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The Paris Club concludes a US $ 141 million flow treatment with Guinea-Bissau under the enhanced HIPC Initiative.

Restructuring the debt of Guinea-Bissau

January 26, 2001

Paris Club creditors agreed on January 26, 2001 with the Government of the Republic of Guinea-Bissau to a restructuring of its public external debt. Given its track-record of reforms as well as the burden of its external indebtedness, Guinea-Bissau 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 an arrangement under the Poverty Reduction and Growth Facility on December 15, 2000.

This agreement consolidates roughly US$ 141 million. This amount is broken down between US$ 58 million in arrears as of November 30, 2000 and US$ 28 million of maturities in principal and interest falling due from December 1, 2000 up to December 31, 2003. Furthermore, around US$ 29 million in arrears on post-cut-off date debt are deferred, as well as US$ 26 million on previously deferred post-cut-off date maturities falling due until December 31, 2003.

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 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.

This interim relief will lead to the immediate cancellation by Paris Club creditors of about US$ 60 million of Guinea-Bissau'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 December 31, 2003 from US$ 58 million down to around US$ 9 million. The remaining payments consist of interest on the rescheduled amounts and of maturities on post-cut off date debt. Guinea-Bissau is committed to use 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-Bissau's stock of debt, as soon as Guinea-Bissau reaches the completion point under the enhanced HIPC Initiative


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