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IDB approves debt relief for Honduras

The Board of Executive Directors of the Inter-American Development Bank has approved financing of interim debt relief for Honduras in the framework of the Enhanced HIPC Initiative ─ the world effort to reduce the debt burden of heavily indebted poor countries.

The board took note of the Poverty Reduction Strategy Paper (PRSP) prepared by the government of Honduras as a condition for advancing toward the Completion Point and the advances in the implementation of policies since the Decision Point was reached in July of 2000.

The Bank assisted the government by providing grant funds in support of an extensive and unprecedented process of national dialogue that facilitated the preparation of the PRSP. Directors observed that the PRSP will set the framework for the Bank’s Country Paper, which will set the basis on which the IDB’s lending program will be fashioned for the next several years. The Bank early this month approved a sector loan for $30 million to assist the country in carrying out the Poverty Reduction Strategy, which is essential for reaching the Completion Point and receiving the full benefits of debt relief under the HIPC initiative.

The IDB is Honduras’ biggest multilateral creditor and will be the single largest source of debt relief, whether multilateral or bilateral. Debt relief to Honduras under the Enhanced HIPC Initiative from the IDB will be $133 million in present value terms. This debt relief will be delivered through forgiveness of 50% of debt service (principal and interest) falling due on Fund for Special Operations loans over the period 2001-2008.

The IDB is financing the cost of debt relief by drawing heavily on internal resources, supplemented by contributions from its member countries, both its borrowers in Latin America and the Caribbean and nonborrowing members.

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