Peter Costello

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Nicaragua Qualifies for Debt Relief

NO.005

Nicaragua Qualifies for Debt Relief

The Treasurer and the Minister for Foreign Affairs are pleased to announce that the Australian Government will provide interim debt relief to Nicaragua. The announcement follows Nicaragua’s qualification for interim debt relief under the World Bank and International Monetary Fund’s Heavily Indebted Poor Countries (HIPC) Initiative on 21 December 2000.

Accordingly, Nicaragua will not be making debt repayments to Australia on its now outstanding debt of $A6.3 million (up from $A5.7 million due to exchange rate movements). This interim bilateral debt relief follows a two-year moratorium on debt repayments that Australia granted Nicaragua in 1998 in the aftermath of Hurricane Mitch. That moratorium is due to expire this month.

On 21 April 2000, Australia pledged 100 per cent bilateral debt forgiveness to countries that qualify for debt relief under the enhanced HIPC Initiative. The cost of this initiative is in addition to the aid budget.

The Australian Government is a strong supporter of the HIPC Initiative. This comprehensive international strategy provides debt relief to the world’s poorest countries where these countries work to develop sound social and economic policies and institutions, and to build poverty reduction frameworks. In this way, the HIPC Initiative strengthens the links between debt relief and poverty reduction. By requiring countries to prepare comprehensive, locally-owned poverty reduction strategies, the enhanced HIPC Initiative ensures that the proceeds of debt relief are directed towards basic health, education and poverty reduction programmes, and not lost in corruption or military spending.

In addition to forgiving the bilateral debts owed to Australia by countries that qualify for HIPC assistance, Australia has committed $A55 million to assist the World Bank and the IMF to provide debt relief.

By the end of last year, 22 countries had benefited from the enhanced HIPC Initiative, exceeding the IMF and World Bank’s goal of 20 countries qualifying for debt relief by the end of 2000. Total committed assistance is approximately $A63 billion.

CANBERRA
2 February 2001

2 Feb 2001

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