How will the debt reduction programme help highly indebted countries?

In 1999 the HIPC (highly indebted poor countries) initiative, which was launched by the World Bank and the IMF in 1996, was considerably expanded. The initiative was aimed at placing the war on poverty at the heart of international development work and national development programmes. By means of debt forgiveness, the foreign debt of the HIPCs is to be reduced to acceptable levels if these countries introduce promising national measures to combat poverty. Currently, twenty-two countries are in the programme. In the opinion of Dr. Peter Nunnenkamp, head of the research group "International Capital Movements" at the Institute for the World Economy in Kiel, sustainable relief cannot be expected. "Positive effects are possible but not to the extent that many hope for. They are by no means a certain outcome." Peter Wahl, board member of the non-governmental organisation WEED criticises the ties of debt extinguishment to "orthodox structural adjustment requirements" which for him "create poverty". He feels that the HIPC initiative is "too late, too little, and too complicated". Thomas Wollenzien, director of the foreign division of the German Bank for Reconstruction disagrees: Debt forgiveness must be accompanied by convincing reform efforts in the favoured countries. Substantial debt reduction of highly indebted, poor developing countries is necessary to enable them to make a new beginning. This must be linked, however, to considerable efforts of their own and must address the structural causes of excessive debt. The conditions in the form of commitments to the reform programme supported by the World Bank and the IMF, which also exist within the framework of the Paris Club debt forgiveness, are thus indispensable.