Canada’s contributions to bilateral and multilateral debt relief initiatives
Canada’s role in international debt relief initiatives
Bilateral debt relief initiatives
As one of the founding members of the Paris Club, an informal group of creditor countries, Canada has been providing bilateral debt relief to debtor countries since 1956.
Through the World Bank/International Monetary Fund (IMF) Heavily Indebted Poor Countries Initiative (HIPC), Canada and other Paris Club member countries have committed to providing comprehensive debt relief to the world’s poorest and most indebted countries. The HIPC sets out a framework for debtor countries to become eligible for the cancellation of up to 90 percent of their outstanding bilateral debts to creditor countries, which is implemented through the Paris Club.
In 1999, Canada established the Canadian Debt Initiative (CDI) to forgive the remaining 10 percent of debts owed to Canada from countries that complete the HIPC process. Côte d’Ivoire became the latest country to receive debt relief from Canada under the HIPC and CDI when Canada cancelled all of its outstanding debt (approximately $130 million) in August 2012.
To date, Canada has forgiven the debts of 15 countries under the HIPC and CDI worth over $1 billion in total. Three countries – the Democratic Republic of the Congo (DRC), Burma and Sudan – remain in the HIPC/CDI process and may be eligible for future debt forgiveness. Table 1 provides a breakdown of Canadian bilateral debt relief since 2000.
|Benin||2001 and 2002||$ 402,000|
|Bolivia||2001 and 2002||$ 11,067|
|Congo||2005-2007, 2010||$ 52,383,000|
|Côte d’Ivoire2||2002-2004, 2012||$ 261,000,000|
|Sources: Various internal memorandums on implementation of bilateral debt relief.
1 Does not include 2010 debt cancellation of $58.6 million, as implementation under CDI is frozen for DRC
2 Includes latest, final debt cancellation of approximately $130 million
Multilateral debt relief initiatives
The other way through which Canada provides debt relief to the world’s poorest and most indebted countries is through its participation in multilateral debt relief initiatives. Canada is augmenting its bilateral debt assistance by contributing to the cancellation of debts owed by heavily indebted poor countries to international financial institutions (IFI) such as the IMF, the African Development Fund (AfDF) and the International Development Association (IDA).
Canada participates in the Multilateral Debt Relief Initiative (MDRI), which was established in 2005 following the G8 Gleneagles Summit as an extension of the HIPC. Under the MDRI, countries that complete the HIPC process are eligible to have 100 percent of their outstanding debts to IFI’s cancelled, with participating creditor countries compensating the IFIs for their losses. The MDRI is expected to eliminate $50 billion in debts owed by the world’s poorest countries, of which Canada’s share is approximately $2.5 billion, to be paid out over a 50-year period. As of 2011, Canada has contributed $321.5 million to the MDRI. Table 2 displays Canada’s contributions to the MDRI up to 2011.
|Source: International Finance and Development Division, International Trade and Finance Branch, Finance Canada|
In addition, Canada paid US$32.67 million to international organizations in 2010 on behalf of Haiti as part of a G20 commitment to cancel Haiti’s debts to IFIs following the earthquake of January 2010. Of this, US$21.6 million went to the Inter-American Development Bank (IADB), US$7.57 million went to IDA and US$3.5 million went to the International Fund for Agricultural Development (IFAD).