Rome (AsiaNews) Tsunami-affected countries may soon benefit from a moratorium on debt repayments as voices calling for an outright debt cancellation get louder.
French Finance Minister Herve Gaymard said the Paris Club has agreed on a moratorium on debt repayments for countries hit by the December 26 tsunami tsunami following an agreement to that effect by the G-7 group. The Club is an informal group of nations created in 1956 to provide financial services such as debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors.
The Club meets on January 12 to discuss the moratorium but the decision has already been taken. "Members have been consulted and have agreed to the measure," Gaymard said.
The Club's approval is necessary for implementation.
Two of the eleven countries affected by the disasterIndonesia and Sri Lankawill be immediately involved.
Sources close to the Paris Club cautioned however that the Wednesday meeting will only deal with debt moratorium, not cancellation.
Further measures such as debt restructuring or cancellation, which the UK backs, will only be discussed in a second phase.
The December 26 tsunami so far has killed 156,000 people on the coastlines of the Indian Ocean, from Indonesia to Somalia.
The affected countries in Asia have a combined total foreign debt of US$ 400 billion with Indonesia at the top.
Here are the World Bank's estimates per country:
Indonesia US$ 132.2 billion,
India US$ 104.4 billion,
Thailand US$ 59.2 billion,
Malaysia US$ 48.6 billion,
Sri Lanka US$ 9.6 billion,
Somalia US$ 2.7 billion,
Seychelles US$ 560 million,
Maldives US$ 270 million.
In the case of Indonesia and Sri Lanka, the debt amounts to 80 and 59 per cent respectively of their GDP.
Sources in the UK Treasury Department, which currently chairs the group of G-7 Finance Ministers, said the moratorium should last 12 months and save debtor nations up to US$ 3 billion per year.
The World Development Movement (WDM), a world anti-poverty group, welcomed the move but said the amount will only cover 1 and a half month public debt service for the five most affected countries.
According to the WDM estimates, annual debt servicing for these countries are as follows:
Indonesia: US$ 13.7 billion,
India US$ US$ billion,
Thailand US$ .9 billion,
Sri Lanka US$ 653 million,
Maldives US$ 20.8 million.
Many voices, not the least that of the Holy See, have been calling on developed nations to cancel the debts of the poorest nations so that debt repayments might be used instead in development.
The Jubilee Debt Campaign and the WDM have said that the moratorium was "welcome but inadequate" arguing that these needed debt cancellation, not just temporary relief from debt repayments.
Analysts say the coming months might bring significant changes. The UK Chancellor of the Exchequer Gordon Brown has said that debt cancellation for the poorest countries was one of the UK's objectives this year when it chairs both the G-7 and the UE.
The permanent member-nations of the Paris club are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, the United Kingdom, and the United States.
The Club agreed in November 2004 to cancel 80 per cent of Iraq's debt.
The G-7 includes the Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. (MA)