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In 1996 the Heavily Indebted Poor Countries (HIPC) Initiative was established by the World Bank and the International Monetary Fund with the aim of reducing the excessive debt burdens faced by the world's poorest countries. The initiative has developed a broad and coordinated approach to debt relief. It involves bilateral creditors (mostly European countries, UK, Japan, USA and Russia) and multilateral creditors (such as the IMF and World Bank). Enhancements were made to the initiative in 1999 in order to:
lower external debt thresholds so that more countries become eligible for debt relief. to facilitate a faster debt relief. to make stronger links between debt relief and poverty reduction by ensuring freed resources are used to support poverty reduction strategies.
After the above changes, the debt relief initiative is now known as the Enhanced HIPC Initiative. Because Ethiopia faces unsustainable levels of debt, the country qualifies as a Heavily Indebted Poor Country.
Italy's Role in Relieving Ethiopia's Debt Burden
The Italian Government recognizes that unsustainable debt is a serious problem for poor countries determined to tackle poverty and attain sustainable development; therefore it has become a strong advocate of the Enhanced HIPC Initiative. In addition, the government of Italy finances debt relief without removing ordinary resources from the development cooperation budget.
Ethiopia's Debt Relief Sheet
Italy has forgiven a tremendous amount of debt owed by Ethiopia. It is in fact one of the top among Ethiopia's creditors in the amount of debt it has cancelled so far. Listed below are the debt cancellations prompted by the Italian government to lighten Ethiopia's debt burden.
2004/5: 332.35 million euros 2003: 23.94 million euros 2002: 10.99 million euros ---------- Total: 367.28
The money Ethiopia saves because of the above debt cancellations go towards alleviating the abject poverty the country's citizens face.
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