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 worlds 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 worlds 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: Treasurers Office: Niki Savva 0418 868 710
Mr Downers Office: Innes Willox 0419 206 890