Restructuring the debt of the Democratic Republic of Congo

Paris Club creditors agreed on 13 September 2002 with the Government of the Democratic Republic of Congo to a restructuring of its public external debt, following the approval of an arrangement under the Poverty Reduction and Growth Facility with the International Monetary Fund on 12 June 2002.

This agreement treats roughly US$ 8 980 million, of which 16% are ODA loans. This amount consists of US$ 8 490 million of arrears in principal and interest as at 30 June 2002 and US$ 490 million of maturities in principal and interest falling due from 1 July 2002 up to 30 June 2005.

The agreement is concluded under the so-called "Naples terms" : 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 ; 67% of pre-cut off date commercial credits are cancelled, taking into account previous treatments 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 debt relief will lead to the immediate cancellation by Paris Club creditors of about US$ 4 640 million of the Democratic Republic of Congo's external debt. These measures are expected to reduce debt service due to Paris Club creditors between 30 June 2002 and 30 June 2005 from around US$ 9 090 million down to around US$ 380 million. The remaining payments consist of a share of the interest due on the rescheduled amounts as well as debt service on post-cut off date debt from 2003 on.

The Government of the Democratic Republic of Congo has committed to seek from its other external creditors, i.e. non Paris Club bilateral creditors, banks and suppliers, a comparable treatment.

Paris Club creditors agreed to top-up the reduction rate to 90% (so called Cologne terms), as soon as the Democratic Republic of Congo has reached its decision point under the enhanced Debt initiative for the Heavily Indebted Poor countries. Creditors stressed the importance they attached to the continued satisfactory implementation of the DRC's economic programme and its poverty reduction strategy.