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Mitigating the impact of MDRI netting out on new IDA country allocations : additional options (الإنجليزية)

The Multilateral Debt Relief Initiative (MDRI) which provides for 100 percent cancellation of eligible debt owed to International Development Association (IDA) by countries reaching the completion point for the Heavily Indebted Poor Country (HIPC) initiative has been under implementation since July 2006. Under the MDRI, IDA's 'gross assistance flows' to countries benefiting from debt relief are reduced by the amount of annual debt service forgiven, an allocation process known as the 'MDRI netting out'. The rationale for this is to help reduce moral hazard and promote equity of treatment among all low-income countries. At the IDA15 Mid-Term Review (MTR), held in November 2009, IDA deputies discussed the negative allocation consequences of the MDRI netting out mechanism and its implications for IDA's operational engagement in these countries. The MTR paper considered four scenarios for mitigating the allocation impact: (i) eliminating the MDRI netting out; (ii) capping MDRI netting out at 50 percent of gross PBA allocation; (iii) capping MDRI netting out at 75 percent of gross PBA allocation; and (iv) redistributing the compensatory donor resources within MDRI-only countries. Accordingly, this paper explores four additional scenarios for mitigating the negative allocation impact of MDRI netting out: (i) capping the MDRI netting out at 50 percent of annual debt service forgone; (ii) capping the MDRI netting out at 30 percent of the gross PBA allocation; (iii) introducing a minimum per capita allocation that will allow IDA to meet the fixed cost of country engagement, and thereby help to deal with the adverse impact of the MDRI netting out; and (iv) placing a moratorium on MDRI netting out for the period lasting through IDA16. The rest of the paper is organized as follows: section two discusses the key tradeoffs associated with the mitigation options for the MDRI netting out. Section three and four discuss the additional scenarios and presents a comparison of the all scenarios (including those from the MTR). Section five concludes by setting out key issues for discussion.

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نسخة رسمية من الوثيقة (قد تضم توقيعات، الخ)