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October 24, 2002

The International Monetary Fund says erasing all the debt of the world's poorest countries would not be the most effective way to support the fight against poverty.

"There have been repeated appeals to the international community to simply erase all the debt of the world's poorest countries, but such a step would not be the most effective or equitable way to support the fight against poverty with the limited resources available," the IMF said in its latest survey.

"Total debt cancellation would imperil the funds that multi-lateral creditors would have for future lending and would come at the expense of resources available to other developing countries, some of which are equally poor but have less external debt."

More than 80 percent of the world's poor lived in countries that were not HIPCs and total debt cancellation would exhaust the resources that financed the Poverty Reduction and Growth Facility and the HIPC Initiative and the IMF would have to stop providing concessional support to its poorest members, the lending body said.

It said reducing world poverty requires a comprehensive strategy that included the efforts of the poorest countries to help themselves as well as increased financial assistance from the international community and improved access to industrial country markets.

Debt relief under the Highly Indebted Poor Countries Initiative was only one element of the international support for poor countries that removed debt as an obstacle to growth.

For many years to come, the IMF said, these countries would continue to need financial support on concessional terms to help them implement their growth and poverty reduction strategies and stand on their own feet.

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