At the finance minister's meeting an agreement was reached over what proportion of ODA should be given in grants and loans from the IDA. The G7 concluded that 20% of IDA funding will be in grant form. This compromise is substantially less than 50% grants proposed by the United States. This is a good development because it does not imply the same reduction in overall aid levels of the American proposal.
This assessment is also scaled down because there was not any new ODA announced- merely a reiteration of what was committed to in Monterrey.
The G7 effectively addressed two issues related to the HIPC initiative. Firstly, new funds were committed to the HIPC Initiative in the Chair's summary. This commitment (up to $1 Billion) will provide for the funding shortcomings of the program caused by recent declines in commodity prices.
Secondly, debt sustainability of completion point countries was extensively treated. In fact, the G7 released a document dedicated to the HIPC: "Delivering on the Promise of the Enhanced HIPC Initiative". This statement provides a number of strong commitments aiming to improve the sustainability of countries that have already graduated from this IMF program. In addition to calling for the improved participation of all HIPC creditors (multilateral, bilateral and commercial) in the debt reduction, there is also a call for the IMF to give careful attention to the debt sustainability of completion point countries. For their part, the major bilateral creditors will increase their use of grants to HIPC graduates.
Prepared by Jacob Young
University of Toronto G8 Research Group
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