Gov't negotiates debt ease with Paris Club creditors

ST JOHN'S, Antigua (CMC):

The Baldwin Spencer administration has reached a favourable arrangement with Paris Club creditors over this country's US$133-million debt to the group.

Finance Minister Harold Lovell announced on Wednesday that the agreement was brokered during intense and very long discussions in Paris on September 15.

Under the agreement, Antigua and Barbuda does not have to repay the principal (US$47 million) for up to seven years and the creditors will stop accumulating penalty interest which now stands at US$86 million.

"Whereas before, interest was accumulating at an average rate of 10 per cent, we now have been able to provide a breather for Antigua and Barbuda where we no longer will be accumulating interest on this debt stock," Lovell explained.

He said if you have a debt stock of US$133 million and you do nothing about it, at an average interest of 10 per cent a year, you would be adding in excess of EC$40 million (US$14.8 million).

The Finance Minister said that money could be used to finance education, infrastructural works and health care. But he said that is the burden that the twin-island state would have had to carry as a result of the non-payment of these debts.

Lovell said Antigua and Barbuda secured the best possible terms given its history on defaulting including, "an extended term of 12 years to repay loans that have already matured and are due to mature in the next year which are eligible for full payment; and a moratorium on principal for a period of up to seven years given that the agreement is for five years, in keeping with Paris Club regulations.

"In other words, instead of a five-year grace period under Paris Club regulations, we were given an extended period in addition to the five years so that the first payment on the consolidated arrears and principal would not be made until the year 2017."

Bilateral agreements

Lovell said the next step would be to enter bilateral agreements with each individual creditor. This would provide Antigua and Barbuda with an opportunity to negotiate for even more concessionary terms, including debt relief.

He said at least one country has expressed a willingness to write off significant portions of Antigua and Barbuda's debt, but declined to identify the nation.

The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilise and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).

The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club has reached 417 agreements with 87 different debtor countries.