Press Release No. 97/41

Press Release: IMF Approves Exceptional Assistance to Bolivia under the HIPC Initiative

September 12, 1997

The Executive Board of the International Monetary Fund (IMF) decided on September 10 that Bolivia has reached the decision point under the Heavily Indebted Poor Countries (HIPC) initiative and that it is eligible for exceptional assistance. A similar decision was reached by the World Bank on September 9. The exceptional assistance to be provided will reduce the external debt of Bolivia by US$448 million in net present value (NPV) terms, of which the IMF will provide US$29 million.

The Executive Board, consistent with its preliminary deliberations and the views of the Inter-American Development Bank Board, agreed that Bolivia could reach its completion point in September 1998 one year after the decision point, and that the target net present value (NPV) of external public and publicly guaranteed debt for Bolivia at the completion point be set at 225 percent of exports, compared to a projected ratio of 259 percent before assistance. To achieve the 225 percent target at the completion point, the level of exceptional assistance in NPV terms that is required is projected at US$448 million. The total nominal debt-service relief is estimated at US$600 million. This compares to a debt in NPV terms of US$3.4 billion and involves a debt reduction of around 13 percent.

In view of the heavy debt service burden facing Bolivia over the next few years, the exceptional assistance from the IMF and World Bank would be front-loaded. The delivery of all exceptional assistance is conditional on continued adherence by the Bolivian authorities to an IMF- and World Bank-supported program, including the observance of social development targets, as well as satisfactory assurances of action under the initiative by all other creditors. The IMF exceptional assistance of US$29 million in NPV terms will be provided at the completion point in the form of a grant into an escrow account to be used exclusively to pay debt service to the IMF.

The HIPC initiative entails coordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of heavily indebted poor countries which pursue IMF- and World Bank-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.