5 June 1998

Australia will be making a financial contribution through the IMF and World Bank to an initiative to help people in the very poorest countries of the world. The initiative is known as the Heavily Indebted Poor Country (HIPC) Initiative.

The HIPC Initiative is a package of measures designed to ensure that economic reform in a number of highly indebted developing countries is not put at risk by crippling debt and debt service burdens. Most of the countries covered by the Initiative are in Africa. The HIPC Initiative involves substantial contributions from the International Monetary Fund, World Bank and other multilateral financial institutions, including debt relief from the Paris Club.

Australia has been a strong supporter of the HIPC Initiative in recognition of the importance of debt relief to facilitate economic growth and development to improve the lives of people in the poorest countries which are eligible. Those countries that are eligible for assistance under the Initiative must develop a good track record in economic reform.

Australia’s financial contribution to the HIPC Initiative involves re-allocating various existing funds on deposit in an IMF and World Bank account.

Australia will provide its $A21.8 million on deposit in the IMF’s Second Special Contingency Account to the Enhanced Structural Adjustment Facility-HIPC Trust administered by the IMF and will instruct the World Bank to use the $A8.7 million deposited in the Banks’ Interest Subsidy Fund in support of the Initiative. This will amount to a total of $A30.5 million devoted to this Initiative. There will be no effect on the budget position since these sums are already on deposit

5 June 1998

CANBERRA