Hurricane nations to get debt relief

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The Independent Online
NICARAGUA AND Honduras are likely to be able to stop paying interest on their debts to rich country governments in the wake of the devastation caused by Hurricane Mitch.

A meeting in Paris on Wednesday is expected to agree to a moratorium on debt servicing, although it will not go as far as campaigners would like and cancel the debts.

The so-called "Paris club" of rich countries will back an agreement by European finance ministers to suspend interest payments by the two afflicted nations.

However, parallel concessions are not expected from a separate meeting of multilateral agencies such as the International Monetary Fund and Inter- American Development Bank in Washington later this week.

Campaigners such as Oxfam and Christian Aid are urging the international community to speed up debt cancellation for Nicaragua and Honduras. The latter, the worst affected, estimates its bill for post-hurricane reconstruction could be $2bn. However, it already owes $4.1bn in foreign debt, and about a third of government revenue has to be spent on debt interest.

In a new report Oxfam calls for an immediate stop to all debt interest payments by the two countries, and proposes how that could be done.

The aid organisation would also like to see an extension of the International Monetary Fund and World Bank's existing debt relief programme for any other country which might suffer a natural disaster.

Many campaigners are highly critical of the existing programme and some, such as Jubilee 2000, want to see all third-world debt written off.