- Guinea-Bissau has joined the poor countries that enjoy the debt relief benefit after the Paris Club creditors has agreed to immediately cancel US $180 million of the country's debt, the club announced.
As of 1st January 2008, Bissau's stock of debt owed to Paris Club creditors was estimated to be US $830 million.
The club has also agreed with the Bissau government to a restructuring of its external public debt. The development followed the approval by the International Monetary Fund of a new arrangement under the poverty Reduction and Growth Facility on 21 December 2007.
The agreement has been concluded under the "Cologne terms" designed by the Paris Club for the implementation of the Heavily Indebted Poor Countries initiative interim debt relief.
About US $160 million of the West African country's debts comprises arrears and late interests. Creditors are rescheduling around US $120 million of Bissau's debts.
On an exceptional basis, considering Guinea’s very limited capacity of payment, creditors have also agreed to defer until after 2010 the repayment of arrears accumulated by the country on short term and post-cut off date debts, as well as on part of the maturities falling due during the consolidation period under the post-cut off date debts, the Paris Club said.
"These measures are expected to reduce the debt service (including the arrears) due by Guinea to Paris Club creditors between 1st January 2008 and 31 December 2010 from US$ 415 million down to US$ 37 million," the club said.
"The remaining payments consist of the interest due on the rescheduled and deferred amounts as well as part of the debt service on post-cut off date debt from January 2008."
Guinea is committed to devote the resources freed by this debt treatment to priority areas identified in the country’s poverty reduction strategy paper. It is also committed to seek comparable treatment from non Paris Club creditors.
Paris Club creditor countries expressed their readiness to reduce further Guinea’s stock of debt to allow it to achieve debt sustainability, as soon as it reaches the completion point under the enhanced HIPC initiative.
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