Chapter

Chapter 8. The ESAF and the HIPC Initiative

Author(s):
International Monetary Fund
Published Date:
September 1999
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In 1998/99, the Board considered various issues associated with the operation and financing of the Enhanced Structural Adjustment Facility—which provides concessional loans for low-income member countries—and the implementation of the joint IMF-World Bank Initiative to provide debt-servicing relief to the heavily indebted poor countries (HIPCs). These discussions were aimed at improving the effectiveness of the ESAF and the HIPC Initiative in helping poor developing countries attain their objectives of growth, external viability, and poverty reduction.

HIPC Initiative

The launch of the HIPC Initiative by the IMF and the World Bank in 1996 represented a major departure from past practice in dealing with the debt problems of developing countries. The Initiative seeks to help countries with good track records achieve overall external debt sustainability, with the participation of all external creditors. As of April 1999, the Executive Boards of both the IMF and World Bank had reviewed the eligibility for the Initiative of 12 heavily indebted poor countries and work was under way on others. Seven countries had qualified for debt relief, and three others were expected to follow. Debt relief totaling $6 billion in nominal terms ($3 billion in 1998 net present value terms) had been committed to the seven qualified countries, and assistance for two countries—Uganda and Bolivia—had been released.

Nonetheless, concern had been widespread in 1998/99 that the Initiative had not provided adequate debt relief for poor countries to escape from a vicious circle in which gains from economic growth are wiped out by the servicing costs of foreign debt. The issue of debt relief and possible changes to strengthen the HIPC Initiative thus attracted considerable attention during the financial year on the part of nongovernmental organizations, religious groups, the media, international organizations, and governments.

Progress in Implementation

In September 1998, the Board welcomed the progress in implementing the HIPC Initiative (see Figure 3 for a description of the key features of the Initiative and Table 5 for the status of country cases), and agreed to extend the initial two-year period for entry into the Initiative from the end of September 1998 until the end of 2000. Several Directors cautioned that this should be a one-time extension and that the Initiative should not be seen as a permanent facility; they emphasized that HIPC-eligible and postconflict countries should be encouraged to adopt IMF-supported programs at the earliest possible stage, well before the new deadline.

Figure 3Initiative for Heavily Indebted Poor Countries

Table 5HIPC Initiative: Status of Country Cases, as of End-April 1999
Country (in order of

expected decision

point within groups)
Decision

Point
Completion

Point
Net Present

Value of

Debt-to-

Export

Target

(in percent)
Assistance at Completion Point

(in millions of U.S. dollars, present

value at Completion Point)
Percentage

Reduction

in NPV

of Debt1
Estimated

Total Nominal

Debt-Service

Relief

(in millions

of U.S.dollars)
Satisfactory

Assurances

from Other

Creditors
TotalBilateralMulti-

latera
IMFWorld

Bank
Completion point reached
UgandaApr. 97Apr. 98202347732746916020650Received
BoliviaSep. 97Sep. 98225448157291295413760Received
Decision point reached and assistance committed by IMF and World Bank
Burkina FasoSep. 97Apr. 002051152194104414200Being sought
Guyana2Dec. 97May 9910725391161352725500Being sought
Côte d’IvoireMar. 98Mar. 011413345163182239164800Being sought
Mozambique5Apr. 98June 992001,442877565105324572,900Being sought
MaliSep. 98Dec. 992001283790144410250Being sought
Total assistance provided/committed (7 countries)3,0781,4191,6572856744196,060
Debt judged sustainable
BeninJuly 97
SenegalApr. 98
Sources: IMF and World Bank Board decisions, completion point documents, final decision point documents, and IMF staff calculations.

In percent of NPV of debt at completion point, after full use of traditional debt-relief mechanisms.

Guyana reached its completion point in May 1999, subsequent to the end of the financial year.

Eligible under fiscal/openness criteria; NPV of debt-to-exports target chosen to meet NPV of debt-to-revenue target of 280 percent.

NonrescheduIable debt to non-Paris Club official bilateral creditors and the London Club, which was already subject to a highly concessional restructuring, is excluded from the NPV of debt at the completion point in the calculation of this ratio.

Mozambique reached its completion point in June 1999, subsequent to the end of the financial year. At that time assistance under the Initiative was increased to $1,716 million (in NPV terms) to ensure that Mozambique met the sustainability target of an NPV of debt to exports ratio of 200 percent.

Equivalent to SDR 211 million.

Sources: IMF and World Bank Board decisions, completion point documents, final decision point documents, and IMF staff calculations.

In percent of NPV of debt at completion point, after full use of traditional debt-relief mechanisms.

Guyana reached its completion point in May 1999, subsequent to the end of the financial year.

Eligible under fiscal/openness criteria; NPV of debt-to-exports target chosen to meet NPV of debt-to-revenue target of 280 percent.

NonrescheduIable debt to non-Paris Club official bilateral creditors and the London Club, which was already subject to a highly concessional restructuring, is excluded from the NPV of debt at the completion point in the calculation of this ratio.

Mozambique reached its completion point in June 1999, subsequent to the end of the financial year. At that time assistance under the Initiative was increased to $1,716 million (in NPV terms) to ensure that Mozambique met the sustainability target of an NPV of debt to exports ratio of 200 percent.

Equivalent to SDR 211 million.

Directors agreed that linking debt relief and social development should be considered in the broader perspective of overall efforts at poverty alleviation, with the World Bank taking a lead role. Some Directors also referred to the work undertaken by the International Development Association (IDA) and other creditors to accelerate progress toward poverty reduction and social development; they welcomed the IMF’s intention to establish a link between HIPC social targets and social development targets for the twenty-first century set out by the Development Assistance Committee of the Organization for Economic Cooperation and Development.17

Directors agreed to amend the ESAF-HIPC Trust Instrument to allow consideration of a member’s performance under programs supported by emergency assistance for postconflict countries as part of the first stage track record leading up to the decision point (see Figure 3). They also agreed that a country’s eligibility and qualification for HIPC assistance, including the amount of assistance committed at the decision point, might be reassessed in cases where problems in policy implementation led to protracted delays in reaching the completion point. In cases of protracted delays prior to the completion point, the option of returning to the beginning of the second stage would be decided by the Executive Boards of the IMF and World Bank.

Options for Enhancing the HIPC Initiative

Although the HIPC Initiative is acknowledged as a positive step forward, many commentators have expressed concern about the depth of debt relief and the pace of implementation. In response, the IMF and the World Bank initiated a two-stage review of the HIPC Initiative: Phase 1 addresses concerns about, and modifications to, the current framework, including debt sustainability targets, the timing of decision and completion points, and performance under economic and social programs. Under Phase 2, more in-depth consultations among interested parties will take place on the link between debt relief and social development. In the course of the review, the IMF and the World Bank have consulted with outside organizations and groups and other institutions and have posted on the Bank and IMF websites a questionnaire soliciting suggestions from the public.

At a meeting in late April 1999, the Executive Board welcomed the helpful comments and proposals received from these outside organizations and groups. Directors generally agreed with the principles for modifying the HIPC Initiative set out in a joint statement issued by the President of the World Bank and the IMF Managing Director:

  • Debt relief should reinforce the tools of the international community—including policy-based and project lending, and donor assistance—with the wider aims of promoting sustainable development and poverty reduction.
  • Debt relief should strengthen the incentives for debtor countries to adopt strong programs of adjustment and reform.
  • Enhanced debt relief should focus particularly on poorer countries for which excessive debt can be a particularly severe obstacle to development.
  • Debt relief should provide a clear exit from an unsustainable debt burden—with an appropriate cushion against external shocks—and remove debt overhangs; debt relief should be irrevocable.
  • Enhanced debt relief, such as through lower targets, should be provided to all member countries, including those—generally the stronger performers—that had already reached decision and completion points under the HIPC Initiative, provided they qualified under any revised thresholds.
  • Implementation of the HIPC Initiative should be simplified and made more transparent.
  • Proposals for enhanced debt relief should be accompanied by proposals on how the major contributions of the key multilateral creditors—including the World Bank, the IMF, and the African Development Bank—should be financed and should involve close consultation with all other affected creditors.

Noting that the estimated costs of the existing framework had risen and that financing for that framework was not yet secured fully, many Directors conditioned their support for change on an identification of the necessary financing from multilateral creditors. A number of Directors emphasized the importance of appropriate sharing of costs among creditors. A number of Directors also stressed that any proposals should be based on net additional financing, to ensure that increases in allocations for the HIPC Initiative do not crowd out existing aid flows.

The Board addressed four main areas of the various proposals: the depth, breadth, and timing of debt relief, and the related policy conditionality.

Many Directors were willing to consider changes to provide for deeper debt relief, to provide a greater safety cushion for debt sustainability, although a few considered that a case for changing the targets had not been established fully and that the HIPC Initiative was sufficiently flexible to accommodate exceptional needs. In light of the uncertainties surrounding the financing of the additional debt relief, Directors agreed that it was too early to consider concrete proposals. Nonetheless, several expressed interest in considering for countries with the deepest poverty a net-present-value-of-debt-to-export target of 150 percent and a netpresent- value-of-debt- to-fiscal-revenue target of 250 percent with reduced thresholds. Some suggested that the lower targets might be related to exceptional country performance. Several Directors thought that HIPC Initiative debt relief could be made available in cases of natural disaster, in postconflict countries, and in countries with arrears to the IMF.

The Board viewed broader debtor country participation within the HIPC Initiative as desirable, both to ensure that debt relief reached all of those countries needing it to achieve sustainability, and also to extend the incentives for countries to sustain adjustment and reform policies. A lowering of targets could serve to broaden eligibility for assistance.

Directors agreed that a performance period was necessary to maximize the development impact of HIPC assistance, but a number supported an explicit and general shortening of the track record. These Directors considered that a three-year performance period would give sufficient assurance of a strong policy environment Many other Directors, however, favored little or no general shortening of the track record period to reach the HIPC Initiative completion point, stressing the need to provide sufficient time and incentives for the countries to undertake the required structural reforms. These Directors pointed out that the three-year track record requirement between the decision and the completion points had in practice been interpreted flexibly—with a shortening in six of the seven early cases—and suggested that this flexibility should be continued. They emphasized that the exceptional nature of HIPC assistance should be justified by exceptional reforms. These Directors noted that substantial external financing was available to countries that had begun IMF- and Bank-supported adjustment programs, and that these countries would also be eligible for concessional flow reschedulings from bilateral creditors.

In the context of a discussion of maintaining a three-year second stage between the decision and the completion point, a number of Directors also supported consideration of interim assistance by the IMF, the World Bank, and other multilateral creditors as a means to provide relief ahead of the completion point. The staff will in due course make concrete proposals on interim assistance from the IMF, including an analysis of the cash flow impact of advancing assistance.

Some Directors expressed interest in linking delivery of HIPC Initiative assistance to a predefined set of policy measures but nonetheless agreed that a minimum period of time would still be necessary to ensure that prudent macroeconomic underpinnings were in place. While recognizing the positive incentives of such an approach, other Directors raised practical concerns about its implementation, including the difficulty of identifying a small set of key measures that could determine the timing of the delivery of assistance under the Initiative, or the danger of overloading the reform agenda.

Directors agreed that debt relief could provide both an incentive and a resource to support poverty reduction and social development programs. They welcomed consideration of ways to tighten the linkages between debt relief within the HIPC Initiative and poverty reduction and social policies in the context of the second part of the 1999 HIPC Initiative consultation and review process. Such work would need to rely heavily on the expertise of the World Bank.

Many Directors supported the proposals made by major creditor governments to increase debt relief outside the HIPC Initiative framework. A number of Directors stressed that strengthening the HIPC Initiative would need to be reinforced by wider actions by industrial country members. Many urged that larger official development assistance flows be provided to HIPCs and that these flows concentrate on countries that implemented strong policies. Directors recognized that most heavily indebted poor countries would continue to depend on substantial aid inflows even after the delivery of assistance under the HIPC Initiative. In addition, many supported a reinvigoration of trade liberalization so that the exports of heavily indebted poor countries, which largely consist of raw materials and agricultural products, would have free access to industrial country markets.

The staffs of the IMF and World Bank prepared, in April 1999, a technical note describing the estimated costs of various proposals from member governments and civil society for changes to the HIPC Initiative, which was discussed by the Boards of the World Bank and IMF in April. The note and other relevant material have been posted on both institutions’ websites for public feedback.18 The objective is to reach decisions to strengthen the Initiative for endorsement at the fall 1999 Annual Meetings.

At its April 1999 meeting, the Interim Committee encouraged the Executive Board—together with the Board of the World Bank—to develop more specific proposals to strengthen the HIPC Initiative framework so as to enhance debt relief in a way that reinforced incentives for adopting strong programs of adjustment, reform, and good governance.

Distilling Lessons from ESAF Evaluations

Since the late 1980s, the IMF has provided highly concessional loans through the ESAF to support the economic adjustment programs of low-income member countries. The facility has been a major source of IMF financing. As of April 30, 1999, the IMF had disbursed SDR 7.2 billion ($9.7 billion) under 81 ESAF arrangements approved for 51 countries; as of the same date, additional disbursements under the Structural Adjustment Facility, the predecessor to the ESAF, amounted to SDR 1.8 billion ($2.4 billion) under 38 arrangements approved for 37 countries.

In July 1997, the Board discussed a staff study assessing the experiences of 36 countries that received SAF and ESAF financing during 1986–95 in support of 68 programs. Subsequently, this internal review was complemented by an evaluation of the ESAF undertaken by a panel of outside experts, and in March 1998 the Board reviewed the findings of the panel.19 Dis-cussing the issue in July 1998, Directors attempted to draw lessons from the two ESAF evaluations and endorsed a number of proposals for changing ESAF operations to improve the design and implementation of ESAF-supported programs and thereby contribute to stronger economic performance in the IMF’s poorest member countries.

Directors reiterated their confidence in the ESAF as an effective and valuable instrument in supporting macroeconomic adjustment and structural reform in low-income countries. Policies under the ESAF had stimulated growth, improved living standards, and helped move countries toward external viability. Directors underscored the need to take into account the individual circumstances of countries—especially a country’s administrative capacities and needs—and to apply the recommendations of the ESAF reviews flexibly. These reforms were part of a continuing effort to adapt the IMF’s strategy for growth and adjustment. Noting that dialogue with interested parties outside the IMF, as well as their views, was important to this process, Directors supported publication of the staff report and the summary of the Board’s discussion.20 Directors intend to review progress in implementing the recommendations in the period ahead.

Design of ESAF-Supported Programs

Directors agreed that a number of key aspects of program design merited greater emphasis in ESAF-supported programs:

  • Stronger efforts were necessary to boost the availability of investable resources. ESAF-supported programs should thus generally target substantial increases in national saving over the three-year period of an ESAF arrangement. Higher public saving rates must take the lead in the process, given the often slow responsiveness of private saving to policy in the short run. The required fiscal discipline would also help provide a low-inflation environment conducive to growth and stronger external positions.
  • The quality of fiscal adjustment was as important as the quantity of adjustment. The balance of adjustment between revenue increases and expenditure savings should continue to take account of the potential for raising revenues efficiently and the adequacy and efficiency of government spending. These factors would vary substantially from country to country. ESAF-supported programs should aim to shift the composition of government revenues over time toward sources that were more robust and less distortionary, while paying due attention to the distributive aspects. This would typically mean reduced reliance on trade taxes in favor of broad-based consumption taxes—such as the value-added tax—and simple taxes on income and profits. Tariff cuts would also be facilitated by improvements in customs administration.
  • The quality and composition of public spending must be improved. Programs should be designed to protect—and in most cases, increase—productive spending on health, education, and basic infrastructure. In addition, as the external evaluators had observed, social safety nets should feature more prominently in the design of future ESAF-supported programs. To make these objectives feasible, savings would have to be generated in other areas over the medium term, notably through far-reaching reforms of the civil service and public enterprises and reductions in unproductive spending.
  • The achievement and maintenance of single-digit inflation should be a key element in countries’ growth strategies, and thus a central objective of programs. An appropriate policy mix was important, and fiscal restraint was a prerequisite, but there was also a case for adopting more effective nominal anchors under a number of ESAF-supported programs to ensure that monetary policy played its part. Such anchors could take the form of exchange rate pegs, money ceilings, or a more explicit commitment to adjust policies to achieve specified inflation targets. Several Directors advocated caution in accepting exchange rate anchors when a country was highly vulnerable to external shocks; they also underscored the importance of identifying appropriate exit strategies as warranted.
  • The extent of structural change already achieved under ESAF-supported programs had been profound. Nevertheless, structural weaknesses remained to be addressed across a broad front. Greater attention to sequencing such efforts was needed, with early implementation of those reforms most crucial to the success of the overall program. The priorities for reform and the appropriate sequencing should continue to be determined country by country, with a clear emphasis on measures to stimulate private investment and entrepreneurship. Thus, further trade liberalization should be targeted, including through attention to the regional dimension of such efforts. The regulatory and legal framework for private sector activity should be streamlined and rigorously enforced, and ESAF-supported programs should work toward establishing a sound banking system and reforming and privatizing public enterprises—two areas in which progress had been comparatively slow. To that end, the quality of data on the banking sector and public enterprises had to be improved, and the fiscal costs of restructuring in both sectors incorporated into program design at an early stage as far as possible.

Experience had shown that reforms to stimulate growth and reduce poverty would also move countries further toward the other ultimate objective of the ESAF, that is, external viability. Growth and external viability were, in practice, complementary objectives. The staff’s analysis of external viability in ESAF countries should continue to use indicators based on exports, GDP, and revenues, all of which conveyed relevant information. The indicators proposed by the external evaluators could also be presented when they were found to provide a differing perspective on a country’s external debt situation. Especially in light of the Asian experience, Directors noted, it was important to use the broadest possible coverage of external obligations in making these assessments, which, in turn, would require improvements in the monitoring of private external debt.

Implementation of ESAF-Supported Programs

The internal and the external reviews of the ESAF had underscored that programs had to be well designed and resolutely and consistently implemented to have their intended effect. The external evaluation, in particular, had offered a number of valuable suggestions on what the IMF could do to help ESAF users prepare and implement programs more effectively. Directors endorsed the notion that “national ownership” of programs greatly improved the prospects for their sustained implementation. The responsibility for developing national consensus behind a program resided first and foremost with the country authorities. IMF staff, however, could and should continue to help the authorities explain to society at large the content and rationale for the program. IMF staff—and resident representatives in particular—should be ready to engage in more frequent contacts with representatives from civil society and to participate, for example, in national conferences on policy issues. Directors agreed that publication of Policy Framework Papers, or similar documents, and Letters of Intent was particularly helpful and should become standard procedure (see Chapter 5 for a discussion of initiatives concerning these documents).

In helping the authorities build a national consensus, Directors felt the IMF could contribute in two main ways:

  • Staff missions should be given greater flexibility to agree with the authorities on alternative policy mixes consistent with an appropriate set of program objectives. The scope for such flexibility, however, would need to be defined reasonably clearly in advance, so that program objectives would not be undermined and to ensure uniformity of treatment.
  • Although IMF staff missions would continue to negotiate with the heads of the countries’ economic teams, they should encourage the authorities to include other relevant ministries in the discussions of structural or sectoral policies, and to discuss with all affected ministries the impact of measures taken in other areas.

Consensus building and the development of ESAF-supported programs that were truly “owned” took time, and some delay in initiating reforms might even be desirable if the result were stronger ownership of the program. While IMF staff had a role in these efforts to strengthen ownership, Directors considered it important to strike the right balance between fostering ownership and securing a strong arrangement. Most Directors supported the suggestion offered in both reviews that the IMF should be more willing to withhold ESAF support when the authorities’ commitment to reform or ability to implement the program was in question. They agreed, therefore, that staff reports for the request of ESAF support should assess the environment for program implementation. This should cover the technical capacity to implement the program; the country’s technical assistance needs and how they will be met; potential roadblocks to the reform measures; and the authorities’ effort to foster consensus for, or anticipate opposition to, reforms.

The authorities’ willingness to take prior actions was a strong and tangible indication of commitment. Prior actions—as part of the overall sequencing of the reform program—should be sought more frequently where progress had not been made on certain structural reforms fundamental to the success of the program.

Social Policies in ESAF-Supported Programs

One reason ESAF-supported reform programs had lost public support—complicating implementation—was the failure to identify and address unintended effects of policies on vulnerable social groups. Directors noted the conclusion of the external evaluators that structural adjustment generally had positive effects on income growth and poverty reduction, and that the cost of the reforms often fell more heavily on the better off than on the poor. Nevertheless, it was important to ensure that the poor were protected during adjustment and reform.

To achieve this, Directors agreed that assessments of the social impact should be conducted during the design of an ESAF-supported program; based on these assessments, measures to protect the poor should be incorporated into the program, and the social impact of the program should then be monitored during implementation. In addition, closer attention should be paid to developments in the real level of social spending, through an assessment of changes not only in nominal spending but also in the relative price of social services, and, more generally, to poverty alleviation. Directors reiterated that the IMF should rely on the expertise of the World Bank to carry out this work, and they welcomed the Bank’s intention to collaborate more actively in this process, including in the context of six “pilot” country cases—Cameroon, Ethiopia, Nicaragua, Tajikistan, Vietnam, and Zimbabwe—intended to demonstrate the potential of closer collaboration between IMF and World Bank staffs to formulate better- integrated programs, drawing on the combined expertise of both institutions. Directors recognized the problem of inadequate data availability but hoped the problem would ease gradually as work proceeded.

IMF-World Bank Collaboration

Directors welcomed the proposal to intensify and enhance the existing channels of IMF—Bank collaboration on other aspects of program design. In particular, they saw a need for more effective joint work with country authorities on formulating reforms in the public enterprise and banking sectors. Better collaboration should aim, for example, to ensure that programs target early reform of those public enterprises that pose a significant threat to the public finances; identify up front the likely costs of bank restructuring, including their dependence on the pace of reform, so that these could be incorporated into the program’s macroeconomic framework from the outset; and help countries plan and execute strategies to build political support for reforms. The IMF and the Bank should also work to ensure that their technical assistance, and that of other agencies, was well coordinated, made available on a timetable that met the country’s needs, and contributed to the development of the authorities’ own institutional capacity to make and implement policy.

The Board also endorsed the collaborative efforts of Bank and IMF staff and the national authorities to assess—in countries that had a track record of macroeconomic stability and were implementing policies that promoted domestic saving—the potential to absorb higher inflows of aid for investment spending without jeopardizing fiscal or external sustainability. Should this analysis demonstrate significant absorptive capacity with limited prospects for private external financing, efforts could be made to increase access to official financing from the ESAF, the World Bank, and bilateral donors, in support of a strong medium-term program that would target early progress in critical areas of reform. Equally important for these and other countries was to create the conditions for inflows of private capital, especially direct foreign investment. To this end, the Board felt that countries had to ensure open markets and transparent and effective regulatory and legal systems.

Directors supported the proposed modalities for the pilot cases, recognizing the importance of allowing flexibility and innovation. Most Directors emphasized that the established delineation of responsibilities between the World Bank and IMF staffs should be maintained, as should the IMF staff’s ultimate responsibility for the content of ESAF-supported programs brought to the Executive Board.

Monitoring ESAF-Supported Programs

The Board supported the use of more intensive program monitoring in cases where it would help in consistent policy implementation, and broadly endorsed the staffs proposal to amend the ESAF Trust Instrument (which established the ESAF Trust; see Chapter 10) to permit monitoring and disbursements along the lines provided for under Extended Fund Facility Arrangements.

Subsequently, in August 1998, the Board endorsed new operational procedures for closer monitoring of ESAF Arrangements; Directors believed that these changes would strengthen the link between financing and adjustment. The proposals called for a shift to semiannual performance criteria, reviews, and disbursements for all ESAF Arrangements and the possibility of quarterly performance criteria, reviews, and disbursements in exceptional cases. Directors also agreed to extend the application of the existing operational guidelines for the use of the IMF’s general resources to ESAF Arrangements approved after the date of amendment of the ESAF Instrument. The decision to amend the ESAF Instrument was approved in November 1998.

Financing the ESAF and the HIPC Initiative

Steps to secure financing for the ESAF and the HIPC Initiative were a key concern of the Board in 1998/99. In December 1998, in a preliminary discussion, Directors emphasized the urgency of securing the full financing quickly to ensure that the IMF could meet its responsibilities under these operations and agreed that further delay in the decisions on gold sales and Special Contingent Account 2 (SCA-2) refunds would lead to significant losses in forgone income. The need for additional loan resources for the current ESAF Trust was also acknowledged.

In April 1999, Directors returned to the issue and emphasized that it was essential to bear in mind the costs of debt relief and, in particular, the delays experienced in financing the IMF’s participation in the HIPC Initiative and the continuation of the ESAF. Directors reiterated that securing new loans for the ESAF Trust was a matter of great urgency in order to enable the IMF to continue to support the economic adjustment efforts of its poorest members without interruption.

Potential contributions were still well below the estimated financing requirement, on an “as-needed” basis, of SDR2.9 billion ($3.9 billion) for the ESAF-HIPC Trust, calculated using the revised baseline cost to the IMF estimated for the HIPC Initiative. Directors regretted that many pledged contributions remained conditional, and noted again the significant losses in terms of forgone income resulting from delays in securing the financing needed for the ESAF-HIPC Trust. Several Directors also indicated the need for appropriate burden sharing, including larger contributions from the developed countries.

The Board acknowledged the significant increase in costs associated with possible modifications to the HIPC Initiative. Directors agreed that decisions on the modification of the HIPC Initiative would have to be taken with clarity about arrangements that effectively secured the necessary financing for the ESAF and HIPC initiatives.

The Development Committee, at its meeting in April 1999, stressed the need to secure financing for the IMF’s ESAF-HIPC Trust. It also requested that changes to the HIPC Initiative framework and financing plans be presented for its consideration at the Committee’s next meeting.

By the end of April 1999, six members—Belgium, Canada, France, Germany, Italy, and the Netherlands—had indicated they would provide an additional SDR 1.6 billion ($2.2 billion) in loan resources for the ESAF Trust. In addition, on April 28, 1999, the participants in the NAB unanimously decided that one-third of the surcharge on Brazil’s outstanding SRF purchases be transferred to the ESAF-HIPC Trust.

17The OECD’s Development Goals for 2015 include reducing extreme poverty by half, providing universal primary education, and reducing child and infant mortality by two-thirds. More information on these targets and related indicators is available on the OECD’s website: http://www.oecd.org/dac.
18The note is entitled Perspectives on the Current Framework and Options for Change. The other material includes a Costings Supplement, a Report of the IMF Managing Director and the President of the World Bank to the Interim and Development Committees, and the IMF Chairman’s summings up of the discussions in the two Boards.
19See Annual Report, 1998, pp. 69–73. The staff study was published as IMF, The ESAF at Ten Tears: Economic Adjustment and Reform in Low-Income Countries, IMF Occasional Paper 156 (Washington, 1997). The evaluation by the outside experts was published as IMF, External Evaluation of the ESAF: Report by a Group of Independent Experts (Washington, 1998).
20See the IMF’s website for the staff report (http://www.imf.org/ external/pubs/ft/distill) and for the summary of the Board discussion (http://www.imf.org/external/np/sec/buff/9862.htm).

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