The Board of Governors of the Inter-American Development Bank has approved 100% debt relief for Bolivia, Guyana, Haiti, Honduras and Nicaragua on loan balances outstanding as of December 31, 2004 from its Fund for Special Operations (FSO), the IDB announced today.
Under an agreement endorsed by governors of its 47 member countries, the IDB will forgive approximately $3.4 billion in principal payments and $1.0 billion of future interest payments.
“This decision represents a historic opportunity for a fresh start for Bolivia, Guyana, Haiti, Honduras and Nicaragua,” said IDB President Luis Alberto Moreno. “The agreement backed by our membership will help these countries free up resources to invest in quality education, health and other social services their citizens need to overcome poverty.”
The IDB is the principal creditor to the five beneficiary countries. By canceling these debts it underscores its commitment to assisting the poorest countries in Latin America and the Caribbean in their efforts to reach the United Nations Millennium Development Goals, which focus on halving poverty by 2015. The IDB’s decision also complements the Multilateral Debt Reduction Initiative launched last year by the G-8.
Honduras will receive approximately $1.4 billion in IDB debt relief (including cancelled loan balances and interest payments); Bolivia, $1.0 billion; Nicaragua, $984 million; and Guyana, $467 million. The benefits will be effective retroactively to January 1, 2007 because these nations have already reached the “completion point” under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC), an earlier debt relief program.
Haiti, which is making progress towards completing the HIPC process, will receive interim relief of $20 million over the next two years. By 2009 it could obtain full debt relief, which in the IDB’s case will total $525 million. Additionally, under the agreement approved by the Board of Governors, Haiti may receive up to $50 million in IDB grants a year through 2009, and a mix of concesional loans and grants thereafter.
The agreement also ensures the FSO’s financial viability through 2015. IDB member countries confirmed their commitment to the fund’s sustainability, agreeing to assess, no later than 2013, the need for an eventual replenishment. Furthermore, the agreement guarantees Ecuador, El Salvador, Guatemala, Paraguay and Suriname access to a $250 million-a-year concesional lending program.
With the Board of Governors’ firm support, the IDB’s Board of Executive Directors and Management established new operational guidelines for the FSO under the Debt Sustainability Framework, featuring a performance-based allocation system to ensure the sustainability of the debt relief.
The IDB is the world’s largest regional development bank. Its membership includes most countries in Latin America and the Caribbean as well as donor nations from North America, Europe and Asia.