Restructuring the debt of Yemen

Yemen's economic program is supported by an IMF Extended Arrangement and a three year arrangement under the IMF's Poverty Reduction and Growth Facility approved in October 1997. The third annual arrangement of the PRGF and the fourth review under the Extended Arrangement were approved by the International Monetary Fund on February 28, 2001.

Given the high level of external indebtness of Yemen, this agreement consolidates part of the stock of debt of Yemen in order to reach a sustainable indebteness level. The stock of debt due to Paris Club creditors was estimated to be US$ 1,9 billion on December 31, 2000, out of which US$ 1,85 billion of pre cut off date debt (of which 24% of Official Development Assistance - ODA) and US$ 50 million of ODA post cut off date debt. The agreement reached with Paris Club creditors included about US$ 420 million on the stock of pre cut off date debt, of which 90% of ODA debt and 10% of commercial debt.

The agreement is concluded under the so-called "Naples terms" designed by Paris Club creditors : 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 are treated so as to reach a 67% cancellation rate taking into account previous cancellations undertaken by Paris Club creditors ; the remaining amounts of commercial credits will be repaid in advance.

This relief will lead to the immediate cancellation by Paris Club creditors of about US$ 25 million of Yemen's external debt. These measures are also expected to reduce debt service due to Paris Club creditors in 2001 and 2002 from US$ 125 million to US$ 96 million. The remaining payments consist of interest on the rescheduled amounts, maturities on previously rescheduled debt and maturities on post-cut off date debt. Yemen is committed to devote the resources freed by the present exceptional treatment of the debt to priority areas identified in the country's poverty reduction strategy.