- Congo Brazzaville was today given a debt cancellation of US$ 2.4 billion by its main creditors. This amounts to 100 percent of all Congolese bilateral debts and will significantly lower budget costs.
This was announced today by a grouping of the world's main creditor nations termed the Paris Club, which for the occasion included Brazil as one of Congo Brazzaville's main creditors. At a Paris meeting, it was agreed that Brazzaville authorities had complied with IMF economic reform programmes to such a degree that debt cancellation could be offered. The IMF gave its approval on 27 January this year.
"As a contribution to restoring the Republic of Congo's debt sustainability, the agreement will provide a cancellation of US$ 981 million," a statement issued by the Paris Club today said. The amount represents the Paris Club and Brazil's share of the debt reduction levels recommended by the IMF.
But the creditors gathered in Paris also expressed their "intention to grant additional debt relief to 100 percent on a bilateral basis for an amount of US$ 1.4 billion." As a result, the total debt relief will amount to US$ 2.4 billion.
But all was not rosy regarding Congo Brazzaville's debt burden. Several creditors outside the Paris Club have not been willing to cancel or reduce their demands, quite contrary to normal debt relief programmes offered heavily indebted poor African nations.
The Paris Club creditors expressed their concern over the "non cooperative behaviour from some litigating creditors" and the agreements these creditors were trying to thrust on Brazzaville authorities. They called on authorities and "remaining external creditors" to seek agreements comparable to the Paris Club debt relief granted Congo today.
Congolese Minister of Finance, Gilbert Ondongo, representing his country at the Paris meeting, was given credit for his government's strong efforts towards economic reform during the last years. The last stage of reform was initiated under an IMF programme in December 2008, ending up in debt relief eligibility in January this year.
The Republic of Congo's public external debt was estimated to be US$ 5.6 billion as of end 2008, according to IMF statistics. The debt owed to Paris Club creditors and Brazil was estimated to be US$ 2.5 billion as of 1 January 2010. Managing this large debt for the nation of only 3.7 million inhabitants proved an unsustainable burden on national budgets.
Brazzaville authorities have implemented a comprehensive poverty reduction strategy, which to a large degree is to be financed by the funds freed from debt down-payments.
The government of Congo has thus pledged to channel these freed resources through a special account to priority areas identified in the national poverty reduction strategy. The priority areas include health, education and basic infrastructures.
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