Europe

Government to launch new debt relief plan

Norway Mission to the UN

January 1, 2003

The Norwegian government is launching its new Plan of Action for Debt Relief for Development, which is a follow-up to the Norwegian Debt Relief Strategy of 1998.

Facts

Norway was the first OECD country to present a comprehensive Plan of Action on debt relief for developing countries (Towards the Year 2000 and Beyond: The Norwegian Debt Relief Strategy, launched in 1998).

Norway was the first OECD country to advocate 100% debt cancellation for heavily indebted poor countries (HIPCs).

Norway has been and remains a staunch supporter of the HIPC Initiative launched in 1996, enhanced in 1999 and refined in the spring of 2004 (improved framework for securing long-term debt sustainability).

Norway has gone beyond the terms agreed under the HIPC Initiative (usually 90% bilateral debt reduction) and has fully cancelled the bilateral debt owed to it by the “HIPC graduates” Benin and Tanzania and all debt service due from a further seven countries (Senegal, Cote d’Ivoire, Guinea, Sierra Leone, D.R. Congo, The Gambia and Ghana) since they qualified for HIPC treatment.

Unlike in other creditor countries Norwegian debt cancellation is not financed over the aid budget, but is wholly additional to its official development assistance (ODA).

The main elements in Norway’s debt relief policy enjoy the backing and support of all political parties represented in the national assembly

Over the years the formation of Norway’s debt policies has benefited from inputs – both supportive and critical – from an active, well qualified and vocal NGO community.

In December 2003, 21 NGOs were invited to comment on the draft Plan of Action on Debt Relief for Development, followed by a seminar at the Ministry of Foreign Affairs in January 2004, chaired by the Minister of International Development.

The Plan of Action, which is both an update and a significant extension of its 1998 predecessor, was adopted by the Government on 18 March 2004.

Figures

21 developing countries are indebted to Norway, their debts amounting to a total of NOK 3.4 billion.

19 developing countries have benefited from, currently enjoy or aspire to debt or debt service reduction from Norway.

Since 1998 Norway has cancelled NOK 1.6 billion of the debt or debt service owed to it by 11 debtor countries (Tanzania, Benin, Senegal, Cote d’Ivoire, Guinea, Sierra Leone, D.R. Congo, The Gambia, Ghana, Egypt and Serbia-Montenegro), including NOK 642 million in 2002 and NOK 576 million in 2003.

In line with a unique 1999 parliamentary decision – and to the envy of other donor country authorities – Norway is able to cancel in excess of another NOK 1.8 billion without touching the ODA budget.

Since 1988 Norway has contributed NOK 3.4 billion to multilateral debt relief efforts, including NOK 1.5 billion for repaying debts owed by poor (“IDA-only”) countries to the World Bank and NOK 915 million to the HIPC Trust Fund, which finances HIPC debt relief from multilateral finance institution.

Policy highlights

Norway will . . .

Continue to cancel 100% per cent of the debt of all HIPC countries indebted to Norway, provided they complete their HIPC treatment.

Support an extension of the December 2004 HIPC sunset clause, in order to allow, inter alia, conflict-ridden countries (e.g. Sudan, Liberia and Somalia) to qualify.

Consistently remind the international community that in order to deliver on the promise of HIPC debt reduction, the huge financing gaps that have been identified (e.g. USD 11 billion in IDA costs) must be addressed – decisively, generously, and regularly.

Help pave the way for the clearance of arrears and speedy HIPC status of severely indebted poor countries emerging from armed conflict and civil strife.

Grant faster and deeper debt reduction to severely indebted post-conflict countries, preferably 100% debt service reduction once credible peace treaties are signed and representative governments are formed.

Pursue the Norwegian proposal for bilateral creditors to undertake multilaterally coordinated debt-for-development swaps, i.e. arrangements by which several creditor countries join forces in trading debt forgiveness for increased spending on e.g. health and education in non-HIPC debtor countries.

Negotiate debt-for-development swaps with Pakistan, Vietnam and Ecuador, in co-operation with Canada, the Asian Development Bank and the Inter-American Development Bank, respectively.

Support debt reduction for middle-income countries with unsustainable debt, as part of the Paris Club’s new Evian Approach.

Support the updating of Paris Club “cut-off dates” to help make sure that demonstrably unsustainable debts are not excluded from debt negotiations.

Support South-South (HIPC-to-HIPC) debt reduction efforts, provided a multilateral mechanism to this end is established.

Continue to actively support mechanisms to reduce debt owed to multilateral finance institutions (the World Bank’s 5th Dimension Facility) and private creditors (the IDA Debt Reduction Facility) in a cost-effective manner.

Make sure that Norway’s debt relief efforts are carefully tailored so as not to benefit other creditors, but only the indebted countries themselves.

Support an international study of “illegitimate debt” (“dictator debt”/”odious debt”) aimed at identifying credible and practicable policy options (if any) for addressing such debts.

Support an appropriate follow-up to UN Secretary-General Kofi Annan’s proposal to establish a working group on the merits and feasibility of an international debt work-out mechanism.

Seek international support for the Norwegian proposal to establish a Consultative Group on Debt Management, aimed at improving the quality of technical assistance and ensuring that debts are managed in line with the best practices available, so that developing countries can avoid future “debt traps.”

Categories: Europe, Norway, Odious Debts

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