What is the Heavily Indebted Poor Country Initiative?
The Heavily Indebted Poor Country (HIPC) aims to assist the poorest, most heavily indebted countries prevent by unsustainable debt.
Debt is described as unsustainable there the ratio of a country's debt to its exports is larger than 150 percent. Other indicators comprise:
- Debt service ratios (debt service like percent of exports)
- Debt as percent of GNP
The International Monetary Fund and World Bank impose conditionality which is debt relief is given when a HIPC implements a comprehensive poverty decrease strategy (formerly termed as a structural adjustment programme), for example on market reforms and as privatisation and illustrates good governance.
Before debt relief is specified HIPC countries should demonstrate good governance economic reforms are into place therefore debt relief will effect in poverty reduction.
Continuous debt relief depends onto meeting targets for example export earnings. Decreasing and low commodity prices on that most Heavily Indebted Poor Country depends has made this not easy for countries to reach IMF/WB targets.