- Togo has finally achieved an "immediate" cancellation of US$ 347 million of its foreign debt. Most of the country's remaining debt has been rescheduled and may be cancelled at a later stage.
According to the so-called Paris Club, an informal group of creditor governments from major industrialised countries, Togo has finally been given a significant debt relief. In an agreement made with Togolese authorities, the Paris Club has agreed to "the immediate cancellation of US$ 347 million" of Togo's debt to these main creditor countries.
The debt treated in this agreement amounts to US$ 739 million, of which US$ 347 million are cancelled and the remaining amounts are rescheduled or deferred, the creditors informed in a statement. The decision follows the lifting of European Union (EU) sanctions against the country and the following approval by the International Monetary Fund (IMF) of a new arrangement under the Poverty Reduction and Growth Facility on 21 April this year.
"On an exceptional basis, considering Togo's very limited capacity of payment further constrained by the sharp rise of commodities and food prices, and provided that this country continues to implement satisfactorily an IMF supported program, no payments are expected from Togo between 1 April 2008 and 31 March 2011," the Paris Club statement reads.
These are seen as exceptionally good conditions given to Togolese authorities. The terms for debt cancellation applied in the case normally do not foresee a total stop in repayments. Further, by 2001, Togo stands a good chance of seeing the rest of its debt cancelled by these creditors if authorities continue working within the framework laid down by the IMF.
For now, Togo is closely playing by the rules defined by the powerful Fund, thoroughly reforming its economy and governance. In that context, the Paris Club in its statement "commended the reforms implemented by Togo" and expressed its commitment to alleviate further Togo's external public debt as soon as it reaches its decision point under the enhanced Heavily Indebted Poor Countries Initiative. This indicates a full debt cancellation may soon be implemented.
Togo has now been committed to devote the resources that otherwise would have gone to Paris Club creditors to "priority areas identified in the country's poverty reduction strategy paper."
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