9! The increaseIn debt service in 2003 is due to Honduras receinng less debt reliefthan anocipated at the decision point This shortfall is related to intermpnons in the PRGF program and a delay m the complenon point IO/ The mcreasein debt scrnce payments in 2003 reflects lower than expected mtenm reliefbecause of program intermphon, a delay m Be completion point and the projected early repayment o f emergency assistanceto the Fund II/Debtserviceduein200U03 reflectsahypotheocal assumptionthatarrearstonon-PansClubcreditors(aboutUSI2billion) would beregulanzedand serviced It also reflects upfront paymentsassociated w t h debt rescheduling agreements 1I!Debt service reflects some payments to commercial crcditon and payments on moratonum interest not reflected in the complenon point document 121The relatively Bghdebt service payments in 2003-05 reflect Zambia's obliganon to repay alarge PRGF loan to the Fund To lessenthe debt sernce burdenthe Fund decided at the decision point, on an exceptional basis. that Fund assistanceshould amount to 75 percentof total Fund debt relief compared with Be maximum of60 percentotherwise applicable It was also decided to acceleratedelivery ofFund assstmce thereby lowenng Zambias debt service paymentsm 2001-03 considerably With the bulk of Fund assistancedisbursed by 2003, debt semce payments mllnrc markedly in 2004 and 2005 However, in 2006 debt service paymentsto the Fund will decline sharply -82- 0 vi 0 N B 0 N 0 m - C ? p ! C ? q - 0 A W b N m ' " m w z m ? ? S I-zoo w a , m b v g w I - 0 E,,, u e> 0 M 0 I 0 I 3 1 2> APPENDIX - 83 - Table 5. Poverty-Reducing Expenditures by Individual HIPCs that Have Reached the Decision Points- by Country (In millions of US dollars) 1999 2000 2001 2002 2003 2004 2005 Actual Estimate Projections Benin Poverty-ReducingExpenditure 114.5 110.2 161.0 162.2 179.9 197.2 214.2 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 30.0 29.2 41.7 35.4 34.1 34.5 33.9 Poverty-ReducIngExpenditllreiGDP (in percent) . . . . ... .'?! ....... -4.8 !:! ...... 3.0 .. .--...... _s,s -. 518 .... 5.8 Bolivia Poverty-ReducingExpenditure I1 882 0 899 6 978.2 970.3 976.3 984.5 1016.9 Poverty-ReducingExpenditure1Govemment Revenue(in percent) 44 8 48 2 52.8 55.1 55.3 50.8 50.2 Poverty-ReducingExpenditureiGgP (in pergct) 107. -II 2 ..!212_ 12.7 . -!2.4 ..... -. . 1?:7- --12.7. ....... __ Burkina Faso Poverty-ReducingExpenditure ?/ 1138 98 9 109.8 157.2 258.2 273.0 273.4 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 29 6 31 9 35.8 42.1 53.3 48.7 43.2 Poverty-Reducin_g_Expen_dltu_reiGDP(in percent) - -.. 4 0 ._ -...? 8 -3P ...... - ...... 5.0 .. . !.I..6.5 - .. ......6.0 Camiroon 31 Poverty-ReducingExpenditure 264 0 286 7 335.6 373.8 594.8 673.0 741.4 Poverty-ReducingExpcnditurelGovemment Revenue(in percent) 15 8 I 7 3 19.1 19.2 25.4 27.4 28.8 Poverty-ReducingExpenditureiGDP (inpercent) - - .. -22 . ... __ 3 2 - 3 2 . . 3.6 ..... 4.9 .. 5. I 52 Chad 31 Povertv-ReducineExoenditure41 - , I90 0 149 0 191.7 235.5 320.3 366.6 403.5 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 1498 1649 153 1 I49 0 I46 0 94 5 86 2 .. Poverty-KeducingExpenditureiGiP(in percent) . .- I*! 13 2 120. ... 1!9 - - __. I?! 8 7 8 5 Democratic Republic of Congo 31 Poverty-ReducingExpenditure 5/ ... 0.0 0.0 26.2 38.2 101.4 170.6 Poverty-ReducingExpenditureiGovernmentRevenue(in percent) ... 5.7 6.3 13.1 16.4 PovertY-Reduci?gExPendituleiGDP (in P"C'"') ...-. .- .~~. .. -~ ..._ _ _o.o- 0.0 0.0 0.0 0.2 O:? - .. I.?.. 2.6 Ethiopia 31 Poverty-ReducingExpenditure61 710.0 534.2 764.7 884.2 1158.4 1288.0 1388.6 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) 60.9 43.6 63.6 71.8 81.8 87.3 84.0 Povefly-Reducing Exeenditure'GDP (inPerce?t) .-?.4 .11.8- J?.! -. !7.9.- . . . 17.9 ~ . . . -. - . . II.0 . ~ ~ . .1?16L The Gambia 31 Poverty-ReducingExpenditure7/ 23.5 20.8 22.2 20.9 18.5 17.5 18.2 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) 30.2 27.2 36.5 35.0 31.7 34.3 33.9 Poverty-ReducingExpenditureiGDP (inFFent!. . . . . . . . -. 2.4 2.0. .. - ._ 5.9 .&9 .- .... -5.8 .. 6.2 ..... 6.3 Ghana 3/ Poverty-ReducingExpenditure 81 344.8 189.2 279.8 313.3 356.1 413.9 424.8 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) 35.3 52.4 29.7 30.3 25.2 24.4 24.5 Poverty-ReducingExpenditurelGDP (in percent). ... - . .4.? 7.2 -52- 3 . L 5.2 ~ . . ..... . .5.0.. 5.4. .... Guinea 3/ Poverty-ReducingExpenditure91 85.1 73.3 82.9 101.5 107.1 112.4 118.0 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) 22.8 21.5 24.4 26.3 28.0 21.8 26.5 Poveny-ReducjngExpenditurelGDP (in percen!). .. _ .- ................ 2.5 .. 2.4. .... 2.7.L . . 3.2. 3.2 ..- . . .-. 3.2 3.2 Guinea-Bissau 31 Poverty-ReducingExpenditure IO1 ... ... ... 6.3 8.5 8.4 9.7 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) ... ... ... 20.3 20.3 20.3 20.3 Poverty-ReducingExpen$itur!!GDF'(in percevt) -.. - . - ...... ... I.. 2.9 3.3.. 3.0 .?.! ~ ~ -. . . . . . . . .- ..-.. .. Giyana 3/ Poverty-ReducingExpenditure I11 87.0 105.2 117.7 123.9 124.7 129.2 135.6 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 43.6 52.0 53.6 53.2 50.5 47.6 48.2 .... Poverty-ReducingExp~ndi!u~e~GllP(in percent) . . . ... .~.... 12.5 . 14.8 16.9 _.. 1?.3 ..!!.P -. 17.8 ~ ..... - . . - . -17.3 .. Honduras Poverty-ReducingExpenditure 121 487.7 476.4 638.4 697.2 841.2 946.2 1011.5 Poverty-ReducingExpenditurelGovemmentRevenue(in percent) 46.9 56.5 56.4 59.6 61.4 64.1 64.6 PovertyIReducing ExpenGtureiGDP,(in percent) . . . . . . . . . 9.0 10.2 _10:0 ..... - .10.6 . . . 12.1 .... 12.8 .... 12:9 Madagascar 3/ Poverty-ReducingExpenditure/I3 156.0 187.8 230.4 298.1 375.7 416.1 456.5 Poverty-ReducingExpenditureiGovemmentRevenue (in percent) 36.7 41.5 50.0 91.1 73.1 72.5 70.2 PovertY:Reducing Expend!ture!GDP.!in PeLcent!L .. 4.2 . . . 4.8 ~.. &6.. ..FO 8. I ~ ........ ~.... -. 5:o _. .... -7.J - .. Malawi 3/ Poverty-ReducingExpenditure 141 208.0 167.4 205.3 226.4 255.0 287.4 316.0 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 66.1 56.2 65.9 67.9 72. I 71.1 73.2 . . MaliWerty-Reduclng Expenditurs!G?P_(!? eercent) . ......... I!.5 - . 8.8 __ .. !e. .... . . . !4.3-- . 14.7 .15.0- Poverty-ReducingEypenditure 151 103.4 150.0 134.7 184.5 271.3 271.7 292.8 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 24.3 39.5 31.3 33.0 38.2 34.8 34.0 Poverty-ReducingExpendituEiGDP(Ln percent) .._ ....... . __3.8 6.1 !.2 .... 2.8. ...... . ?.3 ....... .6:? .. 6.6 Mauritania Poverty-ReducingExpenditure I61 85.0 69 8 78 6 104.9 126.1 139.6 153.8 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 34.7 28 9 38 8 28.2 38.8 41.2 43.0 PovertyReducingExpenditureiGDPJn percent). - __ 9.0 . 1 3 _ _8 _0 _ - . .-14. 1 .. !.1.7 .......12:o Mo-&nbique Poverty-ReducingExpenditure 171 543.0 6883 6764 674.5 791.9 851.0 893.0 Poverty-ReducingExpenditure1GovemmentRevenue(in percent) 52.8 1566 1666 133.5 134.9 126.4 116.9 Poverty-ReducingExpenditureiGDP (in percent) 6.3 19 0 197 ... 1 8 7 L ... 18.7. .... 17.5 . . 16.4 Nicaragua 3/ Poviny-ReducingExpenditure 18/ 342.9 3442 3793 395.0 428.4 463.1 508.2 Poverty-ReducingExpenditureiGovemmentRevenue(in percent) 60. I 59 5 68 4 67.1 62.7 62.4 64.2 Poverty-ReducingExpenditureiGDP (in percent) 15.5 14 1 I4 9 .. 15.4 . .. l6.!. 16.5. 17.0 - 84 - X P x - 85 - - 86- APPENDIX Table 8. HIPC Initiative: Estimates of Costs to Multilateral Creditors and Status of Their Commitments (In millions of U.S.dollars, in 2002 NPV terms) Cost of Providing Cost of Providing Creditors HIPC Relief HIPC Relief (27 countries) (34 countries) Total 16,839 19,010 Delivering or committed to delivering debt relief 1/ 16,769 18,937 World Bank Group 7,700 8,742 International Monetary Fund (IMF) 2,677 2,935 African Development Bank (AtDB) 2,772 3,291 Inter-American Development Bank (IaDB) 1,250 1,250 Central American Bank for Economic Integration (CABEI) 565 565 European UnionEuropeanInvestment Bank (EUIEIB) 663 173 International Fund for Agricultural Development(IFAD) 268 294 Arab Bank for Economic Development in Africa (BADEA) I87 230 OPEC Fund for International Development I60 I85 Islamic Development Bank (IsDB) 136 114 Corporacion Andina de Foment0(CAF) I06 106 Arab Fund for Social and Economic Development(AFESD) 71 71 Caricom Multilateral Clearing Facility (CMCF) 66 66 West African Development Bank (BOAD) 47 70 Fund for the Financial Development of the River Plate Basin (FONPLATA) 28 28 Nordic Development Fund (NDF) 25 25 CaribbeanDevelopment Bank (CDB) 20 20 Arab Monetary Fund(AMF) 13 13 Central Bank ofWest African States (BCEAO) 6 37 Nordic Investment Bank (NIB) 4 4 East African Development Bank (EADB) 2/ 4 4 Banque des Etats de I'Afrique Centrale (BDEAC) I 4 Asian DevelopmentBank (AsDB) 0 75 Have not indicated intentions to provide relief under the HIPC Initiative 71 12 Banque des Etats de I'AfriqueCentrale(BEAC) 35 35 Economic Community of West African States (ECOWAS) 15 16 Easternand SouthemAfrican Trade and DevelopmentBank (PTA Bank) 9 9 Banque de Development des Etatsdes Grands Lacs (BDEGL) 6 6 Conseil de LEntente (FEGECE) 3 4 Fondo Centroamericanode Estabilizacion Monetaria (FOCEM) 2 2 Fund for Solidarity and Economc Development(FSID) 1 1 Sources:HIPC country documents;country authorities; and World Bank staff estimates I / Some of these creditors are providing reliefon a case-by-case basis, and have yet to agree to participation in the entire HIPC Initiative. Moreover, for a few of these creditors, there have been significant delays in developing the modalities for the actual delivery of debt relief. 2/ The EADB Boardhas recently approvedthe Banks participation in the HIPC Initiative. - 87 - APPENDIX Table 9. HlPC Initiative: Status of Delivery of Assistance by the World Bank (In millions of U.S. dollars, as of end-May 2003) Member Total committed debt Debt service reduction Debt reduction delivered service reduction delivered 11 (in percent of total committed reduction) Under the Original HIPC Initiative 2/ Bolivia 3/ 65.4 65.4 100.0 Burkina Faso41 182.8 182.8 100.0 Guyana 41 60.8 60.8 100.0 Mali 51 78.6 78.6 100.0 Mozambique 61 975.0 975.0 100.0 Uganda61 354.5 354.5 100.0 Total Origins1 HIPC 1.717.0 1,717.0 100.0 Under the Enhanced HIPC Initiative 7/ Benin 124.3 19.3 15.5 Bolivia 81 221.8 14.8 6.7 Burkina Faso 91 236.7 20.5 8.7 Cameroon IO/ 265.6 63.9 24.1 Chad 106.7 9.9 9.2 Congo, Dem. Rep. of II1 999.3 0.0 0.0 Ethiopia 857.0 38 0 4.4 Gambi4 The 31.8 4.9 15.3 Ghana 1.445.7 51.3 3.6 Guinea 233.6 27.I 11.6 Guinea-Bissau 1796 11.9 6.6 Guyana 70.6 5.2 7.3 Honduras I21 179.8 36.8 20.5 hfadagascar 436.7 37.6 8.6 Malawi 588.5 44.8 7.6 Mali 213.2 27.7 13.0 h.1awitania 172.8 18.1 10.5 Mozambique 80. I 22.1 27.6 Nicaragua 379.3 17.2 45 h'iger 301.7 23 9 7.9 Rwanda 404.8 32.I 7.9 SBo Tome and Principe 44.9 3,4 7.6 Senegal 160.1 41.1 25.7 Sierra Leone 229 9 7.4 3.2 Tanzania I,157.I 127.3 11.0 Uganda 629.1 39.3 6.2 Zambia 885.2 52.3 5.9 Total Enhanced HlPC 10,635.7 797.9 7.5 Grand Total 12,352.8 . 2,515.0 20.4 Sources:HlPC counuy documents; and World Bank staff estimates. I1 Assistanceis consideredas provided: i)at the effective date of the purchaseo f IDA credits, the provision of IDA grants or prepaymentof BRD loans; and ii) at the due date in the case of debt service reduction. 21These figures are from the respectivecompletion point documents and include the reduction in interest paymentsassociatedwith the cancellationof loans, and the provisionof grants insteadof loans. 31Assistanceto be provided through the reductionof the debt service to IDA. 41Assistance to be provided through the purchaseby the HlPC Trust Fundo f selected IDA credits. 5/ Assistance to be provided through the purchaseby the HIPC Trust Fund of selected IDA credits and the reductionof the debt service to IDA. 61Assistanceto be provided through the provision of IDA grants: the purchaseby the HlPC Trust Fundof selected IDA creditsand the reductionof the debt service to IDA. 7/ Unlessotherwiseindicated, assistanceto be provided through the reduction of the debt service to IDA. 81Since the Original HIPC Initiative covereda significant share of debt service to IDA until June 2002, Bolivia started to benefit from significant amountsof assistanceunder the EnhancedHlPC Initiative only inJuly 2002. 91Includes topping up assistance. 101Assistanceto be provided through: i)IDA grants, which would be used to cover 45 percent of IBRD debt serviceduring the interim period; ii)an IDA credit to prepay all IBRD outstandingdebt at the completion point; and iii)areduction of IDA debt sevice falling due after the completion point. 111Correspondsto the assistanceprovided throughthe reduction of debt service payments to IDA on the disbursed and outstandingdebt as of end-2002.This mechanismwould provide a relief of USS609million in NPV terms. The remaining USS223 million in NPV terms to cover the World Bank's share of assistanceunder the HIPC Initiative was provided .-through the clearanceof the anears. 121Assistanceto be provided through IDA grants and an IDA credit to prepay ail IBRDoutstandingdebt at the completion point. - 88 - APPENDIX Table 10. HIPC Initiative: Estimated Delivery of World Bank Assistance, 2000-09 (In millionsof U.S. dollars) Actual Projections 2000 2001 2002 2003 2004 ZOOS 2006 2007 2008 2009 Debt service before HIPC relief Benin 11 12 I S 16 17 19 20 21 22 23 Bolivia 18 21 24 25 27 28 31 32 36 38 Burkina Faso 13 15 19 20 20 22 23 23 24 25 Cameroon I/ 80 72 60 54 55 41 34 29 30 30 Congo, Dem. Rep. of 35 36 38 41 45 47 48 Chad 10 I O I O 11 12 13 14 15 I 8 Ethiopia I/ 35 37 42 48 50 54 57 59 63 65 Gambia, The 4 4 4 4 5 5 5 6 6 6 Ghana 55 62 67 72 19 85 89 95 101 Guinea 20 22 22 24 25 26 29 30 33 35 Guinea-Bissau 4 5 5 6 6 7 7 7 7 8 Guyana 21 8 9 8 8 8 7 7 7 7 7 Honduras 49 36 33 29 22 21 20 17 16 7 bladagascar 28 30 31 33 35 37 40 44 4 1 48 lMalawi 30 34 38 41 42 47 49 50 53 Mali 20 23 26 27 30 32 35 36 38 39 Mauritania 7 9 9 I O I O 12 13 13 14 15 Mozambique 20 21 23 27 31 35 36 38 40 42 Nicaragua 12 II 9 9 II 13 I 4 14 I S 17 Niger 13 14 15 16 17 17 20 22 24 21 Rwanda 12 I 4 16 17 18 19 21 21 22 23 Sko Tome and Prlncipe 1 2 1 I 2 2 2 2 2 Senegal 30 30 30 32 33 36 38 41 44 45 Sierra Leone 5 6 8 I O I O 11 II 11 1 1 Tanzania I/ 45 54 60 63 70 74 74 1 9 88 90 Uganda I/ 33 39 45 53 62 72 73 74 92 93 Zambia 17 22 26 31 34 40 45 48 47 49 TOTAL 178 60I 634 710 1.51 799 831 869 934 962 Debt service after HIPC relief Benin 8 6 8 9 9 II II 12 13 13 Bolivia affer. original HlPC relief 0 1 17 25 27 28 31 32 36 38 enhanced HlPC relief 0 0 9 12 13 14 I 5 16 18 19 Burkina Faso affer: original HlPC relief 10 9 13 14 15 16 17 18 18 18 enhancedHIPC relief 7 2 6 7 7 8 9 9 9 9 fopping UP 6 6 6 7 7 7 7 7 Cameroon 11 58 46 30 7 9 11 12 12 15 27 Congo, Dem. Rep. of 19 4 4 4 5 5 5 Chad 7 5 5 6 6 6 7 8 9 Ethiopia I/ 35 24 15 17 18 19 20 21 23 23 Gambia, The 4 2 2 2 2 3 3 3 3 3 Ghana 55 29 22 24 26 28 29 31 33 Guinea 20 11 11 12 12 13 14 15 17 18 Guinea-Bissau 4 0 1 I 1 1 I 1 Guyana afier: original HlPC relief 7 7 6 7 6 5 5 5 5 5 enhancedHlPC relief 7 5 4 4 4 2 2 2 2 2 Honduras 39 18 9 3 1 I I 1 1 I Madagascar 28 15 16 16 17 18 20 22 23 24 Malawi 14 15 17 I 8 19 21 22 22 24 Mali afier: original HIPC relief 18 19 22 24 26 29 31 33 34 36 enhancedHlPC relief 16 9 1 1 12 14 15 16 18 18 19 Mauritania 3 3 4 4 4 5 5 5 6 6 Mozambique afier: original HlPC relief 9 I O I O 13 14 16 16 17 18 20 enhancedHlPC relief 2 4 4 5 6 6 7 7 7 16 Nicaragua 12 6 1 1 1 I 1 I 2 2 Niger 13 5 5 5 6 6 7 7 8 8 Rwanda 12 2 2 2 2 2 2 2 3 3 Sao Tome and Principe 0 0 0 0 0 0 Senegal 25 16 15 16 17 18 19 20 22 31 Sierra Leone 5 2 1 1 I 1 I 1 1 - 89 - APPENDIX Table 11. HIPC Initiative: Status of Commitments by the IMF .(In millions of SDRs, as of end-July 2003) Member DecisionPoint Completion Point Amount Committed Amount Disbursed 1/ Under the Original HIPC Initiative Bolivia Sep. 1997 Sep. 1998 21.2 21.2 Burkina Faso Sep. 1997 Jul. 2000 16.3 16.3 CGte dIvoire 21 Mar. 1998 16.7 Guyana Dec. 1997 May. 1999 25.6 25.6 Mali Sep. 1998 Sep. 2000 10.8 10.8 Mozambique Apr. 1998 Jun. 1999 93.2 93.2 Uganda Apr. 1997 Apr. 1998 51.5 51.5 Total Original HlPC 235.3 218.6 Under the Enhanced HlPC Initiative Benin Jul. 2000 Mar. 2003 18.4 20. I Bolivia Feb. 2000 Jun. 200I 41.1 44.2 Burkina Faso31 Jul. 2000 Apr. 2002 27.7 18.1 Cameroon Oct 2000 Floating 28.5 2.5 Chad May. 2001 Floating 14.3 7.2 Congo, Democratic Rep. 41 Jul. 2003 Floating 228.3 1.1 Ethiopia Nov. 2001 Floating 26.9 8.2 Gambia, The Dec. 2000 Floating 1.8 0.I Ghana Feb. 2002 Floating 90.1 25.I Guinea Dec.2000 Floating 24.2 5.2 Guinea-Bissau Dec. 2000 Floating 9.2 0.5 Guyana Nov. 2000 Floating 30.7 10.3 Honduras Jun. 2000 Floating 22.7 4.5 hfadagascar Dec. 2000 Floating 16.6 5.0 hlalawi Dec. 2000 Floating 23. I 2.3 hlali Sep. 2000 Mar. 2003 34.7 38.5 Mauritania Feb. 2000 Jun. 2002 34.8 38.4 hlozambique Apr. 2000 Sep. 2001 13.7 14.8 Nicaragua Dec. 2000 Floating 63.0 1.9 Niger Dec. 2000 Floating 21.6 3.3 Rwanda Dec. 2000 Floating 33.8 10.0 SBo Tome and Principe Dec. 2000 Floating Senegal Jun. 2000 Floating 33.8 13.2 Sierra Leone Mar. 2002 Floating 98.5 47.3 Tanzania Mar. 2000 Nov. 2001 89.0 96.4 Uganda Feb. 2000 May. 2000 68.1 70.2 Zambia Dec. 2000 Floating 468.8 351.6 Total Enhanced HIPC 1,563.3 839.9 Grand Total 1,198.6 1,058.5 Source: IMF FinanceDepartment;also availableat www.imf.orgiextemallfin.hrm I!Includesinterestonamountscommitted. 21Equivalentto the committed amount of US$22.5 million at decisionpoint exchangerates (3117198). 31lncludescommitmentof additionalenhancedHlPC assistanceof SDR 10.93 million subject to receipt of satisfactory financing assurances f?om other creditors. 41Amount committedis equivalentto the remainingbalance ofthe total IMF assistance of SDR 337.9 million, after deductingSDR 109.6 million representingthe conccssionalelement associatedwith the disbursement of a PRGF loanfollowing the DRC's clearance of arrears to the IMFon June 12, 2002, APPENDIX - 90 - Table 12. HIPC Initiative: Estimated Delivery of IMF Assistance, 1998-2010 I/ (In millions of US. dollars) Actual Projections 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 IMF debt service before HIPC relief 21 Benin 6 17 I 4 16 16 16 12 9 6 4 2 2 I Bolina 42 31 31 32 30 29 36 32 25 I 8 II 2 0 Burktna Faso 4 6 II I 5 15 18 19 16 12 10 6 3 I Cameroon 20 20 21 5 3 6 20 33 40 40 36 22 9 Chad II 5 2 4 8 10 12 14 13 8 6 4 2 Congo. Democratic Rep 31 2 2 0 0 408 4 5 5 5 64 126 129 129 Ethiopia 41 3 7 12 I 4 15 I 5 12 10 8 10 9 7 0 Gambia. The 5 4 2 I 0 0 1 2 3 3 3 2 I Ghana 133 72 39 68 17 22 40 48 38 47 42 23 I5 Guinea 10 8 9 13 13 16 21 20 I 5 I 4 8 3 I Guinea-Bissau I I I I 2 3 3 3 3 2 I I I Gu)ana 22 22 26 17 17 17 18 16 I 4 9 6 2 0 Honduras 3 7 10 14 44 42 I 5 26 22 22 21 13 0 Madagascar I 5 13 6 3 5 9 9 12 20 16 I3 13 I 1 Malawi 26 22 10 8 8 10 13 I 4 II 8 6 3 I Mali I 2 I3 19 24 29 29 29 25 18 12 8 4 I Maunwia 8 10 12 I 5 18 19 16 13 9 6 2 2 0 Mozambique 25 32 31 29 24 20 21 23 21 16 I1 .l 0 hraragua I 4 7 7 7 9 17 26 26 26 24 13 I Niger I 4 6 3 2 4 10 13 13 I 2 9 4 I I Rwanda 4 9 13 I 2 7 3 6 10 12 I 2 10 7 3 Sa0 Tome and Pnncipe 0 0 0 0 0 0 0 0 0 0 0 0 0 Sicna Leone I 13 27 78 31 32 21 8 5 I3 1.2 12 I 2 Senega! 63 34 25 31 30 40 48 42 32 22 13 9 3 Tanranla 4/ 39 36 32 27 27 26 31 48 59 64 48 38 0 Lganda 41 58 60 53 50 44 44 5 1 46 36 25 13 2 2 Zambia 9 9 9 222 220 219 219 220 5 4 3 I 0 TOTAL 535 469 424 706 1041 668 709 731 469 486 445 324 194 IMF debt senice after Enhanced HIPC Initiative relief 21 Benin 6 17 II II II 10 7 6 5 2 2 2 I Bolivia 36 23 21 23 19 I8 I8 18 I 8 17 II 2 0 Burkina Faro 4 6 8 8 9 2 2 3 7 I 6 3 I Cameroon 20 20 20 4 3 4 I 4 24 32 3.2 30 17 7 Chad II 5 2 2 5 5 8 II II 7 6 4 2 Congo, Democratic Rep 31 2 2 0 0 408 3 4 4 4 29 32 36 37 Ethiopu 4/ 3 7 12 I 4 10 9 7 4 4 4 3 3 0 Gambia, The 5 4 2 I 0 0 I 2 2 2 2 I Ghana 133 72 39 68 8 5 I 4 21 22 28 26 19 I 5 Guinea 10 8 9 I O 12 II II I O I 1 II 8 3 I Gumea.Biasau I I I 0 2 0 I 0 0 0 0 0 1 Gu\ana 22 I 5 I7 6 I O 6 6 6 6 6 6 2 0 Hondurar 3 7 10 I 2 39 35 10 22 I 8 20 21 13 0 Madagascar I 5 13 6 2 3 3 4 6 I 5 I 4 13 I3 II Malavi 26 22 10 5 8 5 5 7 5 5 5 3 I Mall 12 13 18 17 19 18 16 13 10 6 4 4 I Mawonin 8 I O 7 7 7 8 7 8 4 4 2 2 0 Mozambique 25 I8 0 2 6 6 7 7 5 5 5 3 0 Nicaragua I 4 7 7 6 5 6 2 6 7 6 5 I Niger I 4 6 3 2 3 5 5 5 5 5 4 I 1 Rwanda 4 9 13 4 3 I 2 I 4 4 4 4 3 Sdo Tome and Principe 0 0 0 0 0 0 0 0 0 0 0 0 0 Sierra Leone I 13 27 78 2 2 2 I I I I I I Senegal 63 34 23 26 25 31 35 30 26 22 13 9 3 Tanzania 4/ 39 36 25 6 5 5 I 5 36 48 53 38 28 0 Uganda41 58 45 32 20 20 20 25 24 24 17 10 2 2 Zambra 9 9 9 71 67 63 113 109 5 4 3 I 0 TOTAL 530 421 333 406 708 181 343 380 298 311 262 182 89 APPENDIX - 91 - Table 12 (concluded). HIPC Initiative: Estimated Delivery of IMF Asairtnnce, 1998-2010 I/ (In millions of U.S. dollars) Actual Projections 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 IMFOriginaland Enhanced HIPC Initiative assistance5/ Benin 2 5 5 6 5 2 I 1 0 0 0 Bolivia 10 9 I 1 II 18 14 7 I 0 0 0 Burkma Faso 3 6 6 I 5 17 14 5 2 0 0 0 Cameroon I I 0 2 6 9 8 8 6 5 1 Chad 0 2 3 5 5 3 2 I 0 0 0 Congo, Democrauc Rep 31 I 2 2 2 35 95 94 92 Ethiopia 41 5 6 6 5 4 7 6 4 0 Gambia, The 0 0 0 0 0 0 I I I 0 0 Ghana 9 17 26 27 16 19 16 4 0 Gulnea 0 3 I 5 10 10 5 3 0 0 0 Guinea-Barau 0 I 0 2 2 2 3 2 I 0 0 Gupna 9 II 7 II 12 10 8 3 0 0 0 Hondum 0 I 5 7 5 4 4 I 0 0 0 Madagascar 0 I 2 5 4 6 5 2 0 0 0 Malawi 0 3 0 5 8 7 6 3 I 0 0 Mali I 7 9 II 14 12 8 6 4 0 0 Maunwia 5 8 II II 8 5 5 2 0 0 0 M o m b i q u e 3 1 27 18 14 14 16 16 11 6 I 0 Nicnmgoa 0 0 I 4 II 24 20 19 17 R 0 Niger 0 I I 5 8 8 7 4 0 0 0 Rwanda 0 9 4 2 3 8 8 8 6 3 0 S b Tomt and Pnncipe 0 0 0 0 0 0 0 0 0 0 0 Siena Leone 30 30 19 6 4 I 2 I 2 II 11 Senegal 2 4 5 10 13 I 2 5 0 0 0 0 Tanzania 41 7 21 22 21 16 I2 12 II II 10 0 Uganda 41 21 29 24 24 26 22 12 8 2 0 0 Zambia 0 I51 I54 156 107 Ill 0 0 0 0 0 rorAL 91 3W 333 388 366 352 171 168 181 111 105 Mrmomndum irrm Average Annual Deb1Service Reducrion 6 10% 21% 1 3 K 32% 58% 52% 48% 37% 35% 11% 14% 54% Sources HlPC counu) documents. and IMFnaRestmaks I1Under the Onglnal and EnhancedHlPC Initiauve 21Obltgauons IO the Fund as presented m the members' respective decision and compleuon pomt documents under the EnhancedHlPC Initiauve. uithrevisions when necessar) 3/ The figures for 1998-2002 shown m the table represent actual pa\menu made by the DRC 10 the IMF, including the settlement o f its mean on June 12, 2002 4/ Fiscal )ear data 51 Usmg SDWU S dollar etchangc rate al Lhe completion poml (for ongmal HlPC assistance) or at the decision point (for enhancedHlPC assistance) Includes projected mcsment Income 61Weighted average e - 92 - Table 13. Status of Bilateral Donor Pledgesto the HIPC Trust Fund (Nominal amounts as of September3,2003, in millions of U.S.dollars) Inception through end-Septembc 2002 Since October 2002 3/ Commitments Paid in Paid in Contributions Commitments Contributions Including Donor IncludingEUEC 2ontribution Bilateral Total EUEC Bilateral Total Contribution Contribution 41 Contribution Australia 14 I? 14 Austria 18 26 44 44 f 6 Belgium 26 20 46 46 9 9 18 Canada I14 1 I 4 II4 0 51 51 51 Denmark 15 45 60 57 5 15 20 Finland I O 25 35 35 3 6 9 6 France 166 21 187 I87 57 II 68 Germany 160 72 232 224 55 43 98 Greece 9 3 12 12 3 2 5 2 Iceland 2 2 2 I 1 Ireland 4 20 24 24 I I Italy 86 70 I56 156 29 31 60 Japan 200 200 200 56 56 19 Korea I O 51 I O I O t Luxembourg 2 1 3 2 I 0 I Netherlands l i 36 138 174 174 12 56 68 New Zealand 2 2 2 Norway 80 80 80 26 26 26 Portugal 7 I 5 22 22 2 2 Russian Federation I O 51 I O 5 Spain 40 85 125 105 I 4 25 39 Sweden 19 58 77 77 6 26 32 Switzerland 60 60 60 33 51 33 5 United Kingdom 2i 88 22I 309 226 30 95 125 United States 600 600 600 I50 1SO Total 685 1,890 2,575 2,461 233 655 888 124 lemo. Total contributions less mtributions earmarked for IDA 685 1,830 2.515 2,455 11 233 655 888 124 Source. IDA Note: Many donors have also provided debt reliefthrough other initiatives and mechanismsincluding: the Debt Reduction Facility for IDA-only Countries (providing financing for commercial debt reduction), specific country-held multilateral debt relief facilities and the Central American EmergencyTrust Fund. Bilateral donor funding for such measures has been (in S million) of. Spain-S30; Norway-515.3; Netherlands-$12.8; Switzerland-SI8.3; Italy-S12; United Kingdom - 516.3;Austria - 52.7; Canada S5.4; Germany-$13.2; Sweden-S23.4;United States425; and Denmark-S10.9 (through a bilateral trust - fund administered by IDB). These resourcesare not included herewith as the debt relief under HIPC is additional to these efforts. Figures in the table might not add up due to rounding. li Inaddition, the Netherlands provided USS20million for debt relief provided by the IMFto Zambia over and above the debt reliefcalled for under the HIPC Debt Initiative. This amount is not included in the contribution amount presented above. 21 In addition, the United Kingdom contributed SDR31.5 million to the HIPC Trust Fund for the IMFfor debt reliefto Uganda This amount is not included in the contribution amount presented above. 31 These figures correspondto the Chairman's Summary of HIPC Technical Meeting of Oct. 24,2002, adjusted to take into account the new EC-ACP contributions that were included as part of the EU Member States pledges. Subsequent contributions include Greece( E m 3 million) and Russia(US$IO million). Many donors linked the level oftheir additional pledges to specific funding gap estimates. 41 On May 16,2003, the ACP-EU Council bringing together Ministers from African. Caribbean, and Pacific countries and EUMember States approved a new contribution to the HIPC Trust Fund of EURZOO million. 51 Contribution agreements have beensigned covering all of its outstanding balance. 61 Promissory notes with encashmentschedule. - 94 - 0 8 -1 ! ' " " " x" , L 2 P .-aU c fE ' 0 ' . APPENDOX - 95 - Table 15.HIPC Initiative: ParisClub Debt Relief 11 Status as ofJuly 2003 Date of Enhanced Interim Topping up or Date of Paris Country Decisiod Relief New Club Comments Completion Provided? Rescheduling Rescheduling 1.-Enhanced completion point reached - - -__ . - ..__ . _. Benin Mar-03 yes -new- Apr-03 Enhancedcompletion point March2003 ParisClub operation on stock on Coloice -Bolivia -_ - - - rescheduling terms on April 23,2003 . - _ _ _ - . ._ Feb-00 -yes new Jul-01 Enhancedcompletion point June 2001 ParisClub stock operationon Cologne terms rescheduling July IO, 2001 No interim relief beyond original HlPC relief from the Paris Club - . ____ _ -_ - Burkina Faso Jul-00 Yes new Jun-02 As the decision point under the enhanced HlPC Initiatiie and the completion.. point rescheduling under the original framework were reachedon the same day, creditors decided not to grant a stock operation but a flow rescheduling on Lyon terms to Burkina Faso Enhanced completion point April 2002 On June 19,2002 creditors agreed to a stock treatment on Cologne terms. and in principle, to provide topping-up relief Regarding the methodoftopping up. it was agreed in December 2002 that the share in topping up would take account of any additional bilateral debt relief -__ ___ __ -. __ - - - .-- - _- . _ - __ _ _ _ _ _ Mali Mar-03 yes new Mar-03 Enhancedcompletion point March 2003 Paris Club oFerationonstock ColoG; __. - --- -- - . .....rescheduling terms on March I?, 2003- _ _ - Mauritania Feb-00 yes new Jul-02 Enhancedcompletion point JUn;%O?, Pari Club stock operationon Cologne terms on _ _ - - rescheduling July 8. 2002 - -- - - MoGmbique Apr-00 yes new Nov-Ol Enhancedcompletion point September 2001 Paris Club stock operation on Cologne rescheduling terms . _ _ - ADr-00 yes new Jan-02 Enhanced completion point November-2001-P.& Club stock ODerationon Colom; - rescheduling terms on January 14, 2002. Arrears outstanding at end-March ZOO0 and maturities on pre-cutoffdate debt falling due during April 2000-March 2003 were rescheduledon Cologne terms. Exempt were arrears accrued since the end of the consolidation period (end-November 1999) of the 1997 rescheduling, which were paid by end-November 2000. In a side lener. Japan agreed to a deferral over 3 years of maturities due under the 1997 rescheduling in light of the continuing delays in signing the bilateral .__...... __ . . . -~ agreement. . ._. . . . . . . . . . . . . . . . . . . . . . . . . . . _ _ Uganda FebOO yes new SepOO Enhanced completion point May 2000; Paris Club stock operation on Colo-gneterms rescheduling September 11. 2000; no interim relief from the Paris Club beyond original HlPC relief becauseof the short time period between decision and completion points. .... ._ _ ..... ... ..... - ..... _- . .... ... -. 2. Other retroactive cases 2a. No assistance under original framework .. __ . Senegal Jun-00 topping up-. -- - .- . _. ....... . 70 percent ofpayments falling on non-ODA due betweenJuly I?, 2000 and April 19, 2002 on the 1995 Naples flow rescheduling and the 1998 Naplesstock operation were canceled or rescheduled.In the case ofcreditors that rescheduled, moratorium interest on the rescheduling was capitalized; at the completion point, the rescheduledamounts and capitalized moratorium interest will be treated so as to securecomparable treatment with the creditors that cancelled debt. In April 2003. the Paris Club decided to extend the terms of the 1998 ParisClub agreement to cover the period ofthe arrangement until the time of [he expectedHlPC completion point around the end of2003. -.-. After completion -~ - original ....-..- -~ - . .... - -. - .... ... ..--. 2b. . point under-.-.. -framework ........ ...... -.... ....... .. --- .... -. . . . . .- .. Guyana Nov-00 yes n.a. Jun-99 Guyana was granted a stock-of-debt reduction-on Lyon tenns reachingthe completion point underthe original framework. O f the stock of pre-cutoffdate medium- and long- term public debt, 65 percent was topped up from a 67 percent to an 80 percentNPV . . . _ ....... _... - -........ ..... _~. .-redu_ction.No.additional ipte!i_m.!elief.- .....-.. -........ ...... Guyana Nov-00 no ma. n.a. On June 25. 1999, Guyana was granted a stock-of-debt reduction on Lyon terms after reaching the original completion point. O f the stock of pre-cutoff date medium- and long-term public debt, 65 percent was topped up from a 67 percent to an 80 percent NPV reduction. No additional interim relief. . . . . . . . . . . . -. ... . . . . . . . . . . . .. _ _ ... ..... - APPENDIX - 96 - Table 15 (concluded). HIPC Initiative: Paris Club Debt Relief I/ Status as of July 2003 - . Enh.nced Date ot Interim Topping up or Date of Paris Country DE:lp" Relief New Club Comments Provided? Rescheduling Rescheduling 3. New decision point c a i n ....... -.............. -. ... .- i .. ................... -. ..... - ....... .- .. Cameroon Oct-W yes "CW Anears on pre-cutoffdatc debt accumulated duringOctober-December 2W0 and 811 rescheduling maturities on pre-cutoffdate debt falling due duringJanuary 2WI-December 2W3 were rescheduled on Cologne tems (90 percent debt reduction). Arrears outstanding at end.Septcmber wcre rescheduled on Naples le-s (61 percentdebt reduction). ......... - ......... ~ ... .......... . -- ......... .. C h i d May-01 yes new Jun.01 Anears on pre-cutolTdatedebt at April 30. 2001 were rescheduled an Naples terms. rescheduling Maturities on all pre-cutoff date deb1 fallmg due during May ?WI.March 2003 were rescheduled an Cologne terms. In April 2003. the Paris Club decided to extend the __ consdidation period under the 2W: agrecmcntuntil the end afthe current PRGF Demoerstic Republic or ... ....... pmneemenl. ... ..- - _. -- .... - - -.... -. . Jul-01 -. ..-. n.a. ".a. SepOl The Paris Club agreed in September 2002 io P reschedulingon Naplesiermr covering conga the period from I July ?W? up to 30 June 2005. Paris Club creditors also agreed to canrider a toppingup to Cologne terms as SOD" a the Democratic Republic ofCongo . ..... ..- .......................... -_ . . . . . . .- has reached its decision pint.. ___. _ . .- . ..- ..... . . -.. Ethiopia Nov4l yes toppingup Apr.02 Paris Ciub agreed to provide a tapping up to Cologne icrmi from existing Naples terms. ................ Dec-00. yes .-- . . . Csmbi..The ".a. Jan-03 - Pari;Club thcmaturiii;; from---. ...... -. -. . .... .- -. ......... .&'V 17. m10 17.Gioikoflow;erchcduling&- provided; July ? a L .... _ 6ii.g- due.... _ China Febd? yes new May42 Creditors eilablished a new cut-offdate. thus increasing the amounts treated rescheduling concessionally. and agreed to a flow reschedulingof anears and miiurities on pre. cutoff date debL underColovne terms throueh the end of PRGF in Nav. 2002. In March 2003. it w a agreed to extend the consolidation period ix deb1relidunder the May 2W2 agreement from November 2002 to April 2W4. m anticipation of a new PRGF amngcment and to provide financing aswrancei for that arrangement. .. Dcc-W .. - ........ ........ - Cvinii new May-Oi M ~ t " ~ , l , e ~ . ~ ~ - pnon.ODAdebtf .faW& die during Deciiber 2OWMakh ~ ~ ~ " t ~ f yes rescheduling 2004 were rescheduled on Cologne terms (W percent debt reduction). A m a n on pe- cutoll daic debt outrlanding at end-November 2WO W C ~ C rescheduled on Naples icmi (67 percent debt reducuon~.In June 2003. the Paris Ciub agrccd that in the absence ofa Fund-ruppncd program the third phaseofthe ?Wi agreement WIII enter into no1 ....... force. ...... --. Maluriticr on prc-cutoffdatcdebt-failing due du& December:OOO-Deermber 2003 wcrc rescheduled on Cologne terms (except the paymcntr on a defeml in the context ofthc 1995 agreement.which were dcfcncd again on nonconcesiwnal termr). Ancro on prcsutoffdatc debt were rescheduled on Naples terms (67 percent dcbt reductm). Arrears an prlsuluffdale debt received varying Icvcls ufdebl reduction. Hourrcr. in January 2641the ParisClub decided in view ofthe longrtandm& nslurc of the country's off+ack performance an the explicit nan-entryinto force afthe pharcr envisioned under the ParisClub agrcement. .... -................JuI-W .. ...... .... ... . . . . . . . . . . . Honduras yes ".a. .see Apr.99 Given the fact thal Hondurashad been granted I total pa)ment defcmi during comments November I99S-March 2002 following Hurricane Milch. creditors considered that inlerim rcliei had already been provided to Hondunr. Creditors agrced to consider Hondurasfor a Cologne flow reschedulingin the context of I PRGF amogemcnt. ..... -.- ... - .. -.. . . . . . . . . Madspirrar Doc-OO yes "CW Mahitic; on all pre;uto?fd;re debl-fallin~du;d;ringD;cemd;r ?WO-F&ary %i ... .......... mcheduline.. _were new Maturilier on all prc-cutoff date debt falling due Juring December 2OWDecsmbet. _ r=chi?Wd!n F W n c [em!, .. __.-. . . . . - nisiswi D e c m yes rerchedulina 2003 were rescheduled an Coloanc terms. Also. crediton moved the cutoff date from January I, 1982 toJanuary I. 1997. which made all ofMaiawCr debt prc.cutoffdaa debt. However. In January 2W3 the Paris Ciub decided in view of 1hr longstanding nature ofthe country'soff-track prformancc on the explicit nan-entry into force of the p h w r envisioned under ihc Paris Club agrecmcnt. ......... .............. .. Nicwsgua DeC40 yes "CW Dec42 Nicakgua i i s i r % e d Z G i ~ pym;.tdrrcrraid~~insbecemberl998-Fed;uary iooi rescheduling foilawing Hurricane M w h . In December 2002,crediton agreed to grant Nicaragua P flow rescheduling on Cologne terms. covering the 3 years of the PRCF-wppr~ed program approved on December 4.2002. Under the agreement. all pre-cutoff debt, including the amounts deferred v k r llunicanc Milch. will be rescheduled on Cologne terms. Crediton also expressed their readinas to provide a Cologne stock twatmcni IS swn as Nicaragua rcachcr thc completion p i n t under the Enhanced HlPC Initiative. ... ......... - ..- .-...... -. ....... - Niger Dcc-00 yes "eW Jan-01 Matur&s% p ~ - ~ " t o ~ d ~ ~ ~ ~ b t ~ f ~ l l i n p d u c d u r j n g D-F E c m k ; ; ~ ~ rescheduling 2003 were rescheduled on Cologne terms. Arrears on presuiolldaie debt were rescheduled on Napier terms (61percent reducrionl. Arrears on prt-cutaffdatc debt . . .re~eiyr&vaninplevelsofdrbl ?dustion . . . . . . . . . . . . . . . Rwanda DecdO yes toppingup TOR The April 2000 Paris Club reschedulingagrcemeni on Naples terms was tapped up to Cologne t e m i (by mail) for the period December 2000-April 2002, which was sub!esucp!lv rxtendcd Y.@ the end of?OOj. .- - ....... The Paris Club agreed in May 2000 to a rescheduling on Naples terms. However. provided phases 2 and 3 covering the period from May ZOOl until April 2003 did not take cffect because of PRGF interruptions. In July 2003. the Paris Club considered extendins this agreementto cover the period under a new PRGF arrangement.or negotiating I new ~. .. -. .- -.-........... __ .- ._ .. aqeemegon Coloene terms. . . . . . . . . . . . sicrr. Leone Mar42 yes............. up topping Jul.02 The October2001 Paris Club reschrdulingan Naplcr terms was.topped up to Cologne terms aner Siem Leone reached the Decision Point (coveringmaturities fallingdue on pre-cutoffdate debt during March 2002. September 2004). Znmbis - . .-. .....-De&+.- ....... .- ..... .. -. .......... yes topping up Scp.02 Th&r:l.lPbd i&is Ciub;eschcd;lfig a&&tbn Na& terms% .;id ud1;- Cologne terms. covering maturities on pre.cutoffdate debt falling due duringJan 2001- March 2003. In June2003, the ParisClub agreed to extend the consolidation period to so-",,,: parisCi".b.Scc.~.~.aria~,. ................ _...- ..-. . . cover the period ofa new PRGF amngement. . . . . - . . . . . I/Forthr 21countrie~that havealready reachedthedecision pintsvnderrhe Enhanced HlPCInitiative. S - 97 - H 0 IZa 1 - Y a 4 j, JB a l I I ' W I % " " - I, _ ,3 Z " " ' Z " ' " ' 5 '"'1 , , , I ! % - " " - o = w l * N - 99 - 0 " 3 " -100- h rl ' 0 N I t , 2 ' 8 " Z ' ? ' " " I I , , . -101- - 102- APPENDIX Table 18. HIPC Initiative: Delivery of Assistance by Non-Paris Club Creditors Status as of June ZOO3 (In millionaof US. dollars, in 1002 NPV arm) ~~ ~~ Creditor country Total costs Percent of total costs 1. Delivered debt relief on all claims on HIPCs: Brazil 1.2 0.2 South Ahica 4.3 0.1 Argentina 3.8 0.1 Tanzania 3.5 0.1 Total 18.9 0.6 11. Agreed to deliver debt relief on all claims on HIPCs: Libya 224.5 6.9 Honduras 107.2 3.3 India 33.1 1.o Hungary 14.4 0.4 Cate dIvoire 10.9 0.3 EWPt 10.5 0.3 Morocco 5.2 0.2 Republicof Korea 5.9 0.2 Pakistan 4.1 0.1 Total 415.8 12.8 111. Delivered or agreed to deliver debt relief on some but not all claims on HIPCs: Costa kca 415.7 12 8 Guatemala 21 395.8 I 2 2 Kuwait 297. I 9 1 Chma 285.0 8 8 Algeria 205.6 6 3 Saudi Arabia 189.5 6 3 Bulgaria 95.0 5 8 United Arab Emirates 84.5 2 6 Venezuela 61.6 2 6 Mexico 56.0 1 7 Slovak Republic 29.9 0 9 Poland 16.5 0 5 Czech Republic 7.6 0 2 Cuba 2.0 0 0 Total 2,141.8 65 8 IV. Not yet agreed to deliver HIPC reliep Taiwan Province of China 326.1 10.0 Iraq 88.7 2.7 Fanner SFR Yugoslavia 87.2 2.7 Iran 56.7 1.7 Romania 38.6 I.2 Angola 27.0 0.8 People'sDemocratic Republic of Korea 20.6 0.6 Israel 13.7 0.4 Peru 8.3 0.3 Colombia 4.0 0.I Nigeria 1.8 0.I Oman 1.3 0.0 Bwndi 1.2 0.0 Rwanda 0.8 0.0 Namibia I/ 0.5 0.0 Thailand I/ 0.5 0.0 Congo, Dem. Rep. of I/ 0.3 0.0 Niger I/ 0.3 0.0 Cape Verde I/ 0.2 0.0 Zambia I/ 0.2 0.0 Zimbabwe I/ 0.1 0.0 Cameroon I/ 0.0 0.0 Togo I/ 0.0 0.0 Senegal I/ 0.0 0.0 Total 678.2 20.8 Grand Total (I+IItlII+lV) 3,254.7 100.0 Sources: HIPC country documents, country authorities; and iMF staff estimates. I/TotalclaimsarelessthanSO5million. 2/ Guatemala'sclaims on Nicaragua were taken over by Spain in a debt swap, and Spainhas agreed to provideHIPC relief to Nicaraguaon those claims