The Heavily Indebted Poor Countries (HIPC) initiative marked an important advance in international debt relief strategies, providing for the first time a framework for reducing to sustainable levels all categories of debt. However, despite the efforts of the World Bank and several major creditors, results to date have been disappointing. The Secretary General of the UN, the United Nations Children’s Fund (UNICEF), the Organisation for African Unity, religious leaders and non-government organisations have all expressed concern that too little debt relief is being delivered too late. A related concern is that the HIPC framework has not been integrated into a wider strategy for poverty reduction, with potential losses for human development. Several creditors have advocated linking implementation of the HIPC initiative to a more poverty-focused strategy. To date, however, no consensus has been reached with regard to the design of such a strategy.

This note, intended as a contribution of the HIPC initiative review process, sets out a proposal for developing a more poverty-focused approach to debt relief. It proposes a system of incentives in the form of earlier and deeper debt relief for countries willing to make commitments on poverty reduction. Such commitments could be linked to internationally agreed targets developed during UN-sponsored conferences during the 1990s and adopted by the Development Assistance Committee (DAC) of the OECD in its report Shaping the 21st Century. The DAC goals for 2015 include a reduction in the number of people living in absolute poverty by one-half, the achievement of universal primary education, and a two-thirds reduction in child mortality.

Well targeted debt relief could make a real difference to the achievement of these goals by releasing new resources for human development. At the same time it would help to reduce dependence on aid. This is central to the vision of development set out in Shaping the 21st Century, where OECD governments call for measures "that fosters self-reliance in which countries and people are less in need of aid." Conversely, continuing down the current path will lead to lost opportunities for poverty reduction, as unsustainable debt diverts resources from desperately needed social investment, slows growth and reinforces dependence on aid.

This submission is intended to contribute to the wider debate on debt relief and poverty reduction. It calls for:

* The HIPC initiative to be integrated into the evolving global strategy for poverty reduction set out by the Development Assistance Committee of the OECD

* The creation of a debt-for-human development window, under which governments willing to allocate 85-100 per cent of the savings from debt to poverty reduction initiatives will be given improved incentives in the form of earlier and deeper debt relief

* Co-operation between debtor governments, donors and civil society in developing Poverty Action Frameworks through which resources released through debt relief can be channelled

* The development of a transparent and accountable structure for administering the debt-for-human development window, modelled on the precedent set by the Ugandan Government