[World Bank: Did we say HIPC would be a big deal for poor countries? We're really sorry. We never meant to say that. We were pressured politically into saying that. It's all Jubilee's fault for exposing how stingy the plan was and forcing us to lie about it. We apologize for any confusion this may have been caused. We never, ever meant that this would relieve poor countries' debt problems. We meant rather it would relieve rich countries' debt problems. It wasn't supposed to remove the debt burden. It was rather supposed to make it possible to make payments. And just barely. We never though it would it "end debt rescheduling," i.e., stop debt from being a sword of Damocles concentrating poor countries' minds. We never had any intention of that. Once again, we are deeply sorry for any confusion. The lesson is, please don't subject us to any political pressure in the future. Don't make us lie to you again.]
Financial Times; Feb 27, 2003
THE AMERICAS: Debt relief scheme 'too optimistic'
By Alan Beattie in Washington
An international debt relief initiative for the world's poorest countries became the victim of unrealistic expectations as a result of political pressure, the World Bank has concluded.
A study by the bank's internal review department said the debt relief initiative was supposed to be one of many things that would make it possible for the 40 or so countries never again to default on their debts. But political pressure gave the impression the initiative would do this on its own.
The original objective of the heavily indebted poor countries (HIPC) initiative "was to reduce debt to a sustainable level as part of a strategy to achieve debt sustainability".
"Over time, this objective was transformed to the stated enhanced HIPC objective of assuring a 'permanent' exit from debt rescheduling," it said. In reality, achieving a complete exit from debt problems was never possible from a one-off reduction in debt levels, the report said.
The World Bank and its sister institution, the International Monetary Fund, came under repeated pressure for more debt relief from development campaigners and government ministers, such as Gordon Brown, Britain's finance minister. Mr Brown said in 2000 that the international community should make "deeper, wider and faster debt relief the essential and unbreakable foundation of ... a new virtuous circle of debt relief, poverty reduction and sustainable development".
The bank's management broadly agreed with the report's conclusions. "By reducing the debt stock, the initiative was expected to contribute to a more comprehensive development effort, but not to supplant it," the management said. It also reiterated its acceptance of criticisms in the report that the debt sustainability analysis which underlay the amount of relief offered under the initiative had been too optimistic.