Côte d'Ivoire
1 billion US$ debt cancellation for Côte d'Ivoire

afrol News, 10 April - Côte d'Ivoire is enjoying one pleasant news after another since it hurried to comply with international economic and governance demands. After substantial credits and aid from the World Bank, IMF, European Union and African Development Bank, now the so-called Paris Club - an informal group of creditor governments mainly from major industrialised countries - has cancelled Ivorian foreign debt valuing 911 million US dollars. 

The role of the Paris Club is "to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor nations," the organisation explains on its web page. "Paris Club creditors agree to rescheduling debts due to them," as a means of providing a country with debt relief. The Paris Club creditors met on 9-10 April and agreed with the government of Côte d'Ivoire to a restructuring of its public external debt.

This restructuring follows as a direct consequence of the approval of an arrangement under the Poverty Reduction and Growth Facility with the International Monetary Fund (IMF) on 27 March, the Paris Club informs. Outstanding credits are now to be repaid over 40 years, with 16 years of grace, "at interest rates at least as favourable as the original concessional rates applying to those loans."

- This debt relief will lead to the immediate cancellation by Paris Club creditors of about US$ 911 million of the Republic of Côte d'Ivoire's external debt, according to a release by the creditors. These measures were expected to reduce debt service due to Paris Club creditors between 1 April 2002 and 31 December 2004 from around US$ 2.26 billion down to around US$ 750 million.

Representatives of the governments of Austria, Belgium, Brazil, Britain, Canada, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Switzerland and the US agreed to the reorganisation. The delegation of Côte d'Ivoire also announced it was to meet non-Paris Club creditors to seek comparable treatment from them.

The Ivorian government had been block from international finance from the late 1990s, as various institutions blamed the country of corruption and bad governance. Following the military coup in December 1999, most of the international financial cooperation with Côte d'Ivoire was frozen. The chaotic 2000/2001 elections fermented international isolation.

Only President Laurent Gbagbo's democratic concessions last year slowly opened international doors. The European Union - after using all possible pressures towards democratisation - started re-engaging in the country. The government hurried to accept political reform and showed interest in economic reform.

After the IMF in November last year agreed to discuss its re-engagement with the Ivorian government, Côte d'Ivoire during the last five months has experienced a total normalisation of international financial relationships. In February, the World Bank re-engaged in Côte d'Ivoire. In March, the EU increased its macro-economic support for Côte d'Ivoire and last week, the African Development Bank (ADB) announced its "total" resumption of financial cooperation with the country. 

The debt reorganisation of Ivorian debt by the leading group of creditors - the Paris Club - significantly eases the financial burdens of Côte d'Ivoire. More debt cancellations are sure to follow. The next big step is however to be approved under the extensive Debt Initiative for the Heavily Indebted Poor Countries (HIPC), meaning further significant debt cancellations.

All this financial aid of course has its price. The supposedly socialist government of Côte d'Ivoire has to embark on wide-ranging structural reform, including privatisation of state companies, reduction of subsidies and free trade. Its recently approved 2002 budget however shows that President Gbagbo's government still had its hands free enough to enhance its social policies. Poverty reduction further is an important precondition for IMF cooperation. 

Sources: Based on Paris Club and afrol archives

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