The Paris Club of creditor nations plus Brazil cancelled $7.35 billion of Democratic Republic of Congo’s external debt, almost all its obligations with the group.
Congo called on its remaining creditors to write off their debts at a similar ratio, the Paris Club said in a statement on its website late yesterday. Congo’s debts totaled $13.7 billion at the end of 2009, about the same size as its economy.
The World Bank and International Monetary Fund agreed to support debt relief for Congo on July 2 under the Heavily Indebted Poor Countries initiative. The IMF said last month that it expected the central African nation’s debt to fall to about $3 billion by the end of this year.
The write offs will help Congo save about $520 million in debt servicing costs each year, the budget ministry said in August. The cancellations will allow Congo to open up new lines of credit and increase infrastructure and social spending, Prime Minister Adolphe Muzito said in a speech in July after Congo qualified for the relief.
Matata Ponyo, Congo’s Minister of Finance who led this week’s delegation to Paris, did not answer his phone when called for comment.
In the statement, the Paris Club also expressed concern over Congo’s business environment and urged the country to improve its governance, strengthen the rule of law and fight corruption.
Congo ranked 175 out of 183 countries in the World Bank’s 2011 Doing Business guide, which measures the ease of doing business in a country.
Creditors are not obligated to cancel Congo’s debts under the HIPC initiative. Congo’s debt office says that several private creditors are considering suing the country for their debts or have already begun litigation, a concern Congo raised at the Paris Club, the statement said.
In one such case, a U.S.-based hedge fund has frozen more than $200 million of Congo’s assets in court cases around the world in an attempt to collect a 1980s-era debt.