- Following a recent debt relief for Madagascar by the World Bank, an association of creditor countries today decided to cancel US$ 752 million of the Malagasy external debt. With an additional debt cancellation of US$ 699 million from individual creditor countries, Madagascar's external debt is reduced by more than 90 percent.
Representatives of the so-called Paris Club creditor countries met in France today. The association, which includes the world's leading economies and thus also creditor nations, in a statement today said it "took note of the burden of Madagascar's external debt and agreed to recommend to their governments a reduction of its stock of debt."
The club of creditor countries added it had noted that, "given the Malagasy authorities' strong commitment to economic and structural reforms," Madagascar in October this year had complied with demands by the World Bank and the International Monetary Fund (IMF) to have its debts reduced.
In order to contribute to restore Madagascar's debt sustainability, the countries decided to collectively cancel debts worth US$ 752 million. This amount represented the Paris Club's obligations within the framework of the Enhanced Debt Initiative for the Heavily Indebted Poor Countries (Enhanced HIPC Initiative). Madagascar had fulfilled the demands of this initiative in October.
- Moreover, according to the request of the Malagasy authorities, most creditors also committed on a bilateral basis to grant substantial additional debt relief to Madagascar so that the stock of the debt owed to Paris Club creditors will be reduced by a further US$ 699 million, according to the statement released today.
Madagascar's debt to Paris Club creditors has thus been reduced from US$ 1,572 million to US$ 121 million as a result of this agreement and additional bilateral assistance, which were to be "formalised at a later stage."
The representatives of the Paris Club creditor countries in a statement welcomed what they called "Madagascar's determination to implement a broad-based and rigorous economic programme, which should provide the basis for sustainable economic growth and comprehensive poverty reduction."
Madagascar committed to allocate the resources freed by the present treatment of the debt to priority areas identified in the country's poverty reduction strategy and to seek comparable treatment from all its other external creditors.
The Malagasy government, after having achieved debt relief from the World Bank and the Paris Club, now is to seek further reductions from other creditor countries as well as commercial creditors. The Paris Club creditors in a statement emphasised "the importance they attach to a treatment at least as favourable from non-Paris Club creditors to Madagascar."
Madagascar's public debt was estimated to be US$ 4,843 million in nominal value as at end 2003, according to the IMF. In October, the IMF and World Bank granted Madagascar a debt relief of US$ 836 million. The debt owed to Paris Club creditors as of 1 October 2004 was estimated to be US$ 1,572 million in nominal value.
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