THE Inter-American Development Bank (IDB) yesterday made the long-awaited announcement that its Board of Governors has approved a 100% debt write-off for Guyana on the US$467M loan balances outstanding as of December 31, 2004, from its Fund for Special Operations (FSO).
Guyana, along with Bolivia, Haiti, Honduras and Nicaragua, benefited from the historic 100% debt write-off by the IDB, which totalled some US$4.4 billion, the bank announced yesterday.
Under an agreement endorsed by governors of its 47 member countries, the IDB will forgive about US$3.4 billion in principal payments and US$1 billion of future interest payments owed by the five countries, and which totalled about US$4.4 billion.
IDB President, Mr. Luis Alberto Moreno, said the decision by the IDB “represents a historic opportunity for a fresh start” for Guyana, Bolivia, Haiti, Honduras and Nicaragua.
“The agreement backed by our membership will help these countries free-up resources to invest in quality education, health and other social services their citizens need to overcome poverty,” the IDB President said.
The IDB is the principal creditor to the five beneficiary countries and said cancelling these debts underscores its commitment to assisting the poorest countries in Latin America and the Caribbean in their efforts to reach the United Nations Millennium Development Goals, which focus on halving poverty by 2015.
The IDB decision also complements the Multilateral Debt Reduction Initiative launched last year by the G-8 Group of countries.
In the US$4.4 billion debt relief package announced by the IDB yesterday, Honduras will receive about US$1.4 billion in debt relief (including cancelled loan balances and forgone interest payments); Bolivia – US$1 billion; Nicaragua – US$984M; and Guyana, US$467M.
IDB said the benefits will be effective retroactively to January 1, 2007 because these nations have already reached the “completion point” under the enhanced initiative for Heavily Indebted Poor Countries (HIPC), an earlier debt relief programme.
Haiti, which the IDB said is making progress towards completing the HIPC process, will receive interim relief of US$20M over the next two years. By 2009, the IDB said Haiti could obtain full debt relief, which in the IDB’s case will total US$525M.
Additionally, under the agreement approved by the Board of Governors, the IDB said Haiti “may receive up to US$50M in IDB grants a year through 2009, and a mix of concessional loans and grants thereafter”.
The IDB also said its member countries confirmed their commitment to the sustainability of the FSO, agreeing to assess – no later than 2013 – the need for an eventual replenishment.
Furthermore, the agreement guarantees Ecuador, El Salvador, Guatemala, Paraguay and Suriname access to a US$250M-a-year concessional lending programme.
With the Board of Governors’ firm support, the IDB said its Board of Executive Directors and management established new operational guidelines for the FSO under the Debt Sustainability Framework, featuring a performance-based allocation system to ensure the sustainability of the debt relief.
In January this year, the Committee of the Board of Governors of the IDB met to discuss the terms for granting debt relief to Guyana and the four other countries.
As a result of a meeting held in Amsterdam, The Netherlands, the committee, a working group of the Board of Governors, proposed technical mechanisms for cancelling the balances of loans from the FSO outstanding on December 31, 2004 for the five countries.
The committee's recommendations then had to be ratified by vote by the IDB's 47 member countries. Prior to that, the IDB Board of Executive Directors had to approve a reform proposal presented by management on the future operation of the FSO, the bank's concessional lending window.