IMF formally approves debt forgiveness plan for Mauritania
Mauritania, Economics, 12/10/2005

The International Monetary Fund (IMF) has approved a plan to forgive $4.8 billion in debts of the world's poorest countries early in 2006 as part of a debt-cancellation initiative launched by the Group of Eight (G8) countries.

The G8 comprises Canada, Germany, France, Italy, Japan, Russia, the United Kingdom and the United States.

The G8 vowed in July to cancel about $40 billion owed by the poorest countries to three multilateral institutions.

The IMF is the first of the three institutions to move on the initiative. Other institutions involved are the World Bank and the African Development Bank.

The IMF said December 8 its executive board had completed details of the implementation of IMF's portion of the initiative that involves canceling debt owed to the fund by certain qualifying poor countries.

The first 20 countries identified by the fund as eligible to participate in the plan are: Benin, Bolivia, Burkina Faso, Cambodia, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Tajikistan, Uganda and Zambia.

Another group of 20 countries could be eligible for IMF debt cancellation if they demonstrate satisfactory macroeconomic performance and meet other conditions or qualify through the Highly Indebted Poor Countries (HIPC) Initiative, a debt-reduction program run jointly by the IMF and World Bank.

The costs of the IMF debt forgiveness plan will be covered by profits from a 1999 off-market gold sale and donations from 43 countries to the HIPC initiative.

IMF official Mark Allen told reporters during a December 8 teleconference that the fund expects to receive approval from all potential donors in the coming days. If that happens, he said, the IMF will be able to proceed with the plan early in 2006.

Once the program starts, the IMF will conduct a "spot check" of recipient countries' economic policies to see how they spend the money they retain as a result of debt-cancellation, Allen said.

World Bank President Paul Wolfowitz on December 7 said his institution expects to begin executing its much bigger portion of the G8 initiative that involves more than $30 billion by the middle of 2006 if the bank's board approves details formally the week of December 18.

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