Memorandum submitted by Mr Stephen Pickford,
UK Executive Director, IMF/IBRD
THE FLOATING COMPLETION POINT (QUESTIONS
196 AND 197)
The joint Bank/Fund paper entitled "Modifications
to the Heavily Indebted Poor Countries (HIPC) Initiative"
(dated 23 July 1999), sets out the purpose of, and rationale behind,
the idea of a floating completion point.
What are the advantages of the "floating
completion point"?
The idea of a floating completion point comes
from the World Bank's experience with Higher Impact Adjustment
Lending (HIAL), introduced in the Africa region in 1995. The objective
is to allow the process of debt relief to be speeded up, to increase
a country's flexibility in sequencing its reform agenda, and to
give the government greater ownership over the reform process.
Evidence suggests that outcome-based, rather than time-specific,
programmes achieve better policy outcomes in terms of fiscal adjustment,
structural reforms, inflation, and debt sustainability[2].
It is intended that floating completion points will create the
right incentive for countries to implement growth-enhancing, and
poverty-reducing reforms quickly.
Who will set the reform targets and how will they
be set? How will this process relate to the PRGF lending facility?
The intention is that there will be a tripartite
process involving the country, the Bank and Fund to determine
the reform targets. In preparing its Poverty Reduction Strategy
Paper (PRSP), a country will effectively set the framework within
which the floating completion point will operate. The challenge
will be to define, for each individual country, a small number
of key reforms required for durable growth, debt sustainability
and poverty reduction, and on which timing of the completion point
will depend.
Over time, PRSPs will also set the framework
for all Bank and Fund support in the form of PRGF and IDA supported
programmes. All such programmes will need to be consistent with
delivering the objectives set out in the PRSP.
Can you provide examples of the types of targets
that will be set—eg revenue-raising, poverty reduction,
growth rates?
The International Development Targets (IDTs)
will provide the context for countries' Poverty Reduction Strategies.
There is general agreement that these IDTs will be made operational
within the strategies through setting relevant outcome indicators,
for example, for literacy and child mortality rates. Such outcome
indicators will be translated into related intermediate indicators
which can be monitored in the short and medium term. In the case
of literacy, relevant intermediate indicators might include primary
enrollment and retention rates. Such an approach will augment
the traditional method of relying solely on input indicators,
for example social sector expenditure, though such indicators
clearly still have a role to play.
Will it be possible for decision and completion
point to be reached at the same time for "good" HIPCs
(as was originally planned for Uganda)?
As with all HIPC assessments, timing will be
considered on a case by case basis. Staff will consider carefully
when assessing each country whether sufficient progress towards
implementing its Poverty Reduction Strategy has been achieved
by the decision point to warrant bringing the completion point
forward.
Mr Stephen Pickford
UK Executive Director, IMF/IBRD
September 1999
2 A study prepared in July 1999 by the World Bank's
independent Operations Evalution Depatment reached this conclusion. Back
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