Since 1999 Nicaragua (US$ 4.5 billion), Honduras (US$1 billion) and Bolivia (US$ 2.06 billion), have all received substantial debt relief through the heavily indebted poor countries (HIPC) initiative. In addition, since its implementation last year these countries have also benefited from the 100 per cent. cancellation of debt stock owed to the World Bank, IMF and African Development Bank under the multilateral debt relief initiative (MDRI). Last year, the MDRI relieved debts of $968 million to Nicaragua, $1.3 billion to Honduras and $1.75 billion to Bolivia. DFID has monitored the spending of this money through our work with the World Bank, the Inter-American Development Bank and the International Monetary Fund. This helps to ensure that the money gets targeted to items in the budget that directly impact on the poor, such as health and education. We have cancelled all outstanding bilateral debt owed to the UK, including contributing to the debt relief provided under HIPC and MDRI.
Despite good progress on multilateral debt relief, Nicaragua still has about $1.3 billion in outstanding debt from commercial creditors who are not part of either HIPC or MDRI. This debt hinders how Nicaragua can use other debt relief to address poverty, and is subject to ‘vulture funds’ which buy the debt when Nicaragua is least able to pay, and then press for repayment at several times the debt's face value, when economic prospects are looking better. DFID has just committed $3.5 million to the elimination of this debt, in a deal with the World Bank and other donors. The deal itself reduces the debt to $64 million. The Nicaraguan Government itself will contribute $3.5 million. With contributions from the Government of Nicaragua, World Bank, DFID and others, it is hoped that this will fully eliminate the outstanding commercial debt owed by Nicaragua.
In addition, the Inter-America Development Bank has recently announced debt relief to the five poorest countries in the region. This amounts to $3.4 billion and $1.0 billion of future interest payments from its fund for special operations (FSO). This will provide immediate relief of $1 billion for Bolivia, $984 million for Nicaragua, and $467 million for Guyana among others. However, the UK has abstained from voting on this deal, along with several other European countries. This was because of concerns that the deal would hinder access of the poorest countries to concessionary IADB financing in the future. Access to continued flows of concessionary lending from the FSO of the IADB will be important to the achievement of the millennium development goals in countries such as Nicaragua. The UK is currently in discussions with IADB and other shareholders on this matter.