FROM THE OFFICE OF PUBLIC AFFAIRS

Treasury Secretary Robert E. Rubin on Wednesday welcomed the World Bank and IMF decisions this week to qualify Bolivia for final debt relief under the Heavily Indebted Poor Countries (HIPC) debt initiative.

The HIPC debt initiative was designed to support sustainable development, economic reform and growth by reducing the debt burden of very poor countries, such as Bolivia, to a manageable level.

Bolivia's strong record of economic reform since 1985 and the strength of its current economic program have qualified Bolivia for final relief only one year after being declared eligible for HIPC debt relief. Bolivia will no longer have to pay $760 million in debt service as a result of the global effort of all of its creditors, including the United States. This debt relief is in addition to the debt reduction already provided by the Paris Club, beginning in 1990 with a 33 percent reduction of eligible debt by Bolivia's bilateral creditors and followed by successively deeper debt reduction. HIPC debt relief will lower Bolivia's debt service as a share of exports from 26% in 1997 to 19% in 1999.

"I understand that the debt relief to be provided not only will lighten the debt burden but will enable Bolivia to intensify social reforms by allowing an increase in social sector spending," said Secretary Rubin. Bolivia's social reform program is focusing on improving primary and secondary education and increasing spending on basic health, including maternal and child health programs.

The United States was an early and strong advocate of the HIPC debt initiative, realizing that for a number of countries, despite continuing economic reform programs and 67% reduction of eligible Paris Club debt and commercial bank reduction, debt burdens would remain unsustainable. For these countries, coordinated international relief linked to economic reforms, with international financial institutions and bilateral creditors both participating, is the key to achieving adequate debt relief.

Bolivia is the second country to qualify for final HIPC debt relief; Uganda qualified in April this year. To date, Burkina Faso, Guyana, C“te d'Ivoire, Mozambique, and Mali also have been declared to be eligible for HIPC debt relief.