Ethiopia Reaches Completion Point in HIPC Initiative: Obtains major debt relief from the AfDB
The Bank will, as a result, provide irrevocable debt relief of US$ 339.5 million in net present value (NPV) terms to the country. Ethiopia will be released from up to 80 percent of annual debt service to the Bank Group until the entire amount is delivered. In practical terms, its 2004 debt service obligations, for example, will fall from about US$ 41.33 million to about US$ 11.28 million.
To reach completion point, the government had to fulfill three key conditions:
- Completion and satisfactory implementation of its agreed Poverty Reduction Strategy for at least one year;
- Maintenance of a stable macroeconomic environment, as evidenced by satisfactory implementation of an arrangement under the International Monetary Fund’s Poverty Reduction and Growth Facility; and
- Implementation of major structural and social reforms, particularly in health and education.
In July 2002, the government approved the country’s Sustainable Development and Poverty Reduction Paper (SDPRP) – its equivalent of the Poverty Reduction Strategy Paper (PRSP) – which focuses on promoting growth of agriculture and the rural sectors, strengthening governance and improving the investment climate. An assessment by donors showed that progress in the SDPRP implementation had generally been satisfactory. The government also pursued prudent fiscal and monetary policies at a time of severe draught conditions and worsening terms of trade.
The Boards recognized that while completion point triggers on public expenditure management, agriculture and education may have not yet been fully satisfied, overall progress had been made in structural reforms and in the implementation of an agreed action plan in the agricultural sector.
Ethiopia is the 10th Regional Member Country of the Bank to reach completion point under the enhanced HIPC Initiative. Debt relief from the ADB Group to the country since November 2001 when it reached decision point – the first stage in the HIPC process – amounted to US$ 71.29 million in NPV terms, accounting for 32.93 percent of total debt relief for the country.
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