- Paris Club has agreed to immediate cancellation of US $254 million of owed to Liberia after the West African country had reached its Decision Point.
Concluded under "Cologne terms" designed by the Paris Club for the implementation of the Highly Indebted Poor Countries [HIPC], the agreement endorsed the restructuring of Liberia's external public debt. This agreement has been concluded under the so called "Cologne terms" designed by the Paris Club for the implementation of the HIPC initiative interim debt relief.
As of 1st January 2008, Liberia owed the Paris Club creditors more than US $1.5 billion in nominal terms, of which more than 97% consisted of arrears and late interest. The rest of Liberia's resheduled US $789 million will be addressed for debt relieft when Liberia reaches Completion Point.
"On an exceptional basis, considering Liberia's very limited capacity of payment, and provided that this country continues to implement satisfactorily an IMF supported program, no payments are expected from Liberia between 1st March 2008 and 31 December 2010, by which time Liberia is expected to have reached its HIPC Completion Point and received the remainder of the debt reduction envisioned under the HIPC initiative," Paris Club creditors agreed.
"Several creditors intend on a bilateral basis to grant additional debt relief to Liberia beyond the terms set today in the Paris Club agreement."
This development comes after "Liberia is committed to devote the resources that otherwise would have gone to Paris Club creditors to priority areas identified in the country's poverty reduction strategy paper." The country is also "committed to seek comparable treatment from non Paris Club creditors."
Paris Club creditor countries expressed their commitment to implement the final component of debt relief contemplated under the enhanced HIPC initiative, as soon as Liberia reaches the Completion Point. The IMF and the World Bank currently assume that the Paris Club will then have delivered total debt relief of approximately US$ 1.3 billion in net present value terms.
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