Paris Club cancels most of Malawi's debts

The Paris Club has wiped out almost all of Malawi's foreign debts that remained after the International Monetary Fund (IMF) and the World Bank canceled 90 percent of the country's external loans six weeks ago, Nation Online of Malawi reported Saturday.

Representatives of the Paris Club creditor countries met on Thursday in Paris and agreed to recommend to reduce Malawi's debt to the grouping from 363 million U.S. dollars to 9 million dollars in nominal terms, a Paris Club statement said.

Thursday's deal followed an accord last month whereby the World Bank and the IMF agreed to cancel most of Malawi's external debt of about 2.97 billion dollars immediately releasing 15 billion kwacha (107 million dollars) yearly over the next 20 years from debt servicing to poverty reduction activities.

This development together with the Paris Club decision on Thursday means Malawi's total foreign debt stands at just about 6 billion kwacha (42.857 million dollars).

The Paris Club was formed in 1956. It is an informal group of creditor governments from major industrialized countries. It meets on a monthly basis in Paris with debtor countries in order to agree with them on restructuring their debts.

The members of the Paris Club which participated in the reorganization of Malawi's debt were representatives of the governments of Austria, Belgium, Denmark, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden and Britain.

"The representatives of the creditor countries took note that Malawi had reached the Completion Point under the enhanced initiative for the Heavily Indebted Poor Countries (enhanced HIPC initiative) on 31 August 2006. They welcomed Malawi's determination to implement a comprehensive poverty reduction strategy and an ambitious economic program providing the basis for sustainable economic growth," said the statement obtained from the Paris Club website.

The Paris Club statement said Malawi has been committed to allocate the resources freed by the present treatment of the debt to priority areas identified in the country's poverty reduction strategy.

Source: Xinhua