World Bank’s Multilateral Debt Relief Initiative

(Source Article: World Bank implements MDRI - WB news)

Recently, the World Bank announced that, on July 1st, its MDRI will cancel debt owed the International Development Association by some of the world’s poorest countries. An estimated US $37 billion in debt relief over 40 years is expected to be granted these countries, in addition to US $17 billion already granted under the HIPC (Heavily Indebted Poor Countries) debt relief initiative.

The Bank hopes that such relief will allow these struggling countries to channel their scarce financial resources into those areas that will help their citizens the most: healthcare, education and access to clean water, etc. Uganda was among 19 recipients of this generous debt relief program, having some US $3.76 billion of its debt forgiven yesterday. Countries, like Uganda, that have satisfactorily reached completion of the HIPC initiative are then eligible for the additional relief granted under the MDRI. Uganda itself has shown great improvements in combating poverty, but still needs to increase investment in infrastructure, such as roads and bridges. (see World Bank cancels Uganda’s $3.7 bn debt - AllAfrica.com)

Zambia also received a sizeable amount of debt forgiveness, some $2.7 billion, through the MDRI recently, reducing the country’s debt to $500 million—a drastic difference from the country’s $7 billion debt just last year. Countries like Zambia and Uganda under the MDRI, much like other debt relief programs, promise in return to keep a track record of good governance, human rights and fiscal management. (see Bank grants Zambia relief - ABCnews)

Both the MDRI and HIPC were put into action after the G8 rich nations pledged last year at their Summit in Gleneagles to cancel the debt of the world’s poorest countries—which are mostly in Africa. The cancellation is provided through the IDA of the World Bank, the IMF and the African Development Fund.