The Paris Club of creditor nations on Wednesday agreed with the Government of the Republic of Guinea to alleviate its external public debt, following the approval by the International Monetary Fund (IMF) of a new three-year arrangement under the Extended Credit Facility on 24 February 2012.
The agreement would give US$344 million in debt relief to Guinea, including more than $151 million in debt cancellation.
A statement from the Paris Club said participating creditors noted that following the crisis that Guinea has gone through, the Government has quickly revived economic activity and resumed negotiations with the Club.
The stock of debt owed to Paris Club creditors by the Republic of Guinea as of 1 January 2012 was estimated to be more than US$ 750 million in nominal terms.
The agreement was concluded under the so-called “Cologne terms” designed by the Paris Club for the implementation of the Highly Indebted Poor Countries (HIPC) initiative interim debt relief, the statement said.
“On an exceptional basis, considering the Republic of Guinea’s limited capacity of payment, creditors have also agreed to defer and reschedule over an eight-year period the repayment of maturities due by the Republic of Guinea on short term and post cut-off date debts; and, over a three-year period the arrears on those claims. They also agreed to defer all the interest due on the amounts treated.”
The statement said participating creditors welcomed these measures, which were expected to reduce the debt service (including the arrears) due from the Republic of Guinea to Paris Club creditors between 1 January 2012 and 31 December 2014 by more than 84% which corresponded to more than US$344 million, of which more than US$151 million was cancelled.
The Government of the Republic of Guinea has committed to devote the resources freed up by this debt relief agreement to priority areas identified in the country’s Poverty Reduction Strategy. The Government of the Republic of Guinea has also committed to seek comparable treatment from its private and non-Paris Club bilateral creditors.
The Republic of Guinea is resolutely implementing its reform program, which should allow it to reach the Completion Point of the enhanced Highly Indebted Poor Countries (HIPC) initiative as soon as possible, and thereby obtain the final component of relief on its debt by Paris Club creditors.