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World Bank Admits It Has Been Too Optimistic in Debt Relief Forecasts - 2003-02-28

The World Bank says it had been too optimistic in its forecast for relieving debt among the world's poorest countries. It said this week a program to forgive debt and grow economies in those countries had not worked as fast as anticipated.

Twenty-six countries, most of them in Africa, are benefiting from the debt relief initiative launched in 1996. In its evaluation of what is called the Highly Indebted Poor Countries (HIPC) initiative, the bank says recipient countries have had their external debts reduced and they are likely to get a fresh start in the process of economic development. But, says bank Vice President Gobind Nankani, the projections for resumed economic growth were too optimistic. "This was happening [these projections] in the years 1999 and 2000, which were boom years everywhere," he said. "And I think generally the projections were rosy all around, in this economy and everywhere. And I think we got a little bit of that optimism."

The 26 countries have had their debts reduced by about $25 billion. That amount of forgiveness is considerably less than had been expected four years ago. Successive meetings of the major economic powers [the Group of Eight] have devoted considerable attention to promoting debt relief. Mr. Nankani says projections for slower growth in these poor countries are unrelated to actual debt relief. "The projections have no bearing on the actual amount of debt relief any country gets," said Gobind Nankani. "The debt relief that a country gets is a function of actual and observed debt numbers and growth numbers."

The countries deemed most successful in implementing market based reforms, reactivating their stalled economies and thus receiving the most generous debt relief are: Bolivia, Burkina Faso, Mauritania, Mozambique, Tanzania and Uganda.