Mozambique disappointed at failure to cancel foreign debt

As relief operations in Mozambique were hindered again by new rains, the country's government said yesterday it was disappointed that creditors had decided to suspend - rather than cancel - its large foreign debt in the wake of last month's flood disaster.

However, economists specialising in Mozambique added an optimistic note, saying that foreign help with rebuilding the country's infrastructurewas likely to boost the economy.

Mozambique's Foreign Minister, Leonardo Simao, expressed disappointment that the Paris Club of creditors had decided on Wednesday only to grant his government a "debt holiday" from payments this year. He said: "We are satisfied that a positive step was taken for Mozambique's debt. [But] our expectation was for the full cancellation of the debt."

While still one of Africa's poorest countries, labouring under a heavy debt burden, Mozambique nevertheless had, before the floods, the fastest growing economy in the world. Mr Simao said his country would continue to lobby for a write-off of its debts. His government claims repairing flood damage to roads, bridges and other infrastructure is likely to cost $250m.

The country's Paris Club creditors - which includeBritain, the United States and Portugal - said on Wednesday they would defer all payments due on the country's external debt as part of measures to help overcome its "current exceptional state of emergency".

The World Council of Churches also appealed to the powerful G8 nations to write off Mozambique's debts. "Only complete cancellation ... will do," the council said. But Matthew Pearson, an Africa analyst at Investec in London, said investment was more important than debt cancellation.

He said: "If foreign aid is used to rebuild the infrastructure we could see even greater growth in Mozambique."

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