Institutions and governments, like people, make bold resolutions at the beginning of every year. But, for the millions who face the crushing burden of poverty, mere proclamations that help is on the way are not enough to create jobs or foster development. This year, the international community must move decisively from pledges to action in the effort to reduce poverty. What will this require?
In 2005, the international community renewed its commitments to help the poorest countries meet the United Nations’ Millennium Development Goals (MDG’s), which aim to halve poverty by 2015. These commitments include significant increases in debt relief and aid. While there has been progress on implementing debt-relief measures, the international community must follow through on the other part of its pledge, by delivering increased aid and promoting its better use.
Multilateral lenders have long understood the importance of debt relief to poverty reduction. Indeed, the joint IMF-World Bank Heavily Indebted Poor Countries (HIPC) Initiative was launched in 1996 to coordinate efforts by multilateral organizations and governments to reduce poor countries’ debt burdens to sustainable levels. So far, the results are encouraging.
Before the HIPC Initiative, eligible countries spent, on average, slightly more on debt service than on health and education combined. Now, debt in the 28 countries for which relief has been approved has declined by an average of two-thirds, while their expenditures on health, education, and other social services have risen to almost four times the amount of debt-service payments.