- The representatives of the Paris Club, a group of the leading industrial nations, met today and agreed to cancel a substantial amount of Malawi's stock of debt. The initiative will see Malawi's debt to these countries reduced from US$ 363 million to US$ 9 million, also signalling a major victory for the economic policies of President Bingu wa Mutharika.
The Paris Club decision resulted after Malawi had reached the completion point under the enhanced initiative for the Heavily Indebted Poor Countries (HIPC) on 31 August 2006. The meeting was attended by officials of the Paris Club and a delegation of Malawian officials.
As at 1 August 2006, Malawi owed the creditors belonging to the Paris Club - an association of the world's major creditor nations, including most of Europe and North America - about US$ 363 million in nominal value, Paris Club declared in a statement.
As a way to contribute in restoring Malawi's debt sustainability, the Paris Club decided to cancel US$ 180 million in nominal terms, which represents the Paris Club's share of the effort in the framework of the enhanced HIPC Initiative.
Most creditors also committed on a bilateral basis to grant additional debt relief of US$ 174 million in nominal terms to Malawi. As a result of this agreement and additional bilateral assistance, "Malawi's debt to Paris Club creditors will be reduced from US$ 363 million to US$ 9 million in nominal terms," the statement concluded.
The club hailed Malawi for its determination to implement a comprehensive poverty reduction strategy and ambitious economic programme that provides the basis for sustainable economic growth. This coincides with the harsh and disputed economic policies of President Mutharika, who worked in the World Bank before entering Malawian politics.
The President has invested much of his political credibility in getting on good terms with foreign creditors and international financial institutions, in great contrast to his predecessors. Mr Mutharika sees this as the only possibility to achieve investments and development aid for his impoverished nation, which had attracted little donor support earlier.
His polices are hailed by the Paris Club, which said that Malawi was now "committed to allocate the resources freed by the present treatment of the debt to priority areas identified in the country's poverty reduction strategy." Creditors had further welcomed and supported the Malawi's "commitment to seek comparable treatment from all their other external creditors, including other creditor countries as well as commercial creditors."
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