- Negotiating with its main creditors, the government of Congo Brazzaville did only manage to get a small part of its debts cancelled. A significant part of the debt was only rescheduled.
The world's leading creditors, associated in the Paris Club, today in a Paris meeting agreed with the Brazzaville government "to alleviate its external public debt." The move follows the approval by the International Monetary Fund (IMF) of a new three-year poverty reduction programme, signed on 8 December.
The agreement was concluded under the so called "Cologne terms", the poorest terms for debt cancellation by the Paris Club. In practical terms, the agreement leads to the immediate cancellation of US$ 643 million and the rescheduling of US$ 119 million of Congo's debt to these creditors.
This means that only a very small part of Congo's debt has been cancelled. The stock of debt owed to Paris Club creditors by the Congo Brazzaville as of 1 July was estimated to be more than US$ 3.4 billion in nominal terms.
The Brazzaville government therefore will remain heavily indebted. It's population of a mere 4 million will still have a debt burden of around US$ 2.8 billion after striking this deal with the Paris Club. Congo's down-payment conditions have however somewhat improved, easing the government's budget burden to in mild degree.
At the same time, Congo has just committed to devote much resources to priority areas identified in the country's poverty reduction strategy paper, negotiated with the IMF. The fund recognised Congo as a highly indebted poor country (HIPC), and approves of its government's means to fight poverty.
Congolese authorities however also struck a deal with several single creditors, pledging they, on a bilateral basis, were willing to grant additional debt relief to the country beyond the terms set today in the Paris Club agreement.
The Paris Club also promised to go further in debt relief "as soon as the Republic of Congo reaches the completion point" of its IMF economic reform programmes. At that point, creditors would be committed to "implement the final component of debt relief," which could result in an up to 100 percent debt cancellation.
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