Senegal to receive $800 million in debt-service relief

• Pages: 220-221

Page 220

In a press release dated June 23, the IMF and the World Bank Group’s International Development Association (IDA) announced that they had agreed to support a comprehensive debt-reduction package for Senegal under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The full text of Press Release No. 00/36 is available on the IMF’s website (www.imf.org).

Total relief from all of Senegal’s creditors is worth about $800 million. This is equivalent to about $450 million in net present value terms, or approximately 18 percent of the total net present value of debt outstanding after the full use of traditional debt-relief mechanisms. IDA will start providing interim debt relief on July 1, 2000. The IMF will begin providing interim relief once satisfactory assurances have been obtained from Senegal’s other creditors.

Senegal will reach its completion point under the initiative and receive the remainder of its debt relief from all creditors once it has fulfilled a number of steps designed to strengthen and broaden economic growth and reduce poverty. The Senegalese authorities will outline these measures in a poverty reduction strategy paper, drafted in consultation with a broad cross section of local civil society and the support of international partners. Country authorities estimate this will be completed by the end of 2001.

Background

Senegal was first considered for debt relief under the original HIPC Initiative framework in early 1998, but it was determined at the time that other sources of debt relief (that is, a 67 percent reduction of eligible bilateral debt in the Paris Club of bilateral creditors) were sufficient for Senegal to attain a sustainable debt position as defined under the terms of the original HIPC Initiative framework. In September 1999, the international community endorsed major enhancements to the initiative designed to deliver deeper, broader, and faster relief, which lowered the qualifying threshold. (Countries are now eligible for assistance if the net present value of external debt exceeds either 150 percent of exports or 250 percent of fiscal revenue.) Under this enhanced framework, Senegal qualifies under both criteria.

The debt relief provided by IDA of $149 million ($116 in net present value terms) will cover 50 percent of Senegal’s debt-service obligations to IDA in each of the next nine years. The debt relief...