Ethiopia to receive debt relief totaling US$3.616 Billion – WB
July 4, 2006 (WASHINGTON) — Starting on July 1, 2006, the World Bank will cancel the International Development Association (IDA) debt of Ethiopia under the Multilateral Debt Relief Initiative (MDRI).
According to a press release issued by the World Bank, Ethiopia will receive an overall debt relief of US$3.616 billion, which is the total amount of additional IDA debt relief provided under the MDRI and the IDA portion of debt relief already committed under the Heavily Indebted Poor Countries (HIPC) Initiative.
“We have secured a level of financing commitments from donors that allows us to begin implementing the Multilateral Debt Relief Initiative,” said World Bank President Paul Wolfowitz. “Additional debt relief will help Ethiopia channel resources into programs that directly help the people who need it most – the poor who need and deserve a better education, better health services, greater access to clean water, and greater opportunities to escape poverty.”
Countries that have graduated from the HIPC Initiative are eligible for additional debt relief under the MDRI. Ethiopia will receive estimated MDRI relief in the amount of US$2.337 billion, in addition to the US$1.278 billion in IDA debt relief committed under the HIPC initiative.
The main objective of the MDRI is to provide additional support to HIPCs to reach the MDGs. Ethiopia’s economic growth performance over the past two years has been very strong and broad based. Ethiopia has also made important gains on human development indicators. These gains have been fueled by an increase in pro-poor spending from 39 percent of the budget in 1999/2000 to 54 percent in 2005/06.
“The MDRI debt reduction will put more resources at the disposal of the public sector. The main challenge in the coming years is for Ethiopia’s economy to continue to grow while governance improves, so that empowered communities all over the country can take the MDGs into their hands, holding the government more accountable for efficient services.” said Ishac Diwan, World bank Country Director for Ethiopia and Sudan.
The Multilateral Debt Relief Initiative (MDRI), which will cancel the International Development Association (IDA) debt of some of the world’s poorest countries, will take effect on July 1, 2006. Under the MDRI, IDA is expected to provide some US$37 billion in debt relief over 40 years. This is in addition to some US$17 billion of debt relief already committed by IDA under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Initially, 19 countries will receive 100 percent cancellation of their eligible debt: Benin, Bolivia, Burkina Faso, Cameroon, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
The remaining HIPC countries will be eligible for debt cancellation once they have completed the requirements of the HIPC Initiative.