Abstract
Many African countries have been struggling to achieve sustainable economics in order to contribute in putting Africa in the path for socio-economic development. This is partly due to the burden of debt that hangs over many African countries that borrowed funds from multilateral partners irresponsibly. As a result of this, the International Monetary Fund (IMF) and the World Bank put in place in 1996 a strategy to provide debt relief to countries that were struggling to repay their debts. This debt relief initiative was reviewed in 1999 to provide adequate results. This paper is, therefore, a critical assessment of HIPIC and the implication of NEPAD from 2001 to date. Keywords: HIPIC, NEPAD, IMF, World Bank, socio-economic development. JEL Classification: H62, H63
Highlights
The twenty-second meeting of the Committee of Experts of the Conference of African Ministers of Finance in May 2003, highlighted that in many African countries, domestic debt burden is causing severe problems in terms of fiscal sustainability, high interest rates and crowding-out of private sector investment
The continent’s debt crisis can be attributed to number of external factors, i.e., oil price shocks of the 1970s, the expansion of the Eurodollar, the rise in public expenditure by African governments following the rise in commodity prices in the early 1970s, the recession in industrial countries and the subsequent fall in commodity prices, the rise in world interest rates, and the inappropriate economic policies forced by the World Bank and International Monetary Fund (IMF) which became an important component of flows to Africa [1]
Up till today the World Bank and IMF have welcomed the intention of creditor governments to provide additional debt reduction beyond the Heavily Indebted Poor Countries (HIPC) Initiative, provided that the relief is not offset by reductions in aid flows
Summary
The twenty-second meeting of the Committee of Experts of the Conference of African Ministers of Finance in May 2003, highlighted that in many African countries, domestic debt burden is causing severe problems in terms of fiscal sustainability, high interest rates and crowding-out of private sector investment. In 1996, the Heavily Indebted Poor Countries (HIPC) Initiatives was created as the first comprehensive debt relief framework that included commercial institutions, government creditors, the World Bank and IMF.
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