The European Investment Bank (EIB), the European Union's (EU) long-term financing institution, has approved a contribution of up to EUR 60 million to provide debt relief under the enhanced framework of the Highly Indebted Poor Countries debt initiative (HIPC Initiative)(1). This amount comes in addition to EUR 10 million already approved in 1998 to provide HIPC eligible countries with grants from which to prepay certain loans extended by the EU. The Bank's contribution is based on the share of loans from its own resources(2) in the overall debt to be relieved.
In September 1999, the Governors of the IMF and World Bank, with the lead of many from the EU, agreed an enhanced framework for the HIPC Initiative designed to provide broader, deeper and faster debt relief. The new amount approved brings EIB's contribution to the Initiative to a total of EUR 70 million and is commensurate with the volume of EIB lending in the eligible countries. By increasing EIB's contribution more than six-fold, it will permit the Bank to support fully the effort required under the enhanced framework.
Under the initial HIPC framework, debt relief was to be delivered at the completion point, once certain performance criteria had been met. Under the enhanced framework, the Bank will also be able to offer early relief on debt service between the decision point (when creditors make a commitment, on certain conditions, to provide debt relief) and the completion point (when these conditions are actually met).
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union.Lending in Africa, the Caribbean and the Pacific (ACP) is done under the Fourth Lomé Convention, which was concluded in 1989 for a period of 10 years and is accompanied by two Financial Protocols, spanning 1991-1995 and 1996-2000. Under the second financial protocol, the total financial aid available amounts to EUR 14.6 billion, of which EUR 12 billion is grant aid from the EU member states, EUR 1 billion is managed by the EIB as risk capital finance, and up to EUR 1.6 billion is in the form of loans from the EIB's own resources.
(1) The HIPC Initiative was launched in September 1996 by the World Bank and the IMF to deal comprehensively with the accumulating problem of un-repayable debt in a number of poor countries. Under the HIPC Initiative, poor countries meeting certain performance criteria would be eligible for HIPC relief.
(2) The EIB's own resources are those raised on the international capital markets.