The Paris Club of creditor nations has agreed to write off or reschedule almost half of the $6.9 billion debt owed to it by Democratic Republic of Congo, it said yesterday.
Of $3 billion covered by the agreement, $1.3 billion will be cancelled and almost $1.7 billion rescheduled, while debt service payments have been deferred until after July 1, 2012.
The agreement follows the International Monetary Fund’s approval in December of a long-awaited $550 million loan arrangement for the DRC, making the country eligible for an IMF debt relief program.
The Club deferred repayments “on an exceptional basis, considering the Democratic Republic of Congo’s limited capacity of payment”, it said in a statement.
Paris Club creditors said they would be ready to give further relief once Congo reaches completion point under the Highly Indebted Poor Countries (HIPC) initiative.
“Now we are waiting for (completion point in) June and the cancellation of 90 percent of our debt,” Congolese central bank director general Jean-Louis Kayembe told Reuters from Paris.
“Then we will be left with a debt stock of $1 billion, which our economy is good enough to manage.”
Congo and its creditors said the money the country saves on debt repayments will be spent on poverty alleviation.
“The Democratic Republic of Congo is committed to devote the resources that otherwise would have gone to Paris Club creditors to priority areas identified in the country’s poverty reduction strategy paper,” the statement said.
The mineral-rich but politically unstable and economically fragile central African nation’s debt to the Paris Club stood at $6.9 billion at the end of June 2009.
The World Bank and the IMF launched HIPC in 1996 to provide a framework in which creditors can provide debt relief to the world’s poorest and most heavily indebted countries.
The Paris Club, formed in 1956, is an informal group of creditor governments from large industrialised countries.
Pic: DRC road