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Debt treatment -
October 19, 2006

Supporting agreements with the international institutions

Program with the IMF : Poverty Reduction and Growth Facility (PRGF) approved on August 05, 2005

Download the IMF report : PRGF document

Total external debt of the country

$2 969 million as of December 31, 2005

$355 million of which being due to Paris Club as of August 01, 2006

Amounts treated

$355 million of which $137 million being canceled, of which $218 million being rescheduled

Accorded treatment

Reduction of Malawi's stock of debt

Completion point reached on August 31, 2006

Categories of debt treated

Treatment of arrears as of July 31, 2006

Treatment of the stock as of August 01, 2006

Repayment profile

Treatment under HIPC Initiative Exit terms

  • repayment of ODA credits over 40 years with 16 years of grace

Rescheduling of loans, credits and consolidations granted under ODA conditions at rates and conditions of interest at least as favorable as the concessional rate applying to those loans, and in any case not more than the Appropriate Market Rate.

Specific provisions

Possibility to conduct debt swaps

On a voluntary and bilateral basis, the Government of each Participating Creditor Country or its appropriate institutions may sell or exchange, in the framework of debt for nature, debt for aid, debt for equity swaps or other local currency debt swaps:

(i) all ODA loans;

(ii) the amounts of other outstanding credits, loans and consolidations, up to 20% of the amounts of outstanding credits as of 31 December 2000 or up to an amount of SDR 5 million, whichever is higher.

Participating Creditor Countries and the Government of the Republic of Malawi shall inform semi-annually the Secretariat of the Paris Club, who shall inform other creditors, of the debt swaps agreements they have implemented. All elements necessary to evaluate the operation, its impact on the Republic of Malawi's economy and on the evolution of Creditor's exposure shall be transmitted to the Secretariat, including: its nature and purpose; the parties to the debt swap; the amount, type and value of the debt treated; the price of sale to investors and the expense of the Republic of Malawi.

Payment of non-consolidated amounts before May 01, 2007

Comparability of treatment provision

The Republic of Malawi was declared eligible to the Enhanced HIPC initiative by the IDA and the IMF in 2000 and was declared to have reached its Completion Point on 31 August 2006. In this context, the Republic of Malawi commits to seek promptly from all its external creditors which are not participating in the Agreed Minutes dated October 19, 2006, their appropriate contribution in terms of debt relief to the enhanced HIPC initiative, on top of traditional debt relief mechanisms and consistent with the proportional burden sharing based on their relative exposure in net present value of total external debt at Decision Point after the full use of traditional debt relief mechanisms.

The appropriate nature of the debt relief provided will be assessed not only on the basis of the reduction in the net present value of the debt as computed under Appropriate Market Rate, but also on the terms of repayment of the debts not cancelled. For this purpose, all relevant elements will be taken into account, including the level of cash payments received by those creditors as compared to their share in the Republic of Malawi's external debt, the nature and characteristics of all treatment applied, including debt buy backs, and all characteristics of the reorganized claims and in particular their repayment terms whatever forms they take and in general the financial relations between the Republic of Malawi and creditor countries not listed in these Agreed Minutes.

Consequently, the Republic of Malawi commits not to accord any category of creditors -and in particular creditor countries not participating in these Agreed Minutes, commercial banks, suppliers and bondholders- a treatment more favourable than that accorded to the Participating Creditor Countries.

Cut-off date

January 01, 1997

Organisation of the session

The meeting was chaired by Mr. Ambroise Fayolle, Co Chairman of the Paris Club.

The head of the debtor country's delegation was Mr. Goodall E. Gondwe, Minister of Finance.


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