Debt Relief

Paris Club freezes debt payments of over $3.3 billion

Indonesia, Sri Lanka, Seychelles granted relief.

The Paris Club of creditor nations offered Wednesday an unconditional freeze on debt repayments for Indonesia, Sri Lanka and the Seychelles to help them recover from last month’s catastrophic tidal waves.

Debt payments owed this year amount to three billion dollars for Indonesia, 328 million for Sri Lanka and five million for The Seychelles, though some of those sums may be owed to private creditors.

“This decision is an exceptional measure. It is justified by the scale of the catastrophe. In this exceptional situation, creditors wished that the suspension not be submitted to any conditions, neither an accord with the IMF (International Monetary Fund), nor to comparable treatment by private creditors,” Club president Jean-Pierre Joyuet stressed at a press conference.

“It is an offer by the Paris Club that has not yet been formally accepted by the countries concerned: Sri Lanka, Indonesia, and The Seychelles,” he added.

The death toll from the earthquake and tsunamis that devastated Indian Ocean coastlines on December 26 has topped 159,000, while as many as five million people were thought to be homeless or without food and clean water.

Such conditions typically accompany aid by the 19-member Paris Club, an informal cluster of some of the world’s richest creditor nations.

“This measure takes effect immediately. It will allow countries affected to use all available resources for humanitarian needs and reconstruction,” Jouyet said.

Detailed evaluations of needs by the IMF and the World Bank would allow the Paris Club to fine-tune its offer, in particular regarding how long it would remain in effect, the club said.

The need for supplementary measures would also be determined, with some political leaders and non-governmental organisations calling for debt restructuring or outright cancellation.

Other countries affected such as India, Malaysia and Thailand have not asked that their debt payments be frozen, and official aid announced at UN-sponsored meetings in Jakarta and Geneva was independent of the Paris Club measures.

To date, public and private aid pledged worldwide for the countries hit by the disaster has surpassed 10 billion dollars, according to an AFP tally.

The principle of a debt repayment freeze had been agreed upon last week by the Group of Seven industrialised nations and by several members of the Paris Club.

The Paris Club gathers here once a month to confer with debtor countries with which it has agreements and, in some cases, to re-negotiate repayments. The club was formed in 1956 at a meeting here of countries owed money by Argentina.

The club currently groups Australia, Austria, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.

Agence France-Presse (AFP),  January 14, 2005

Categories: Debt Relief, Odious Debts

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