The Treasurer, the Minister for Foreign Affairs and the Minister for Trade are pleased to announce that the Australian Government has forgiven Nicaragua’s bilateral debt to Australia of $5.4 million.
The announcement follows a recent determination by the International Monetary Fund (IMF) and World Bank that Nicaragua had undertaken all steps necessary under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative to be afforded debt forgiveness.
On 21 April 2000, the Australian Government pledged 100 per cent bilateral debt forgiveness to countries that qualified for debt relief under HIPC. Nicaragua is the first country to receive such bilateral debt forgiveness from Australia, the cost of which is in addition to the aid budget.
Australia supports the enhanced HIPC Initiative as one way of effectively addressing the unsustainable debt burdens of the world’s poorest, most heavily indebted countries. Twenty seven countries have now benefited from the Initiative, qualifying for over US$40 billion in debt relief, which amounts to nearly two thirds of their total stock of external debt in net present value terms.
The HIPC framework requires countries to prepare comprehensive, locally-owned poverty reduction strategies and ensures that the proceeds of debt relief are directed towards basic health, education and poverty reduction programmes. Nicaragua is committed to devoting the resources freed by the forgiveness of its debts to priority areas such as health and education.
Australia’s decision to formally forgive this debt follows interim bilateral debt relief that was extended to Nicaragua after it qualified for HIPC assistance in December 2000. Since that time Nicaragua has not been required to service its debt to Australia pending it reaching the final stage of the HIPC process.
In addition to forgiving bilateral debts owed to Australia by countries that qualify for HIPC assistance, the Australian Government has committed $77 million to date to assist the World Bank and the IMF provide debt relief through the HIPC Initiative.