UK forgives US $152 million debt

Mozambique secured its image as the poster child of donor countries on Thursday as Britain announced that it had written off all of the country's bilateral debt.

The US $152 million was scrapped under the Heavily Indebted Poor Countries (HIPC) debt relief scheme, British embassy officials in Maputo said.

Minister for Finance and Planning Luisa Dias Diogo told IRIN: "The forgiveness is crucial in delivering Mozambique's Action Plan for the Reduction of Absolute Poverty.

"The savings will allow us to spend more money on education, health, infrastructure and rural development. Eighty percent of the population depend on agriculture as a primary source of income," she added.

The debt relief was signed late Wednesday by Britain's Junior Foreign Minister for Africa, Baroness Valerie Amos, and Mozambican Foreign Minister Leonardo Simao.

A senior Mozambican foreign affairs official said that donor countries were rewarding one of Africa's poorest countries for its commitment to good governance.

"We have shown that we are committed to reducing poverty by implementing strong IMF-supported economic policies. Our reward is well-deserved," desk officer for the United Kingdom, Eufresio Gouveia, told IRIN.

Gouveia added that the British government's decision to drop the debt would hopefully set a precedent for other foreign governments.

"More recently we have had very positive discussions with the Germans about writing off the bilateral debt," he said.

Before qualifying for HIPC, Mozambique, one of the world's poorest countries, had a staggering foreign debt of more than US $5 billion. Most of the debt has now been forgiven. Mozambique's debt stands at slightly under US $1 billion.