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                     Office of the Press Secretary
                           (Cologne, Germany)
For Immediate Release                                      June 18, 1999

                               FACT SHEET

                      The Cologne Debt Initiative

The G-7 leaders have endorsed a new Initiative to enable Heavily Indebted Poor Countries (HIPCs) to receive deeper, broader and faster debt relief in return for firm commitments to channel the benefits into improving the lives of all their people. The HIPC Initiative was created in 1996 to provide deeper multilateral debt reduction for poor countries with unsustainable debt burdens.

New focus on poverty: The Cologne Initiative calls on the International

     Financial Institutions to develop a new framework for linking debt
     relief with poverty reduction that centers around better targeting
     of budgetary resources for priority social expenditures, for
     health, child survival, AIDS prevention, education, greater
     transparency in government budgeting, and much wider consultation
     with civil society in the development and implementation of
     economic programs.

Substantially deeper relief: Together with earlier debt relief

     commitments, the Cologne Initiative provides for reduction of up to
     70 percent of the total debts for these countries, (reducing the
     stock) from about $127 billion today to as low as $37 billion with
     the cancellation of official development assistance (ODA) debt by
     G-7 and other bilateral creditors.  In today's dollars (net present
     value -  NPV terms), this would more than triple the amount of
     relief to be provided from $13 billion under the current HIPC
     framework to as much as $50 billion. This would be accomplished by
     reducing the HIPC program target ratios for the NPV of outstanding
     debt to 150 percent of exports, and 250 percent of government
     revenues, with fiscal thresholds of 30 percent exports to GDP and
     15 percent revenues to GDP, and by providing full cancellation of
     ODA debts.

Faster relief: Relief will be available significantly faster than under

     the current framework by providing early cash flow relief ("Interim
     Relief") and allowing earlier stock reduction.

Broader participation: The number of countries expected to qualify for

     HIPC relief would rise from 26 to 33, meaning that more than 430
     million people could ultimately be affected.

Releasing resources for priority needs: For the average HIPC country,

     the share of scarce government revenue devoted to debt service
     could fall by 10 percentage points to a ratio for debt service to
     revenues of well below 20 percent and close to 10 percent in some
     cases.  This is equivalent to a reduction in actual payments of
     about 25 percent.  Mozambique's debt will be reduced by some $3.5
     billion ($1.7 billion in NPV terms), for example, which could cut
     in half the share of government revenues allocated to external debt
     service from over 30 percent to about 15 percent in 1999 and free
     about $30 million in budgetary resources each year. These savings
     are equivalent to over half the health budget in 1999 in a country
     where children are 3 times more likely to die before the age of
     five than they are to go to secondary school.

In proposing this Initiative on March 16, President Clinton stated that "Our goal is to ensure that no country committed to fundamental reform is left with a debt burden that keeps it from meeting its people's basic human needs and spurring growth. We should provide extraordinary relief for countries making extraordinary efforts to build working economies." On June 16, the President pledged "to work to find the resources so we can do our part and contribute our share toward an expanded trust fund for debt relief."