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Mozambique calls for total debt cancellation

MAPUTO: The Mozambican government said of Friday it will continue to appeal for a total cancellation of its external debt in the wake of the worst floods in living memory.

Reacting to Wednesday's announcement by the IMF and World Bank of a further 600 million dollars (627 million euros) in debt relief for Mozambique, Foreign and Cooperation Minister Leonardo Simao told AFP: "Our objective is total debt cancellation and anything short of that is not a great help."

However, Simao expressed satisfaction at the latest relief, bringing the total amount of Mozambique's debt reduction under the Heavily Indebted Poor Countries (HIPC) initiative to 4.3 billion dollars.

"The savings made out of external debt relief will be used to improve the living standards of the population," said Simao. About 70 percent of Mozambique's population of about 17 million live in absolute poverty.

The IMF and the World Bank said that in response to the floods, the institutions had also agreed to waive 100 percent of the debt service owed them by the country over the next 12 months.

The 600 million dollars in additional relief, offered by the two institutions as well as some of Mozambique's bilateral creditors, is part of an enhanced version of the Heavily Indebted Poor Countries Initiative (HIPC), launched by the IMF and the Bank in 1996.

In net present value terms, the additional relief is worth 254 million dollars, according to a World Bank statement.

Under the original HIPC scheme, creditors accorded Mozambique some 3.7 billion dollars in debt reduction.

The World Bank's assistance under the enhanced initiative amounts to 67 million dollars while the IMF will contribute 19 million dollars. Under the original plan, the Bank and the Fund contributed 975 million and 152 million dollars respectively. AFP