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GAO-08-888R 1 (2008-07-24)

handle is hein.gao/gaocrptawvc0001 and id is 1 raw text is: SGAO Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 July 24, 2008 Congressional Requesters Subject: Developing Countries: U.S. Financing for Multilateral Debt Relief Initiative Currently Experiencing a Shortfall A buildup of foreign debt throughout the 1970s and 1980s-combined with low growth, falling commodity prices, and other economic difficulties-left many poor countries with significantly more debt than they could repay. International efforts to provide debt relief to 41 such heavily indebted poor countries have been ongoing for over a decade, and these efforts culminated in the Multilateral Debt Relief Initiative (MDRI), which was announced in 2005. MDRI eliminates eligible debt that countries owe to four international financial institutions-the World Bank's International Development Association (IDA), the International Monetary Fund (IMF), the African Development Bank's African Development Fund (ADF), and the Inter-American Development Bank (IaDB).' To receive MDRI debt relief, countries must first complete the Heavily Indebted Poor Countries (HIPC) Initiative, which the World Bank and IMF created in 1996 to relieve the debt burden of poor countries. In response to concerns over the continuing vulnerability of these countries, the World Bank and IMF enhanced the initiative to provide additional debt relief in 1999. Recognizing that recipient countries needed further assistance, MDRI was created to help accelerate countries' progress toward achieving the United Nations Millennium Development Goals.2 Of the 41 eligible countries, 23 countries have received debt relief under both the MDRI and HIPC Initiatives, and another 10 countries are receiving debt relief under just the HIPC Initiative. Donor governments (including the U.S. government) have agreed to help fund multilateral debt relief. Donor governments and each institution agree to the amount 'IaDB was not included in MDRI but decided in 2007 to provide equivalent debt relief under a similar initiative. IaDB's Fund for Special Operations is the entity responsible for providing debt relief. For the purpose of this report, references to MDRI also include the IaDB initiative. IMF, ADF, and IaDB plan to cancel all eligible debt that countries owed to them as of the end of 2004. IDA plans to cancel all eligible outstanding debt as of the end of 2003. 2The United Nations Millennium Development Goals, which have a target completion date of 2015, are to (1) eradicate extreme poverty and hunger; (2) achieve universal primary education; (3) promote gender equality and empower women; (4) reduce child mortality; (5) improve maternal health; (6) combat HIV/AIDS, malaria, and other diseases; (7) ensure environmental sustainability; and (8) develop a global partnership for development. GAO-08-888R Cost of Debt Relief

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