3.The enhanced Heavily Indebted Poor Countries Initiative (“the Initiative”) is an international initiative to provide debt relief to heavily indebted low income countries. Under the Initiative, the International Monetary Fund (“the IMF”) and World Bank calculate the proportionate reduction required in the country’s external debts in order to return them to 150% of the country’s annual exports(1), which is considered to be a sustainable level. All creditors – multilateral, bilateral and commercial – are expected to provide the proportionate reduction that will achieve this. At present, the Government, and many governments of other countries, multilateral lenders and commercial creditors do so.
Countries with high exports relative to the size of their economy may also qualify under the ‘revenue window’, if their ratios of exports of goods and services to GDP and fiscal revenue to GDP exceed 30% and 15% respectively. For these countries, a ratio of 250% debt to fiscal revenue is assessed as sustainable and the HIPC Initiative expects the reduction that will lower their debts to this level. Subsequent references in these notes to sustainable levels of debt assume this point.
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