Japan's Official Development Assistance White Paper 2009

(6) Response to Debt Issues

As long as the developing countries can maintain their repayment capacity by using the received funds effectively and thus ensuring future economic growth, debt is useful in achieving development. However, if a country has little repayment capacity and becomes overburdened with excess debt, it could inhibit sustainable development.

<Japan's Efforts>

Such debt issues must be resolved by the indebted countries themselves by putting forward reforms and other efforts. However, their excessive debt must not stand in the way of their development path. As for the debt issue faced by the poorest countries, 35 Heavily Indebted Poor Countries HIPCs have become eligible for the Enhanced HIPC Initiative (Note 27) so far, and 24 of them had received comprehensive debt cancellation as a result of their achievement of economic and social reforms as of the end of FY2008. At G8 Gleneagles 2005, the G8 countries agreed on the proposal to reduce 100% of the debts that the HIPCs owe to the International Monetary Fund (IMF), International Development Association (IDA), and African Development Fund (AfDF)(Note 28).

Some low-income and middle-income countries, other than HIPCs, may owe heavy debts. To properly respond to such issues, in 2003 the Paris Club (Note 29) adopted the Evian Approach (a new Paris Club approach to debt restructuring). The Evian Approach examines measures that correspond to respective situations of low-income and middle-income indebted countries other than HIPCs, with focusing more on debt sustainability. The approach takes comprehensive debt relief measures for a country that has difficulties sustaining its debt, as long as the country meets certain criteria. Japan provides cooperation for debt relief measures through debt rescheduling (Note 30), cancellation, and reduction measures that were agreed upon at the Paris Club and other international frameworks.


(27) The HIPC Initiative developed to the Enhanced HIPC Initiative (Cologne Debt Initiative) when the G8 agreed at the G8 Cologne Summit in 1999 to take further debt-relief measures, including 100% reduction of bilateral ODA loans.

(28) MDRI: Multilateral Debt Relief Initiative.

(29) The Paris Club is an informal group of creditor countries to discuss the rescheduling of public debts. The name of the Paris Club derives from the fact that France has chaired meetings and invited creditor countries to Paris upon requests from indebted countries.

(30) Debt rescheduling is one form of debt relief. Payment is postponed for a certain period of time in order to lessen the burden of debt payment on the indebted country.