Finance ministers of the G-7 industrialised countries said yesterday they have agreed to freeze the debt repayments of nations hit by the Asian tsunami and will work with the Paris Club and other creditors to arrange how.
The G7 finance ministers agreed to urge the International Monetary Fund, the World Bank and the Asian Development Bank and other multilateral institutions to make the strongest possible efforts to assist ravaged nations struggling with a tragedy that has left more than 150,000 people dead.
"We would not expect debt payments from affected countries that request it [ the freeze] until the World Bank and IMF have completed a full needs assessment of their reconstruction and financing requirements, recognising that some countries may be unable to make debt payments," the G7 said in a statement, adding, "We will work, within the Paris Club, with other creditors to achieve a consensus for this approach."
The Paris Club is scheduled to meet on January 12th.
The G7 finance ministers also urged the World Bank and IMF to complete their needs assessment by month-end. They said they will then consider whatever other steps are necessary when they meet on February 4th in London.
Asian countries affected by the tsunami have some $272 billion in external debt, with Indonesia alone owing some $48 billion to the Paris Club. That Indonesian debt would generate more than $3 billion in principal repayments alone this year.
While the debt relief plan reflects a generous spirit on the part of the G7, some analysts say debt relief for tsunami-hit Asian economies may offer them short-term gain but bring pain in the long run as the cost of servicing debt payments may rise in future.
Countries hardest hit by the tsunami are Indonesia, India, Sri Lanka, Thailand and the Maldives. The death toll from the tsunami stood at well over 150,000 people, government and health officials said. Indonesia's health minister said the toll in his country was likely to be more than 100,000. - (Reuters)