KV.RAH.LAIT/Multilateral Debt Relief Iniative (MDRI) in IDA and AfDF

Description What is done in the programme or project and why, what results are pursued, who benefits from the activities and who are involved in the implementation.

The Multilateral Debt Relief Initiative, MDRI, is based on the proposal of the G8 Summit in July 2005. According to the proposal, the International Development Association (IDA), the African Development Fund (ADF) and the International Monetary Fund (IMF) will cancel, in full, the debts of countries qualified for the Heavily Indebted Poor Countries initiative (HIPC) once the countries have reached the HIPC initiative completion point. The objective of the MDRI is to grant debt relief to heavily indebted poor countries to secure the stability of their debt levels and to free up resources for poverty alleviation. The MDRI covers 39 HIPC-eligible countries, of which 36 have reached the completion point. MDRI and HIPC initiatives have had a significant impact on the participating countries’ debt burden and on the headroom in their public finances. The basis for the implementation of the MDRI is that donor countries fully cover to IDA and to ADF the costs incurred from debt relief. The MDRI is a very long term development commitment. At IDA it will continue until 2044 and at ADF until 2054. Finland has, together with other IDA and ADF Members, given its support to the implementation of the MDRI and committed to compensating to IDA and ADF the forgone reflows arising from cancelled loans. A periodic adjustment to reflect changes in the actual and estimated MDRI cost is made every three years in conjunction with IDA and ADF replenishments. Following the advancement of the IDA-20 replenishment by one year due to the Covid19 pandemic, the IDA and ADF replenishments will no longer follow the same cycle. Finland has, based on funding approvals in 2006, 2008, 2011, 2014, 2017 and 2020 made MDRI commitments to IDA and ADF reaching until 2032. The current funding approval updates Finland's financing commitments under MDRI until 2035, confirming Finland's commitments following IDA 20th replenishment for years 2023 through 2033 and the commitments following the ADF 16th replenishment for years 2023 through 2035.