Official Development Assistance (ODA)

(7) Efforts for Debt Issues

As long as developing countries can use the funds they receive through the loans effectively, debt can be useful in achieving economic growth. However, if a country has little repayment capacity and becomes overburdened with excessive debt, such debt could inhibit sustainable development and thus pose a significant challenge to developing countries.

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. At the G8 Gleneagles Summit (the United Kingdom) held in 2005, the G8 countries agreed on the proposal to reduce 100% of the debts that the Heavily Indebted Poor Countries (HIPCs) owe to the IMF, the International Development Association (IDA), and the African Development Fund (AfDF).(Note 7) As for the debt issue faced by the poorest countries, 39 HIPCs have become eligible for the Enhanced HIPC Initiative(Note 8) to date, and 36 of these countries have received comprehensive debt cancellation as a result of having attained a certain level of economic and social reforms as of the end of FY2016.

Furthermore, some low-income and middle-income countries, other than HIPCs, may owe heavy debts, and appropriate measures must be taken to make sure such debts do not prevent their stable medium- to long-term development. In 2003, the Paris Club10 adopted a new Paris Club(Note 9) approach to debt restructuring (the Evian Approach), which examines measures that correspond to the respective situations of low-income and middle-income indebted countries other than HIPCs, while focusing more on debt sustainability. The approach takes comprehensive debt relief measures for a country that is considered insolvent, from the perspective of debt sustainability, as long as the country meets certain criteria.

<Japan's Efforts>

In providing ODA loans, Japan makes its decisions based on the careful consideration of the cooperation structure, debt repayment ability, operational capacity, and credit protection measures, etc. of the recipient countries. In most cases, the recipient countries make their repayments of the loans, but there are also exceptional cases in which they face serious difficulties in their repayment due to events that could not be foreseen when they received ODA loans. In such cases, based on international agreements such as the aforementioned Enhanced HIPC Initiative and Paris Club agreements, Japan takes debt relief measures such as debt rescheduling(Note 10), cancellation and reduction only when they are absolutely necessary.

As of the end of 2017, Japan has cancelled ODA debts worth a total of approximately ¥1.129 trillion with respect to 33 countries since FY2003. However, following on from FY2016 to the end of 2017, no debt relief measures have been taken.

  1. Note 7: MDRI: Multilateral Debt Relief Initiative
  2. Note 8: This is an initiative that was agreed at the Cologne Summit (Germany) in 1999. It further expanded the existing initiative for international debt relief for HIPCs, and established decisions to reduce the debt by 100%, etc.
  3. Note 9: 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
  4. Note 10: Debt rescheduling is one form of debt relief. Payment is postponed for certain period of time in order to reduce the burden of debt payment on the indebted country.