afrol News, 6 July - Guinea-Bissau, facing acute problems down-paying its debts, was given a break until the end of 2012 by its major creditors. Also, a part of the impoverished country's debts were cancelled.
This was announced today by the so-called Paris Club, a group of the world's major creditor countries discussing the difficult case of Guinea-Bissau.
Guinea-Bissau has sought debt reduction from the Paris Club since the end of 1986. Only in December 2000, the country was cleared by the International Monetary Fund (IMF) for debt cancellation, but it took ten more years for a debt relief decision to be taken in Paris.
The stock of debt owed to Paris Club creditors by the Guinea-Bissau was estimated to be more than US$ 240 million. But not even the creditors were able to say how much of this sum would now be cancelled.
The problem is that Guinea-Bissau first contacted the Paris Club in 1986, which is defined as the "cut off date". The cut-off date is designed to protect credits granted by Paris Club creditors after this date, meaning that newer credits are not included in today's cancellation.
Given the urgent financial situation in Bissau and the rather small debt cancellation, Guinea-Bissau Finance Minister José Mário Vaz was offered at least one exceptional deal to reduce its debt burden.
Considering "Guinea-Bissau's limited capacity of payment, creditors have also agreed to defer until after 31 December 2012 the repayment of maturities due by Guinea-Bissau on short term and post cut-off date debts, as well as a very significant part of the arrears on those claims. They also agreed to defer all the interest due on the amounts treated," according to the Paris Club.
"These measures are expected to reduce by more than 98 percent the debt service, including the arrears, due by Guinea-Bissau to Paris Club creditors between 1 January 2010 and 31 December 2012," the creditors added.
Minister Vas thus was asked to start negotiations with the country's other main creditors, not member of the Paris Club. These include Abu Dhabi, Algeria, Angola, Kuwait, Libya, Pakistan, Portugal, Saudi Arabia and Taiwan.
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