Press Release: IMF to Extend 100 Percent Debt Relief to Nicaragua Under the Multilateral Debt Relief Initiative
December 23, 2005
"Under the Multilateral Debt Relief Initiative, the IMF Executive Board has approved debt relief for Nicaragua (see Press Release No 05/286). As part of the Initiative, the IMF will provide 100 percent debt relief on all debt incurred by Nicaragua to the IMF before January 1, 2005 that remains outstanding. This amounts to approximately US$201 million, or US$132 million excluding remaining assistance under the Heavily Indebted Poor Countries (HIPC) Initiative. This debt relief should become available in early January as soon as the remaining consents of the contributors to the PRGF Trust Subsidy Account have been received. The international community has made these additional resources available to help Nicaragua make progress toward its Millennium Development Goals (MDGs).
"Nicaragua has qualified for IMF debt relief because of its overall satisfactory recent macroeconomic performance, progress in poverty reduction, and improvements in public expenditure management. Macroeconomic performance in recent years has been favorable although the economy was adversely affected in 2005 by factors including the oil price shock. To strengthen the policy framework further, the authorities have adopted a 2006 budget ensuring continued macroeconomic stability in the run-up to next year's elections and have made excellent progress in advancing their agenda of reforms, especially in the fiscal area and financial sector. Since adoption of Nicaragua's first PRSP in 2001, poverty reducing spending has been increased from about 10 percent of GDP in 2002 to 13½ percent of GDP projected for 2005. The positive effects of the PRSP implementation are reflected in improved indicators in the education and water sectors. Moreover, the public expenditure management framework has been further strengthened by the passage of a new law on budget administration. Performance in these areas provides assurance that resources made available under the Multilateral Debt Relief Initiative will be used effectively.
"The IMF looks forward to working with Nicaragua to help it develop a strong and stable economy and to make sustained progress toward the MDGs," he said.