East West Debt, solving defaulted trade and bank debt

East-West Debt march 2003 news, update : CONGO

Congo

Paris Club creditors agreed in September 2002 with the Government of the Democratic Republic of Congo to restructure its public external debt. This agreement treats roughly $8.98 billion, of which 16% are loans under the Official Development Assistance program (ODA). This amount consists of $8.49 billion of arrears in principal and interest as of 30 June 2002 and $0.49 billion of maturities in principal and interest to be paid by 30 June 2005.

With this agreement, pre-cut off date ODA credits are to be repaid over 40 years, with a 16 years period of grace, at interest rates at least as favorable as the original rates applying to those loans. 67% of pre-cut off date commercial credits are cancelled, taking into account previous treatments undertaken by Paris Club creditors. The remaining amounts are rescheduled over 23 years, with 6 years of grace, at market interest rates. This debt relief will lead to the immediate cancellation by Paris Club creditors of $4.64 billion of Congo's external debt. This will reduce debt service due to Paris Club creditors between 2002 and 2005 from $9.09 billion down to $380 million.

The remaining payments consist of a share of the interest due on the rescheduled amounts as well as debt service on post-cut off date debt from 2003 onwards. The Government of the Democratic Republic of Congo has committed to seek from its other external creditors, i.e. non Paris Club bilateral creditors, banks and suppliers, a comparable treatment. Paris Club creditors agreed to increase the reduction rate to 90%, as soon as the Democratic Republic of Congo has reached its decision to implement the enhanced debt initiative for the Heavily Indebted Poor Countries.

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