Debt relief and public health spending in heavily indebted poor countries.

Abstract

In 1996 the Heavily Indebted Poor Countries Initiative was launched as the first comprehensive effort by the international community to reduce the external debt of the worlds poorest countries. Enhancements made to this Initiative in 1999 further strengthened the links between debt relief poverty reduction and social policies. The underlying objective of the enhanced Initiative is to channel the government resources freed up because of debt relief into poverty reduction programs. By the end of May 2001 debt relief was committed to 23 of 41 eligible countries: Benin Bolivia Burkina Faso Cameroon Chad the Gambia Guinea Guinea-Bissau Guyana Honduras Madagascar Malawi Mali Mauritania Mozambique Nicaragua Niger Rwanda Sao Tome and Principe Senegal Tanzania Uganda and Zambia. The paper discusses debt relief and public health spending in regard to these countries. It notes that these countries should see their debt-service payments drop on average by 1.9 percentage points of Gross Domestic Product a year during 2001-03. The use of funds saved because of debt relief is to be guided by each countrys poverty reduction strategy which is delineated in a poverty reduction strategy paper. Moreover it is critical that debt relief result in an increase in public spending related to poverty reduction programs and that these funds be used for their intended purposes and reach the poor.