Heavily Indebted Poor Countries - History and Structure

History and Structure

The HIPC program was initiated by the International Monetary Fund and the World Bank in 1996, following extensive lobbying by NGOs and other bodies. It provides debt relief and low-interest loans to cancel or reduce external debt repayments to sustainable levels. To be considered for the initiative, countries must face an unsustainable debt burden which cannot be managed with traditional means. Assistance is conditional on the national governments of these countries meeting a range of economic management and performance targets.

As of December 2011, the HIPC program had identified 39 countries (33 of which are in Sub-Saharan Africa) as being potentially eligible to receive debt relief. The 36 countries that have so far received full or partial debt relief are:

(*) indicates the four countries yet to reach completion point for the HIPC program, and therefore entitled only to partial debt relief. The remaining 32 countries have completed the program and had their external debt cancelled in full.

An additional three countries (Eritrea, Somalia and Sudan) are being considered for entry into the program.

To receive debt relief under HIPC, a country must first meet HIPC's threshold requirements. At HIPC's inception in 1996, the primary threshold requirement was that the country's debt remains at unsustainable levels despite full application of traditional, bilateral debt relief. At the time, HIPC considered debt unsustainable when the ratio of debt-to-exports exceeded 200-250% or when the ratio of debt-to-government revenues exceeded 280%.