IDB approves US$467M debt relief
'Fresh start' seen for Guyana, other countries
Stabroek News
March 17, 2007
The Inter-American Develop-ment Bank (IDB) yesterday announced its approval of 100% debt relief for Guyana on loan balances outstanding as of December 31, 2004 from its Fund for Special Opera-tions (FSO) to the value of US$467 million.
In a release issued yesterday, the IDB said that under an agreement endorsed by governors of its 47 member countries, the IDB would forgive some US$3.4 billion in principal payments and US$1 billion of future interest payments owed by five Latin American and Caribbean countries.
The other countries are: Honduras, about US$1.4 billion (including cancelled loan balances and forgone interest payments); Bolivia, US$1 billion; and Nicaragua US$984 million. Haiti will receive interim relief of US$20 million over the next two years. The bank had previously announced its support for the debt relief but it required approval by the governors of the member countries.
The release said the benefits would be effective retroactively to January 1, 2007 because Guyana, Honduras, Bolivia and Nicaragua have already reached completion point under the enhanced initiative for Highly Indebted Poor Countries (HIPC).
Haiti, which the IDB said was making progress toward completing the HIPC process, could obtain full debt relief by 2009. The amount, in the IDB's case, will total US$525 million.
In addition, under the agreement approved by the bank's board of governors, Haiti may receive up to US$50 million in IDB grants a year through 2009, and a mix of concessional loans and grants afterwards.
The agreement also guarantees Ecuador, El Salvador, Guatemala, Paraguay and Suriname access to a US$250 million-a-year concessional lending programme.
The release said the agreement ensures the FSO's financial viability through 2015 and IDB member countries confirmed their commitment to the fund's sustainability, agreeing to assess, no later than 2013, the need for an eventual replenishment.
According to IDB President Luis Alberto Moreno, the decision to grant the debt relief represented a historic opportunity for a fresh start for Bolivia, Guyana, Haiti, Honduras and Nicaragua. He said the agreement, backed by the bank's members, would help these countries to free up resources to invest in quality education, health and other social services their citizens need to overcome poverty.
The release noted that the IDB is the principal creditor to the five beneficiary countries and by cancelling the debts it was assisting the poorest countries in the hemisphere to reach the United Nations Millennium Develop-ment Goals.
In September last year following the meeting of the IMF Board of Governors in Singapore, President Bharrat Jagdeo had expressed the belief that once negotiations went well Guyana was going to benefit from debt relief in the approximate sum already mentioned. He had said he hoped this would have come through by last year-end.
On the fringes of the IMF Board of Governors Meeting which he chaired, Jagdeo had also met representatives of the four other countries on a joint strategy for the current debt relief which has been announced.
The last debt relief initiative saw Guyana reducing its debt by about US$300 million bringing the total debt relief then to between US$850 to US$900 million. Jagdeo had said that the lobby for debt relief had been very effective and that the US$2.1 billion debt the PPP/C government had inherited in 1992 had since been reduced to just under US$1 billion.
Since the PPP/C government took office, he said it had borrowed some US$900 million as of September last year.
The US Treasury Depart-ment yesterday welcomed the IDB announcement. Treasury Assistant Secretary for International Affairs Clay Lowery said "This landmark agreement follows President Bush's call to address the debt sustainability of the poorest countries in the region, including through grants and debt relief. The Treasury Department worked closely with the IDB for more than a year to develop this proposal to provide debt relief for the poorest countries in the Western Hemisphere - a critical step to reducing poverty and stimulating economic growth to help countries create the opportunities for upward mobility."