Private sector restructurings in HIPC cases

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Private sector restructurings in HIPC cases
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INTERNATIONAL DEVELOPMENT ASSOCIATIONAND
INTERNATIONAL MONETARY FUNDHeavily Indebted
Poor Countries (HIPC) Initiative andMultilateral
Debt Relief Initiative (MDRI)Status of
ImplementationPrepared by the Staffs of IDA and
IMFApproved by Danny Leipziger and Mark
AllenAugust 21, 2006
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Creditor Participation. Most multilateral
creditors participate in the HIPC Initiative.
Inaddition, IDA, the IMF, and AfDF also provide
debt relief to HIPCs under the MDRI. Paris Club
creditors have continued to grant not only HIPC
Initiative debt relief, but also, on a voluntary
basis, additional debt relief beyond the HIPC
Initiative. Delivery of relief by nonParis Club
official bilateral and commercial creditors,
however, has been limited. Staffs have continued
their efforts to improve participation of these
creditors in the HIPC Initiative. Most commercial
creditors have not provided their share of debt
relief to HIPCs, and creditor litigation has been
on the rise. Stronger efforts will be called for
to discourage further litigation and encourage
commercial creditor participation in the
Initiative.
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These statements give the feeling that private
creditors (ex London Club creditors) are
dragging their feet. But the truth, regarding
these creditors, as discussed with the IMF, is
exactly the opposite.
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Example Republic of Congo Long before the
implementation of the PRGF, Private Creditors
organized themselves in a Committee to enter into
good faith negotiations with the debtor. They
prepared and reconciled all data regarding their
debt vis à vis the Republic and shared detailed
figures with the IMF.
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Then, the IMF and the WB were able to negotiate
the PRGF with the country and to calculate the
common reduction factor.As soon as the factor
was available, the Creditor Committee called for
a meeting and prepared proposals complying with
the comparability of treatment requirement.
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For various reasons well known by the
Multilaterals and the Paris Club, the process is
slow. But no delay is due to Private Creditors.
As of today, a preliminary agreement has been
reached.
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Other Countries For Ivory Coast, the Creditor
Committee already exists and is prepared to
resume negotiations.The contact with the
Ministry of Finance never was interrupted and is
well established.
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Other Countries For Liberia, Creditors
started organizing themselves, and exchanged
information with the IMF but the Ministry of
Finance has not yet responded to a proposal for a
meeting to initiate the restructuring process.
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ParticipationAn agreement negotiated in good
faith with a Creditor Committee, in line with the
Principles, is very likely to attract Creditors
and to result in a high participation rate.
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ParticipationAn agreement negotiated in good
faith with a Creditor Committee, in line with the
Principles, is very likely to refrain creditors
from litigation. .The sooner the better !
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ConclusionHow can the Public sector
(Governments and Multilaterals) discourage
further litigation and encourage commercial
creditor participation in the Initiative ?
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ConclusionBy encouraging debtor countries to
initiate dialogue with Creditor Committees as
early as possible and by encouraging them to
consider good faith negotiation as a high
priority.