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Creditor Countries Cancel Afghanistan's Debt


WASHINGTON (RFE/RL) -- A group of creditor nations known as the Paris Club today forgave more than $1 billion of Afghanistan's foreign debt, giving one of the poorest countries in the world a much needed boost.

The Paris Club is an informal grouping of 19 nations, plus the World Bank and the International Monetary Fund, who meet once a month in Paris to discuss whether to offer financial aid to developing countries, and whether to forgive existing loans.

In a statement, the Paris Club said the move was partially in response to Afghanistan's participation in a joint World Bank-International Monetary Fund program for a group of nations known as Heavily Indebted Poor Countries (HIPC). Some $440 million is being canceled as part of that initiative, and creditors have voluntarily agreed to cancel an additional $585 million.

In March 2009, the Paris Club estimated Afghanistan's total foreign debt at $2.1 billion, half of which was owed to its member nations.

The U.S. Treasury Department said the group made its decision based on the progress Afghanistan has made in strengthening its economy.

"Today's agreement represents a great achievement for Afghanistan," State Department spokesman Mark Toner said, "and reflects the international community's acknowledgment of the great strides the country has made in strengthening its economy. Lifting the debt burden inherited by the Afghan government marks a crucial step on Afghanistan's road to economic sustainability."

With U.S. help, he said, Kabul was able to streamline its finances.

"The accord also recognized Afghanistan's performance under its IMF program and its progress on adopting and implementing economic reform in a tremendously challenging environment," Toner said. "Since 2002, [U.S.] Treasury technical advisers have worked closely with the Afghani Ministry of Finance to streamline the budget process, improve the payment system for government employees, restructure Afghanistan's debt, and establish a debt-management unit within the Ministry of Finance, which played a crucial role in today's negotiations."

Afghanistan has agreed to use the funds it would have spent paying its debt on poverty-reduction programs and initiatives to advance the UN's Millennium Development Goals.

written by Andrew F. Tully