July 2, 2004
The OPEC Fund for International Development today signed an agreement with the Republic of Nicaragua for the provision of debt relief within the framework of the Enhanced Heavily Indebted Poor Countries (HIPC II) Initiative. Endorsed by the Interim and Development Committees of the World Bank and the International Monetary Fund in September 1996, the Initiative represents a united effort by the international community to address the external debt problems of the world's heavily indebted poor countries. Specifically, it aims to reduce the debt of eligible countries to sustainable levels, subject to satisfactory policy performance, in order to ensure that adjustment and reform efforts are not put at risk by continued high debt and debt service burdens. As the Initiative requires participation by all relevant creditors, debt relief efforts entail coordinated actions by the international finance community, including multilateral institutions.
The OPEC Fund, committed to strategies aimed at securing economic growth for the countries it works with and helping alleviate poverty, has from the very beginning expressed its support of the HIPC Initiative and has participated actively in its design. Under the Initiative, the Fund has approved debt relief to 22 countries, 18 of which are in Africa and four in Latin America.
In December 2000, the decision point was reached for Nicaragua, and support for a comprehensive debt reduction package to this country under the HIPC Initiative was agreed upon by the IMF and the World Bank. In January 2004, Nicaragua attained its completion point under the Initiative, i.e., the time at which it is decided that the country has met the conditions for assistance. Over time, total relief from all of Nicaragua's creditors will amount to approximately US$4.5 billion, or US$3.3 billion in net present value (NPV) terms, which represents 73% of total debt obligations. Resources made available by debt relief under the Initiative will be allocated to fund Nicaragua's key pro-poor programs. Under today's agreement, financing in the amount of US$10 million will be made available to ease the country's debt burden. In May 2002, The Fund extended a US$10 million loan to Nicaragua, which was also within the framework of the Enhanced HIPC Initiative.
The OPEC Fund has assisted Nicaragua with its development activities for over two decades, providing balance of payments support, and assisting projects in the sectors of transportation, agriculture, education and water supply and sewerage. Fund grants also went to provide the country with emergency assistance, as well as to finance a water supply and environmental sanitation program and technical assistance schemes in the energy sector.
Today's agreement was signed in Vienna by Dr. Mario B. Alonso Icabalceta, President of the Central Bank of Nicaragua, and by Mr. Suleiman J. Al-Herbish, Director-General of the OPEC Fund.