Debt Relief Beyond HIPC
"3. DETAILS OF UK PROPOSALS
The UK’s proposals based on these principles are designed to assist eligible countries in making the investments necessary to achieve the MDGs by cancelling up to 100% of multilateral debt. We believe that the IMF’s gold reserves are an under-utilised resource that could be used to finance further debt relief by the IMF, and we discuss this separately below. However, any further debt relief from IDA and the African Development Fund’s internal resources would inevitably result in a dollar-for-dollar reduction in new disbursements to low-income countries..."
"IMF debt relief through better use of gold
In 1999, the IMF’s part in the Enhanced HIPC initiative was financed by the revaluation of a portion of the IMF’s gold reserves through off-market transactions. The IMF continues to hold significant reserves of gold at historic prices, well below current market prices. As an undervalued asset, the IMF’s gold provides a fundamental strength to its balance sheet, and it is our priority to maintain the IMF’s financial integrity. However, there is scope to make better use of the IMF’s gold reserves to generate the resources needed to finance deeper debt relief by the IMF, for example through a further revaluation or off-market sales. We have asked the IMF to examine a range technical approaches to using gold to finance debt relief, hope to reach agreement on a mechanism during 2005..."
The HIPC Initiative has shown the effectiveness of debt relief in releasing resources for poverty reduction. But its achievements must be set against the wider context of a failure to achieve the Millennium Development Goals (MDGs) caused by inadequate resources. Many countries still have to choose between servicing their debt and investing in health, education, infrastructure and other areas necessary to allow them to attain the MDGs. While many donors – including the UK – provide 100% bilateral debt relief to the world’s poorest countries, in practice only 50% or less of multilateral debt is being cancelled. That is why the UK is proposing to the international community that we match bilateral debt relief of up to 100% with multilateral debt relief of up to 100%. This will need to be financed through additional resources, to assist the world’s poorest countries to meet the MDGs while ensuring that debt burdens remain sustainable, and to preserve the international financial institutions’ capacity to assist all low-income countries. We will continue to call for a revaluation or off-market sale of further International Monetary Fund (IMF) gold to fund the IMF’s share of further multilateral debt relief. But for the World Bank and African Development Bank, additional donor resources are required..."