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Debt relief for Bolivia

he IDB has agreed to participate in a plan to reduce Bolivia's external debt as part of an international initiative granting debt relief to poor countries that have proven their commitment to sound economic policy.

The September 12 announcement by the Committee of the IDB's Board of Governors was made in the same week that the World Bank and the International Monetary Fund (IMF) announced their debt relief plans.

Bolivia will become the first country in the region to receive debt relief under the framework of the Heavily Indebted Poor Countries (HIPC) Initiative, through which multilateral and Paris Club creditors have pledged to reduce the debt burden of the world's poorest nations to a sustainable level. Last April, Uganda became the first country to benefit from the plan.

In the case of Bolivia, the IDB, the World Bank and the IMF will provide relief to ensure debt sustainability at what financial experts term a "225 percent present value debt-to-exports ratio." In lay terms, that means that Bolivia will carry no more than $3.25 worth of present value debt for every dollar's worth of its annual exports.

This debt relief will become effective in September 1998, provided the credit arrangement with the imf is in place, and the country has implemented the social development policies envisioned under the hipc Initiative.

The IDB's share of the relief package is estimated to amount to $155 million in present value, or about $260 million in nominal terms. This is equivalent to over a third of the relief to be provided by all of Bolivia's creditors and more than half of the amount for multilateral institutions. The IDB portion of the relief package is nearly three times greater than the next-largest amount provided by a single institution.

In announcing the IDB's participation in the agreement, Bank President Enrique V. Iglesias praised the "spirit of solidarity" shown by the institution's 46 member countries in backing the initiative. He also called Bolivia's economic progress "one of the most brilliant cases of management of resources and an example to the world." The country has been hailed for its progress over the past decade in carrying out economic and social reforms and maintaining fiscal and monetary discipline.

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