Canada cancels over US $80 million in debt

The Canadian government has announced the cancellation of all US $83.6 million in debt it is owed by Tanzania. "Tanzania's debt load is unsustainable, and cancelling these debts will enable it to invest more in critical areas such as health care, HIV/AIDS prevention and primary education," Canadian Finance Minister Paul Martin said in a statement on 11 February. So far, 11 heavily indebted poor countries (HIPCs) had benefited from a moratorium on debt service payments under the Canadian Debt Initiative (CDI), the Canadian Department of Finance said. Announced in December 2000, the CDI complements existing debt relief agreements under the HIPC initiative by allowing for all debts owed to Canada to be written off as indebted countries complete the requirements of the HIPC process, the statement said. Resources made available by debt relief provided under the HIPC initiative are expected to be allocated to key anti-poverty programmes outlined in Tanzania's Poverty Reduction Strategy Paper. "Canada is committed to working with the Tanzanian people and helping them implement their plan for reducing poverty in their country," Canadian Minister for International Cooperation Susan Whelan said. According to the statement, Canada was the first country to call for the cancellation of all bilateral debt owed by HIPCs. The HIPC initiative slashes debts of developing countries in the framework of poverty alleviation programmes and economic reforms. Although economic reforms have led to an increased growth rate in Tanzania, the impact on poverty has been limited. The pattern of growth, regional analysts say, has been biased to sectors of the economy - most notably the tourism and mining sectors - in which the poor generally do not participate. According to the country's central bank, before Tanzania qualified for relief under the HIPC initiative its foreign debt stood at US $6.6 billion Tanzania on 11 February secured the right to export clothes duty-free to the United States under the African Growth and Opportunity Act (AGOA) scheme, the BBC reported. Under AGOA, countries could export unlimited amounts of apparel made from US textiles to the US without duties or quotas, and existing quotas on exporting locally produced fabrics to the US would also be enlarged, the BBC said. AGOA also requires countries to show their commitment to the rule of law and democracy, lift barriers to US trade and investment, protect intellectual property, fight corruption and reduce poverty, the BBC added. Tanzania's approval comes 18 months after it became eligible and began to implement the conditions of the AGOA agreement.