A/HRC/23/37 low-income countries at subsidized rates; (b) have a debt burden deemed “unsustainable” 9 by the World Bank and IMF and which cannot be addressed through traditional debt relief mechanisms; (c) have established a track record of reform and sound policies through IMFand World Bank-supported adjustment programmes; and (d) have adopted a Poverty Reduction Strategy Paper (PRSP)10 through a broad-based participatory process in the country.11 11. Upon meeting or making sufficient progress in meeting these four conditions, the World Bank and IMF formally decide on the country’s eligibility for debt relief and creditors commit to reducing its debt to a “sustainable” level. At this initial stage, referred to as the “decision point,” creditors begin to provide interim relief on debt service falling due. However, this interim relief may be stopped if the country goes off track with its reforms.12 12. In order to reach the “completion point” and receive full and irrevocable reduction in debt under the HIPC Initiative, a country must: (a) establish a further track record of “good performance” under IMF and World Bank programmes; (b) implement to the satisfaction of IMF and the World Bank key reforms “agreed” at decision point; and (c) adopt and implement its PRSP for at least one year. 13. It should be noted that the portion of debt that creditors are asked to forgive (the “common reduction factor”) is calculated to bring the country’s debt to the sustainability threshold of 150 per cent of present value of exports (or in some cases, 250 per cent of government revenue). Thus, debt relief under the initiatives does not necessarily entail extinguishing all of the debtor country’s debt.13 III. Impact of debt relief A. Fiscal impacts 14. The total cost of providing assistance to the 39 countries eligible or potentially eligible under the initiative is estimated at $112.9 billion ($76 billion under the HIPC Initiative and $36.9 billion under MDRI) in end-2011 net present value terms.14 15. According to the World Bank and IMF, debt relief under the initiatives has “substantially” reduced debt burdens in recipient countries and enabled these countries to 9 10 11 12 13 14 6 The World Bank and IMF consider a low-income country’s debt unsustainable if either (a) its external debt exceeds the value of its exports by a ratio of 150 per cent, or (b) the ratio of its debt-togovernment revenues is above 250 per cent. The PRSP links debt relief and poverty reduction: it consists of a report by the debtor country on the macroeconomic and social policies and programmes to be implemented under its strategy for growth and poverty reduction. It also describes the requirements for and sources of external funding. The PRSP is subject to approval by the World Bank and IMF. IMF, “Debt Relief Under the Heavily Indebted Poor Countries (HIPC) Initiative”, Factsheet (2 April 2013), available from www.imf.org/external/np/exr/facts/hipc.htm This was the case, for example, with the Gambia, Guinea, Guinea-Bissau and Malawi. In 1998, IMF rejected calls for outright cancellation of the entire external debt of HIPCs as “unrealistic” and raising “false expectations” in view of the reduced net official development assistance (ODA) flows. See IMF, “HIPC Initiative: The IMF’s Response to Critics” (September 1998), available from www.imf.org/external/np/hipc/res.htm. IDA and IMF, “Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI)”, Statistical Update (25 March 2013), p. 4.