Historically, the present crop of debt relief initiative began in the 80s when many developing countries that borrowed on favourable financial terms a decade earlier were unable to meet their debt obligation due to a drying up of the surplus petro dollars of the 70s. In Latin America, two large economies namely Mexico and Brazil, among others, were unable to fully service their external debt obligations, especially their commercial debt. As a result, a number of initiatives such as the Baker Initiative and Brady Bonds were issued to manage the debt crisis of the eighties. However, there was a group of low-income countries that would have required even larger debt reduction on their debt in order to become credit worthy. This group of countries was treated under a more concessional Paris Club arrangement. The Paris Club was a group of official bilateral creditors mainly the G-7 and other developed countries that offered new and increasingly modest terms for debt relief. In May 1996, the Paris Club agreed to a stock of debt reduction of some US$550 million under the Naples terms that reduced Guyana's external debt stock from US$1.9 billion to US$1.4 billion in nominal terms. However, this stock of debt reduction from the Paris Club did not returned Guyana to debt sustainability; as Guyana began to service bilateral debt it had accumulated arrears on for over two decades. As a result, Guyana became a strong case for HIPC. In June 1997, as the fiscal window became part of the eligibility criteria for HIPC, Guyana became the first country to qualify under the fiscal criteria in December 1997.

The HIPC Initiative is a really comprehensive approach to debt reduction for poor countries that requires the participation of all creditors (both bilateral and multilateral). After a country has reached the HIPC completion point, its external debt burden should be more manageable and sustainable. Since its introduction in 1996, HIPC has been reviewed regularly and modified twice by the International Financial Institutions so as to provide deeper, faster and broader debt relief for eligible countries. This was due to the struggle waged by OXFAM, Jubilee 2000 and a number of other organisations and important individuals like Pope John Paul. In 1998, only weeks before Guyana reached completion point under the original HIPC, the Enhanced HIPC was accepted by the Governors of the IMF/World Bank and immediately came into force. The Enhanced HIPC lowered the threshold on all of the qualifying ratios for debt relief. These were adjusted as follows:

a) The debt to export target was lowered to 150 per cent (down from 200-250 per cent range) for countries qualifying under the export window.

b) The debt to fiscal revenue target was lowered to 250 per cent (down from 280 per cent) for countries qualifying under the fiscal window, with the qualifying eligibility threshold reduced as follows:

- the export to GDP ratio will be 30 per cent (down from 40 per cent) and

- the fiscal revenue to GDP ratio is now 15 per cent (down from 20 per cent).

Even the targets for Guyana completion point in 1999 under the original HIPC far exceeded its level due in part to a fall in commodity prices and export earning as a result of the Asian cries of the late nineties and the adverse weather condition (El Nino). After HIPC implementation in 1999 the total debt to fiscal revenue was 415 per cent some 125 per cent point higher than the 280 per cent targeted while the debt servicing to revenue was some 34 per cent; higher than the 20-25 per cent range expected at completion point under the original HIPC. These higher ratios created the perfect condition for Guyana to benefit further under the Enhanced HIPC. In November 2000, Guyana's case for a decision point under the Enhanced HIPC was approved by the IMF/World Bank board, and unlike the original HIPC, was now eligible for interim debt relief at decision point. Guyana was granted a floating completion point of eighteen months for the implementation of new Bank/Fund conditionalities and the preparation of a Poverty Reduction Strategy Paper (PRSP).

Guyana's NPV debt after the original HIPC cancelled some US$256 million NPV or US$440 million of debt in nominal terms totalled some US$833.1 million NPV. Due to the consolidation of the data, the debt relief granted on the enhanced HIPC is now US$334.5 million NPV or US$610 million in nominal terms. Total assistance under the full HIPC programme for Guyana will be US$590.5 million in NPV terms or over US$1 billion in nominal terms. The present structure of the external debt has changed considerably from the early 90s with the multilateral creditors: the IMF, World Bank, IDB, CDB, EU/EIB, etc., now accounting for over 61 per cent of the total debt while 28 per cent of the debt are held by Paris Club members with the residual 11 per cent held by Non Paris Club and Commercial Creditors.

The debt relief received from the multilateral creditors after the Enhanced HIPC will amount to US$202.3 million NPV or 60 per cent of the total relief package while the Bilateral Creditors will provide the US$132.2 million NPV which includes the Paris Club members that now have to top up their debt write off by an addition 10 per cent to 90 per cent estimated at US$94 million NPV. The Enhanced HIPC debt relief brings the ratio of debt to revenues for 2003 at 220 per cent. This ratio is expected to increase slowly over the years due to the large investment in GUYSUCO. The revenue to debt ratio is expected to peak at 256 per cent in 2007 and later decline by 2009 to 250 per cent the debt sustainability target under the fiscal criteria. Based on the IMF Projections on growth and revenue, the country's external debt should now be more manageable.

Let me caution that the HIPC debt relief should not be considered the BE END and END ALL to Guyana's social and economic problems. A large chunk of the HIPC resources will be channelled to finance the PRSP. However, an even large amount or more than two third of the resources will have to be mobilised to finance this strategy. Experience has shown that of the nine countries that had already received full HIPC benefits few has witnessed a rapid decline in the incidence of poverty to date. The HIPC measures will have to be complemented by both external and domestic measures such as trade - improve market access for HIPC exports, better targeting and increase of concessional resources; along with the implementation of appropriate policy with enough flexibility; are some but only a few of the critical measures that will help facilitate the successful exit of the HIPC countries from indebtedness. Of course, improved governance will provide the basic framework for sustainable economic success.

OXFAM, an independent intellectually blended Non-Governmental organisation based in London has provided useful analysis of the debt relief granted to low-income countries. A number of their past recommendations had been incorporated into the revision of the HIPC over the years. However, the debt relief granted falls short of the targets and achievements to reach the millennium goals especially cutting poverty by half by 2015. OXFAM was quick to point out that this target will not be achieved without a stronger compact between recipient governments and donors. Bolivia, a showcase for HIPC in Latin America, among the first group of countries to qualify for HIPC, is today in turmoil. OXFAM questioned the optimism of the data in the HIPC projections that has been adjusted over time to fit the availability of donor resources. Experience has shown that debt is only a tip of the iceberg and no other country than Bolivia justifies this warning. HIPC should be considered a means to the end rather than an end in itself.

Let me also state that the successful HIPC completion for Guyana is a step in the right direction since it tackles both the debt over hand and onerous debt servicing burden. Guyana's success on debt forgiveness is a fitting tribute to the struggle waged by its late leader Dr. Cheddi Jagan way back in the late 70s when the idea of debt relief was a distant dream from the minds of the world especially the Financial Multilateral Institutions (FMI). Dr. Jagan was one of the early statesmen who dreamt that dream and worked aggressively for its realisation. Unlike his contemporaries, he struggled to change the world into a better place for mankind rather than allow the world to change him. His contribution to topical issues like globalisation, debt and development and his commitment to reduce poverty is second to none in the Western hemisphere. Debt relief for prosperity remained Dr. Jagan's most active idea and is a fitting testimony to the struggle waged by him not only for political independence in Guyana but most important economic emancipation. After all, it was Harry Truman, past U.S. President who argued that "men make history and not the other way around."

Let me conclude by stating that one of the critical variables that have contributed to macro-economic imbalance has now been corrected. Now is the time to build on this achievement.