NO.005

The Treasurer and

the Minister for Foreign Affairs are pleased to announce that the Australian Government

will provide interim debt relief to Nicaragua. The announcement follows Nicaragua’s

qualification for interim debt relief under the World Bank and International Monetary

Fund’s Heavily Indebted Poor Countries (HIPC) Initiative on 21 December 2000.

Accordingly, Nicaragua will not be making debt repayments to Australia on its now

outstanding debt of $A6.3 million (up from $A5.7 million due to exchange rate

movements). This interim bilateral debt relief follows a two-year moratorium on debt

repayments that Australia granted Nicaragua in 1998 in the aftermath of Hurricane Mitch.

That moratorium is due to expire this month.

On 21 April 2000, Australia pledged 100 per cent bilateral debt forgiveness to

countries that qualify for debt relief under the enhanced HIPC Initiative. The cost of

this initiative is in addition to the aid budget.

The Australian Government is a strong supporter of the HIPC Initiative. This

comprehensive international strategy provides debt relief to the world’s poorest

countries where these countries work to develop sound social and economic policies and

institutions, and to build poverty reduction frameworks. In this way, the HIPC Initiative

strengthens the links between debt relief and poverty reduction. By requiring countries to

prepare comprehensive, locally-owned poverty reduction strategies, the enhanced HIPC

Initiative ensures that the proceeds of debt relief are directed towards basic health,

education and poverty reduction programmes, and not lost in corruption or military

spending.

In addition to forgiving the bilateral debts owed to Australia by countries that

qualify for HIPC assistance, Australia has committed $A55 million to assist the World Bank

and the IMF to provide debt relief.

By the end of last year, 22 countries had benefited from the enhanced HIPC Initiative,

exceeding the IMF and World Bank’s goal of 20 countries qualifying for debt relief by

the end of 2000. Total committed assistance is approximately $A63 billion.

CANBERRA

2 February 2001