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Paris Club creditors agreed on 13 December 2002 with the Government of Nicaragua to a restructuring of its public external debt.

Agreement to a debt restructuring of Nicaragua

December 13, 2002

Paris Club creditors agreed on 13 December 2002 with the Government of Nicaragua to a restructuring of its public external debt. Based on its track-record of reforms, Nicaragua reached on 21 December 2000 its decision point under the enhancedHIPC Initiative.

This agreement is concluded under the so-called "Cologne terms" designed by Paris Club creditors for the implementation of the enhanced HIPC Initiative: pre-cut off date commercial credits falling due after 30 September 2002 are treated so as to reach a 90% cancellation rate taking into account previous cancellations undertaken by Paris Club creditors; the remaining amounts are rescheduled over 23 years, with 6 years of grace, at market rates of interest (see attached Table). ODA credits, which amount to US$ 19 million, will be rescheduled over 40 years including a 16 years grace period.

This agreement consolidates roughly US$ 579 million of which US$ 560 million relate to pre-cut off date commercial credits falling due from 1 October 2002 to 30 September 2005.

This interim relief shall lead to the immediate cancellation by Paris Club creditors of about US$ 405 million of Nicaragua's external debt, consistent with the implementation of the enhanced HIPC Initiative. These measures are expected to reduce debt service due to Paris Club creditors between 1 October 2002 and 30 September 2005 from US$ 657 million to approximately US$ 90 million. The remaining payments consist mainly of interest on the rescheduled amounts and of maturities on post-cut off date debt. Nicaragua is committed to devote the resources freed by the present exceptional treatment of the debt on priority areas identified in the country's poverty reduction strategy.

Nicaragua agreed to seek comparable treatment from non Paris Club official creditors and private creditors.

The creditor countries express their readiness to reduce Nicaragua's stock of debts, as soon as Nicaragua reaches the completion point under the enhanced HIPC Initiative.

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