restructuring of the debt of Guinea

Paris Club creditors agreed on May 15, 2001 with the Government of the Republic of Guinea to a restructuring of Guinea's public external debt. Given its track-record of reforms as well as the burden of its external indebtedness, Guinea reached in December 2000 its decision point under the enhanced HIPC Initiative. This Paris Club agreement also follows the International Monetary Fund's approval of a three year arrangement under the Poverty Reduction and Growth Facility on May 2, 2001.

This agreement consolidates roughly US$ 151 million. It includes US$ 18 million of arrears in principal and interest as at November 30, 2000 (of which 60% of ODA) and US$ 133 million of maturities in principal and interest falling due from December 1, 2000 through March 31, 2004 (of which 40% of ODA).

The 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 ODA credits are to be repaid over 40 years, with 16 years of grace, at interest rates at least as favourable as the original concessional rates applying to those loans ; pre-cut off date commercial credits falling due after the decision point 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).

This interim relief will lead to the immediate cancellation by Paris Club creditors of about US$ 70 million of Guinea'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 December 1, 2000 and March 31, 2004 from US$ 228 million to US$ 83 million. The remaining payments consist of interest on the rescheduled amounts and of maturities on post-cut off date debt. Guinea 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.

The creditor countries expressed their readiness to reduce Guinea's stock of debt, as soon as Guinea reaches the completion point under the enhanced HIPC Initiative.