The Paris Club of sovereign creditors and Brazil have agreed to cancel all of the debt owed to them by Congo Republic, in a deal worth around $2.4 billion, they said in a statement on Thursday.
Congo Republic has been trying to rebuild its economy and infrastructure since civil wars in the late 1990s. It began debt relief talks in 2001 with the World Bank and IMF, who manage the Heavily Indebted Poor Countries (HIPC) programme. The deal comes after the Central African oil exporter completed its current HIPC programme.
“As a contribution to restoring the Republic of Congo’s debt sustainability, the agreement will provide a cancellation of $981 million,” the statement said. “Paris Club creditors also expressed their intention to grant additional debt relief to 100 percent on a bilateral basis for an amount of $1.4 billion.”
The Paris Club members participating in the deal were Belgium, Canada, Denmark, France, Germany, Italy, the Netherlands, Russia, Spain, Switzerland, Britain and the United States, the statement said. Non-Paris Club member Brazil also took part.
The Paris Club said the case had raised the issue of “non-cooperative behaviour from some litigating creditors”, a reference to so-called “vulture funds”, investors who buy deeply discounted sovereign debt then pursue payment at face value through the courts.
“Paris Club creditors and Brazil expressed their concern over the past agreement between the Republic of Congo and some litigating creditors, and urged the Republic of Congo to seek from all its remaining external creditors a treatment comparable to HIPC debt relief,” they said. Robert York, IMF mission chief to Congo, said in January the conditions for completing HIPC were set very high and included measures to combat corruption and increase transparency in the oil sector.
But he said it was also important that the government be careful about future borrowing and spending so that debt levels were not driven up again.