Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative
The HIPC Initiative is defined by the International Monetary Fund (IMF) as : The joint IMF–World Bank comprehensive approach to debt reduction is designed to ensure that no poor country faces a debt burden it cannot manage. To date, debt reduction packages under the HIPC Initiative have been approved for 36 countries, 30 of them in Africa, providing $75 billion in debt-service relief over time. Three additional countries are eligible for HIPC Initiative assistance.
By mid-1990s, the average African nation owed more than the value of all the goods and services it could produce in a year. The loans, which had to be paid back in foreign currency, came mostly from foreign governments and multilateral institutions, not from private bankers. This money was to be used to build roads, ports, and power plants money which would speed up economic development and create the capacity to repay the loans. However, corruption, natural disasters, wars, and bad policies made it impossible for African governments to make debt payments without cutting the desperately necessary programs that assisted their severely impoverished people. However, the debt forgiveness allowed African governments the necessary leeway to devote the money needed for debt payments to social or economic programs that would help alleviate poverty.
Then, in the mid-2000s, the prices of oil, gas, and minerals began to climb and the technologies to look for natural resources got better and cheaper. African governments suddenly had much more money to spend. With no choking debt, better management, and rising commodity revenue, Africa has grown faster and for longer than it ever did before -- about 5 percent per year for the past 10 years. The proportion of Africans living in poverty has been falling for more than a decade. In fact, data shows that, by 2012, countries that had their debts forgiven had better economic policies than the rest of the developing world.
Link to Article
https://www.imf.org/external/np/exr/facts/pdf/hipc.pdf
By mid-1990s, the average African nation owed more than the value of all the goods and services it could produce in a year. The loans, which had to be paid back in foreign currency, came mostly from foreign governments and multilateral institutions, not from private bankers. This money was to be used to build roads, ports, and power plants money which would speed up economic development and create the capacity to repay the loans. However, corruption, natural disasters, wars, and bad policies made it impossible for African governments to make debt payments without cutting the desperately necessary programs that assisted their severely impoverished people. However, the debt forgiveness allowed African governments the necessary leeway to devote the money needed for debt payments to social or economic programs that would help alleviate poverty.
Then, in the mid-2000s, the prices of oil, gas, and minerals began to climb and the technologies to look for natural resources got better and cheaper. African governments suddenly had much more money to spend. With no choking debt, better management, and rising commodity revenue, Africa has grown faster and for longer than it ever did before -- about 5 percent per year for the past 10 years. The proportion of Africans living in poverty has been falling for more than a decade. In fact, data shows that, by 2012, countries that had their debts forgiven had better economic policies than the rest of the developing world.
Link to Article
https://www.imf.org/external/np/exr/facts/pdf/hipc.pdf