I.  Introduction

1. The management and staff of the IMF and World Bank are continuing to work in partnership with governments, other creditors, and donors towards the goal of bringing countries as quickly as possible to their decision points within a framework of sound policies and a clear focus on poverty reduction. Management and staff are committed to doing everything possible to bring about 20 countries to their decision points by the end of 2000.¹ In response to requests from several Executive Directors, this note provides up-to-date information on the status of country implementation of the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.²

2. The notes below cover 22 countries which are expected to reach decision points in 2000 and beyond. From the group of 41 HIPCs, this excludes those countries that: have already reached their decision point under the enhanced Initiative (10)³; are considered sustainable under the Initiative (4)⁴; have indicated they do not wish to seek relief (2)⁵; and for which there is inadequate data and/or protracted arrears (3).⁶

3. Countries are divided into three groups in the notes below. The first group of ten comprises those (beyond the ten that have already reached the decision point) which are most likely to reach decision points during 2000. This is an ambitious timetable, and management and staff will make every effort to meet it, recognizing that exogenous shocks or major policy realignments could derail the timetable. Second, there are five countries which could have decision points in early 2001. It remains possible that one or more of this group could reach a decision point in 2000. The third group of seven countries comprises those which are expected to reach decision points later on. The timing of decision points will need to be considered using a case-by-case evaluation of the track record prior to the decision point, as accepted in principle by the Boards in their discussions in September 2000 of the HIPC review (referred to earlier). In all cases, countries would need to demonstrate strong commitment to reform programs, particularly in the areas of governance and accountability, to ensure that debt relief would be monitored and used effectively for poverty reduction.

II.  Countries most likely to reach decision points in 2000

The Executive Boards of the IMF and the World Bank endorsed Cameroon’s preliminary HIPC document in June 2000. The final review of the third-year PRGF arrangement, the interim PRSP (I-PRSP), and the HIPC decision point are expected to be considered by the Boards by mid-October 2000. The authorities are committed to implement strictly their governance and anti-corruption program and adopt a "ring-fencing" mechanism to demonstrate to the international financial community the government’s capacity to ensure the efficient use of the HIPC resources. The government also plans to intensify its efforts in the fight against HIV/AIDS.

The Boards of the Fund and the Bank considered the I-PRSP and the preliminary HIPC document, and declared Chad eligible for assistance under the enhanced HIPC Initiative in July 2000. A joint Fund-Bank mission is in the field in September 2000 to finalize the Debt Sustainability Analysis (DSA) and discuss with the authorities the final decision point document. The HIPC decision point could be reached before the end of 2000.

A joint Bank-Fund staff mission is now in the field to complete the DSA and hold discussions regarding the PRGF and IDA programs, identify possible floating completion point conditions, and advise on the preparation of an I-PRSP. Any necessary follow-up will take place in November and the PRGF staff report, the I-PRSP, and the related Joint Staff Assessment (JSA), and a HIPC decision point could be considered before end-2000.

A joint Bank-Fund mission visited Conakry in May, and discussions continue on the mid-term review of the PRGF arrangement. There have been policy slippages in the fiscal and governance areas, and needed macroeconomic and structural policy actions were discussed with the authorities. Pending sufficient progress on the above, the PRGF review, I-PRSP, JSA, and HIPC decision point could be discussed by the Boards before end-2000, but this could be delayed if the policy slippages have not been corrected.

Implementation of the program supported by the Fund’s emergency post-conflict assistance, approved in September 1999, has been broadly satisfactory. Understandings on a program that could be supported by a new three-year PRGF arrangement are likely to be completed in September 2000 when a delegation from Guinea-Bissau will visit Washington to conclude the technical discussions (including a preliminary framework of the budget for 2001). Work is also underway to seek a solution to Guinea-Bissau’s problem of substantial external arrears, especially to multilateral creditors. Pending prior actions in the banking, energy, and social sectors, the new PRGF arrangement, the I-PRSP, and a decision point under the enhanced HIPC Initiative could be discussed by the Boards before end-2000.

In August 2000, a joint Bank-Fund mission discussed a program for 2000-01. The authorities’ proposed macroeconomic framework and structural reform agenda are still under consideration, but staff have begun work on the documentation for the second annual PRGF arrangement. Once the program has been approved by management, and two remaining prior conditions are implemented (relating to the steps for the privatization of a public sector owned bank and a revenue action) proposals for the second annual PRGF arrangement and the decision point under the enhanced HIPC Initiative could be presented to the Boards before end-2000.

The Boards discussed the preliminary HIPC document in late August. A Fund mission is currently in Malawi to finalize discussions on a PRGF arrangement and to identify, jointly with a concurrent Bank mission, the floating completion point conditions for the HIPC decision point document. The government has prepared a draft I-PRSP, to be considered by the Boards together with a JSA at the time of the decision point. Lack of control on expenditure commitments resulted in domestic arrears under the ESAF arrangement that expired in October 1999, and Malawi has introduced a new expenditure control system. Pending its full implementation, a decision point could be considered before end-2000, along with Board consideration of a request for a new three-year PRGF arrangement.

The Fund and Bank Boards endorsed the preliminary HIPC document in September 1999. Slippages in implementing the PRGF-supported program occurred in early 2000 relating to a higher fiscal deficit and delays in structural reforms, and because of the need for greater attention to governance problems. Since April 2000, the authorities have been implementing a package of policy measures aimed at redressing these problems, and performance through July was satisfactory. However, concerns about banking system fragility were heightened in August by the sharp deterioration in the financial condition of the largest commercial bank, as well as the weak financial health of other banks. The authorities are working to put in place satisfactory bank resolution plans, and to take credit-tightening steps. Once these are in place, and with continued strengthening of the Comptroller's Office, the review under the second annual PRGF arrangement could be presented in October 2000. The authorities have been working on their poverty strategy since 1999, and the I-PRSP and JSA will be circulated for the decision point under the enhanced HIPC Initiative.

The Boards of the Fund and the Bank discussed the preliminary HIPC document in July 2000 and agreed that Rwanda was eligible for HIPC assistance. A joint Bank-Fund mission will visit Kigali in October to finalize the DSA and reach understandings on the floating completion point triggers to be included in the decision point document. The Fund team will also seek to reach agreement on the final review of the second-year PRGF arrangement and on a third-year PRGF arrangement. The authorities are expected to finalize their I-PRSP by end-October. On the basis that the above steps are completed on time, the PRGF, the I-PRSP, JSA, and HIPC decision point could be discussed by the Boards before end-2000.

In July/August 2000, the Boards of the Bank and Fund endorsed the preliminary HIPC document and the I-PRSP, and agreed that Zambia was eligible for HIPC assistance. At the same time, the Fund Board completed the first review of the PRGF and approved the 2000 program, after the authorities had completed the long-delayed privatization of the copper parastatal and based on measures to improve fiscal performance and control, accelerate the privatization of remaining state-owned enterprises, and address concerns regarding governance and the banking sector. Bank and Fund staff are working with the authorities to update the DSA and reach understandings on floating completion point triggers for the decision point document.⁷ In November, a Fund mission will visit Lusaka to assess the macroeconomic performance through end-September and hold preliminary discussions on the budget for 2001. Based on this, the Boards could discuss the HIPC decision point before end-2000.

III.  Countries Which Could Reach Decision Points in Early 2001

The Fund- and Bank-supported program has been off-track due to significant fiscal and governance problems. Agreement has not been reached on a staff-monitored program (SMP), as the government has been focused on the political agenda, and necessary remedial measures in the fiscal and governance areas have not been adopted. The constitutional referendum took place on July 23, 2000, and presidential elections have been postponed to October 22, 2000. The timing of the decision point under the enhanced HIPC Initiative will need to be considered once a new Fund- and Bank-supported program has been negotiated with the authorities after the elections, possibly in the first quarter of 2001.

A joint Fund-Bank mission is scheduled to take place in October 2000 to complete the DSA and reach understandings on the triggers for reaching the floating completion point. In addition, the Fund staff will discuss a program which could be supported by a new three-year PRGF arrangement. Depending on the speed with which final understandings can be reached, it is most likely that the PRGF program, I-PRSP and JSA, and HIPC decision point could be discussed by the Boards in early 2001.

A Fund mission is presently discussing the end-year review under the second annual PRGF arrangement, and the staff report is expected to be submitted to the Board in the second half of October. A mission to begin negotiation of a new three-year PRGF arrangement is expected to take place in November, and the I-PRSP is expected to be finalized by the authorities around that time. If the PRGF negotiations progress well, it is expected that the Boards would consider the decision point document in early 2001.

Fund and Bank missions were in Niamey in August 2000 to initiate discussions on a program which could be supported under a new three-year PRGF arrangement and an IDA credit. The Fund mission reached broad agreement on the macroeconomic framework for 2000–03 and understandings on the main objectives of fiscal policy for 2001, but several understandings have yet to be reached on policies with respect to additional revenue generating measures, the petroleum products subsidy, and domestic payments arrears. A follow-up joint Bank-Fund mission will visit Niamey in September 2000. The mission will: (i) complete discussions on the new PRGF arrangement; (ii) review the authorities’ I-PRSP and prepare a JSA; (iii) prepare a HIPC decision point document, including possible triggers for a floating completion point; and (iv) complete the Article IV consultation discussions. It is expected that the associated discussions by the Boards will take place in early 2001.

A new three-year PRGF arrangement was approved by the Fund in April 2000, following the successful implementation of a staff-monitored program in 1998–99. At the same time, the I-PRSP was endorsed by the Boards of the Bank and the Fund. Good progress was made in the implementation of the program during the first half of 2000 and it is expected that the first semiannual review will be considered by the Fund Board in December. A HIPC decision point document could be considered by the Boards at the time of the conclusion of the second PRGF review in early 2001.

IV.  Countries Expected to Reach Decision Points Later

Following a period of conflict, an interim peace accord was signed on August 28, 2000. However, arrangements for a ceasefire, the selection of a transition president, and electoral modalities for transitional institutions remain to be decided. An interim country assistance strategy was presented to the Bank Board in October 1999; the World Bank is currently supporting Burundi with an Emergency Economic Recovery credit and a number of other projects. It is envisaged that, once a transitional government is in place, an IMF staff team would return to Burundi in late 2000 to negotiate a program which could be supported under the emergency post-conflict assistance policy. This could be followed by a three-year PRGF arrangement, possibly in early 2002, by which time the authorities are expected to have prepared an I-PRSP.

Discussions on a second annual program under the current three-year PRGF arrangement in early 2000 were not completed because of delays in implementing measures to privatize petroleum distribution, together with insufficient external financing commitments. The second tranche disbursement under the World Bank’s Fiscal Consolidation Credit is also behind schedule. Program discussions will resume in October 2000. The authorities expect to adopt an I-PRSP by October 2000. If sufficient progress is made by the Fund and Bank teams in reaching policy understandings, and adequate external financing is identified, a decision point under the HIPC Initiative could be considered by the Boards by mid-2001, at the same time as the first review under the second annual PRGF arrangement.

The Democratic Republic of Congo, during the last four years, has been in a state of war that has involved several countries in the region. Once conditions permit, discussions will be initiated on a reconstruction program that could be supported under the Fund’s post-conflict emergency assistance policy—possibly in the second half of 2001. A track record of performance under such a Fund-supported program could lay the basis for a PRGF arrangement leading to a HIPC decision point. The Democratic Republic of Congo has been continuously in arrears to the Fund since November 1990.

There is no Fund-supported program in place at present, and the country remains in arrears to the World Bank and the African Development Bank. While intermittent conflicts had interrupted earlier efforts, discussions on a program for 2000–01 that could be supported by the Fund under the post-conflict emergency assistance policy have been completed and Board presentation is envisaged for the second half of October 2000, following a donors’ meeting on October 5–6. A new three-year PRGF arrangement and the HIPC decision point could be considered by mid-2001.

There has been no Fund-supported program since 1981-82. The World Bank has approved no new lending since 1987, and does not have an active program in Myanmar. Poor debt statistics make an assessment of the debt burden difficult. Highly tentative estimates indicate that Myanmar’s debt ratios exceed the thresholds under the HIPC Initiative.

The current program supported under the Fund’s post-conflict emergency assistance policy has been generally on track, despite the recent outbreak of violence in the country. It is anticipated that a new program, which could be supported by a three-year PRGF arrangement, could be presented to the Board in early 2001, accompanied by an I-PRSP. Timing of the decision point under the HIPC Initiative could be considered at that time.

There has not been a Fund-supported program since mid-1998. A Fund Article IV consultation mission is planned for later this year, but the initiation of discussions on a new PRGF- and Bank-supported program is unlikely before the end of the year as the government has not yet taken measures to regain control of fiscal management and to clarify the political situation, which is a condition for the resumption of financial assistance from the international community. In particular, the European Union has indicated that it will resume financial assistance only once it is satisfied that the expected legislative elections (expected for early 2001) have been free and fair. Fund Board presentation of a new program could take place in the second quarter of 2001, at which time an I-PRSP would be presented. A HIPC decision point could be considered in the second half of 2001.