News Brief: IMF Managing Director Welcomes Paris Club Debt Relief for Honduras and Nicaragua
December 10, 1998
IMF Managing Director Welcomes Paris Club Debt Relief for Honduras and Nicaragua
Michel Camdessus, Managing Director of the International Monetary Fund (IMF), who is participating in the Consultative Group meeting on the Reconstruction and Transformation of Central America at the Inter American Development Bank (IADB), today welcomed the actions by the Paris Club with respect to the external debt of Honduras and Nicaragua:
"The actions by the Paris Club represent a clear demonstration of the international community’s determination to ensure that external debt payments do not become an obstacle to reconstruction and modernization in Honduras and Nicaragua. As such, a deferral of all payments due to the Paris Club, pending more definitive treatment of their debt fits into the broader assistance strategy. In this connection, the assistance committed to a Trust Fund to help cover multilateral debt service obligations of these two countries is also welcomed.
"In the case of Honduras, the IMF has already contributed to this overall strategy by ensuring flows of financial assistance through a SDR47.5 million (US$66 million) emergency credit; by making the maximum contribution possible (50 percent of quota) under its policies; and by disbursing the full amount of the emergency loan to support purchases of badly needed imports. In addition, the IMF staff is accelerating discussions with the authorities on an Enhanced Structural Adjustment Facility (ESAF) concessional loan early in 1999, which will provide financial support for strong economic policies for reconstruction andgrowth. In Nicaragua, which already has in place an ESAF program, we expect to review the economic situation in early 1999, focusing in particular on the emerging larger balance of payments requirements.
"Moreover, the staffs of the IMF, World Bank and IADB will prepare a comprehensive assessment of the external debt situation of Nicaragua and Honduras and related requirements for debt relief in the context of the HIPC Initiative early next year.
"After my report to the Executive Board on my recent visit to the Central American countries affected by Hurricane Mitch, I found a clear commitment among IMF Executive Directors to assist the courageous governments and people of this region in their efforts to transform this tragedy into an opportunity to create new, more just societies. We intend to continue to follow the situation closely and to react with new initiatives as needed," Camdessus said.