Paris Club nations agree to cancel $758 m debt

The Paris Club of mainly western creditor nations have agreed to cancel US $758 million of Ethiopian debt to help cut poverty and stimulate growth. The debt write-off is part of the Heavily Indebted Poor Countries initiative (HIPC), launched in 1996 to ease the burden on the world's poorest countries. Ethiopia's external public sector debt was estimated in 2003 by the International Monetary Fund at $6.8 billion, of which the Paris Club nations were owed $1.89 billion as of April 2004. The write-off came as the Ethiopian government launched concerted efforts through its diplomats overseas to gain greater debt relief. According to the Ministry of Finance and Economic Development, Ethiopia allocates up to $100 million a year in debt servicing. The Paris Club said in a statement issued in the French capital on Friday that Ethiopia's outstanding debt now totalled $153 million. "Paris Club creditors welcomed Ethiopia's determination to implement a broad-based and rigorous economic program which should provide the basis for sustainable economic growth and comprehensive poverty reduction," the statement added. Representatives of Australia, Austria, Belgium, Finland, France, Germany, Italy, Japan, the Netherlands, the Russian Federation, Sweden, the United Kingdom and United States struck the deal. The African Development Bank also agreed on Friday to wipe out $339.5 million in Ethiopian debts. "Ethiopia will be released from up to 80 percent of annual debt service to the Bank Group until the entire amount is delivered," the bank said in a statement. It added that interest repayments would fall from $41.33 million to about $11 million as a result of the deal. The bank added that it had also agreed a loan of $88 million to Ethiopia to support the government's poverty reduction strategy. "Hard-hit by drought, famine, epidemics and wars, Ethiopia remains one of the poorest countries in the world," the bank said.