Australia will provide 100 per cent debt forgiveness to countries which qualify for

debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative co-ordinated by

the IMF and World Bank.

Of the 40 countries that have currently been identified for possible debt relief under

the enhanced HIPC Initiative, there are two – Nicaragua and Ethiopia – which have

debts to Australia and are expected to qualify for relief. These debts relate to supply by

private sector firms of machinery to each of these countries. Australia is owed $5.7

million by Nicaragua and $12.6 million by Ethiopia. When Nicaragua and Ethiopia receive

debt relief under HIPC, all of the debt they owe to the Australian Government will be

forgiven.

The cost of this initiative will be additional to the aid budget.

Australia has a very small proportion of bilateral debt owed by heavily indebted poor

countries. This is because Australia has not generally made loans to poor countries which

have to be repaid. It has given aid as grants. As a consequence, the bilateral debt

Australia is owed is considerably less than the major industrial economies.

Australia has nevertheless been at the forefront in efforts to find a lasting solution

to the serious problem of the unsustainable international debt of the world’s poorest

countries. The decision to provide bilateral debt relief to HIPC eligible countries is in

addition to the $55 million Australia has already pledged toward the World Bank and IMF in

support of the debt forgiveness HIPC Initiative.

Australia believes the enhanced HIPC Initiative is the most credible way to provide

sustainable debt relief to the world’s poorest countries. It involves all creditors,

including multilateral development institutions giving debt relief. It provides debt

relief in the context of establishing sound institutional and policy frameworks to aid

further development. It is also directed to ensuring that the proceeds of debt relief are

directed towards basic health, education and poverty reduction programs, and not lost in

corruption or military spending.

The Government has also been strongly advocating that the enhanced HIPC Initiative

should be implemented quickly and effectively to enable eligible countries to receive debt

relief as soon as possible. This was the message that Australia registered at the meetings

of the IMF and World Bank, which were held last week.

Contact: Treasurer’s Office: Niki Savva 0418 868 710

Mr Downer’s Office: Innes Willox 0419 206 890

21 April 2000

CANBERRA