The African Development Fund Approves US$ 8.5 billion for Multilateral Debt Relief Initiative
Tunis, 19 April 2006 – The Boards of Directors of the African Development Fund (ADF) and the African Development Bank (ADB) on Wednesday, 19 April 2006, have approved US$ 8.5 billion for financing debt relief of 33 low-income countries in Africa under the Fund’s Multilateral Debt Relief Initiative (MDRI). The ADF Board of Governors is expected to adopt a Resolution on the compensatory financing scheme, in May 2006, to authorize debt cancellation and financing of the debt relief. The aim of the MDRI is to assist the eligible countries make progress towards achieving the Millennium Development Goals (MDGs), while preserving the long-term financing capacity of the ADF.
"Today’s Boards decision is the culmination of an extensive and historic process of consultations with shareholders and donors about the Multilateral Debt Relief Initiative and its implementation by ADF", the President of the African Development Bank Group, Mr. Donald Kaberuka, said. He thanked Executive Directors and ADF Deputies for their engagement and the robust and constructive discussions that have improved the MDRI package. He called for adequate donor funding to fully compensate ADF for its share of MDRI on an ongoing basis to protect its financial standing and its ability to continue to strengthen and deepen its assistance to the ADF low-income countries.
The G8 leaders had pledged, at the Gleneagles Summit in July 2005, to cancel 100 percent of the claims due to the International Development Association (IDA), the African Development Fund (ADF), and the International Monetary Fund (IMF) on countries reaching the completion point under the enhanced HIPC initiative. A consultative meeting of African Finance Ministers held in Tunis, Tunisia on 22-23 November 2005, endorsed the MDRI and welcomed the pledge to maintain the financial integrity of ADF.
The 33 potential beneficiaries of the Initiative include: 14 post-completion point HIPCs, 10 post-decision point HIPCs, 8 pre-decision point HIPCs, and one country qualifying under the ‘sunset clause’ extension. On the basis of country eligibility assessments independently conducted by the IMF, IDA and ADF, 13 of the 14 post-completion point HIPCs become the immediate beneficiaries of ADF debt relief effective 1st January 2006. They are: Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia. Mauritania will qualify for debt relief under the Initiative after satisfying criteria on public expenditure management reforms.
While the MDRI implementation date in ADF is 1st January 2006, when debt relief begins to accrue for the immediate beneficiaries, actual delivery of the benefits are to be provided retroactively by July 2006 when targets set for the effectiveness thresholds are satisfied. The deadline for receipt of donor financing commitments to satisfy the effectiveness thresholds is end-June 2006.
The indicative pledges made by donors for financing the Initiative already exceed the effectiveness thresholds. Accordingly, donors will now be taking the necessary steps, in their home countries, to obtain the legislative approvals in support of their financing commitments. In line with the compensatory financing scheme, donors have pledged to provide additional contributions to the regular ADF replenishments, over time, to ensure that additional resources are made available for poverty reduction.