- Burundi's main creditor nations, united as the so-called "Paris Club", have agreed to reduce the country's debt by 67 percent. The agreement was reached after negotiations with the Burundian government and after Burundi had implemented structural reforms as defined by the International Monetary Fund (IMF).
A Burundian delegation, headed by Finance Minister Athanase Gahungu, this week had negotiated the country's debt with the "Paris Club" - an informal group of creditor governments from major industrialised countries. According to a press release by the "Paris Club" of creditors this agreement treats roughly US$ 81 million and cancels immediately US$ 4.4 million of Burundi's foreign debt.
This amount, according to the release, consists of arrears in principal and interest - including late interest - as at 31 December 2003 and of maturities in principal and interest falling due from 1 January 2004 up to 31 December 2006.
The agreement is concluded under the so-called "Naples terms": pre-cut off date ODA credits are to be repaid over 40 years, with 16 years of grace, at interest rates at least as favourable as the original concessional rates applied to those loans. 67 percent of pre-cut off date commercial credits are cancelled, the remaining amounts are rescheduled over 23 years, with 6 years of grace, at market interest rates.
These measures are expected to reduce debt service due to "Paris Club" creditors between 1 January 2004 and 31 December 2006 from around US$ 20 million down to around US$ 2.1 million. The remaining payments consist of a share of the interest due on the rescheduled amounts.
The "Paris Club" creditors said they had agreed to top-up the reduction rate to 90 percent - the better, so-called Cologne terms - as soon as the Burundian government had implemented further economic reforms as prescribed by the IMF.
According to the release, the creditors had stressed the importance they attached to "the continued satisfactory implementation" of the Burundian government's economic programme and its poverty reduction strategy.
The debt cancellation included Burundian debts to Austria, France, Japan, Russia, Belgium, Germany, Italy, USA and several international credit agencies. The government of Burundi said it had now committed to seek a comparable treatment from its other foreign creditors.
The total stock of Burundi's public sector debt was estimated as of January 2004 to be US$ 1,217 billion, according to the IMF. The stock of debt owed to "Paris Club" creditors as at 1 January was estimated to be US$ 130 million.
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