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G8 Vows to Boost Help for Poor Indebted Countries

Leaders of the Group of Eight (G8) countries have pledged to boost a program designed to reduce external debts of the poorest countries by extending its life and providing more money.

In a June 10 statement, the leaders said that they are committed to implementing fully the debt initiative for the heavily indebted poor countries (HIPCs) designed to bring their debt burden to sustainable levels. They said the G8 will work toward extending the program -- scheduled to expire by the end of 2004 -- until December 31, 2006, and supporting debt sustainability in the poorest countries through debt relief and grant financing.

The G8 countries are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States plus Russia.

To become eligible for debt reduction under HIPC, countries need to demonstrate the capacity to use the assistance prudently to the benefit of their people, the International Monetary Fund (IMF) said in an April fact sheet. The IMF said that countries' efforts toward macroeconomic adjustment and structural and social policy reforms -- including higher spending on social sector programs like basic health and education -- are now central to the enhanced HIPC Initiative. The HIPC framework also establishes the possibility of providing additional relief ("topping up") to a country whose economic fundamentals have deteriorated significantly because of external factors as it achieves eligibility.

Following is the text of the G8 statement:

THE WHITE HOUSE
Office of the Press Secretary
(Sea Island, Georgia)
June 10, 2004

DEBT SUSTAINABILITY FOR THE POOREST

The Heavily Indebted Poor Countries Initiative (HIPC) has to date provided welcome debt reduction to 27 countries pursuing economic reform programs, 23 of them in Africa, and is providing $31 billion in debt service relief over time. We are committed to fully implementing the HIPC initiative and to supporting debt sustainability in the poorest countries through debt relief and grant financing. To that end, we have asked our Finance Ministers to:

-- Work with other donors and the international financial institutions to extend the sunset date of the HIPC initiative until December 31, 2006 and to provide the necessary financing for completion of the initiative, including topping up where appropriate.

-- Consider measures that can further help the poorest countries address the sustainability of their debt.

We have asked for a progress report on these efforts by the end of the year. We urge other creditors to fully participate in the HIPC initiative.