Nicaragua among Countries to Receive Debt Relief

After months of negotiations, the G-7 (Germany, Canada, the United States, France, Italy, Japan and the United Kingdom), plus Russia, agreed to cancel the debt owed to the World Bank, the IMF and the African Development Bank for 18 of the world's poorest countries, including Nicaragua, Honduras, Bolivia and Guyana in Latin America. There was no agreement to cancel debt owed to the Inter-American Development Bank.

Mario Alonso, President of the Central Bank of Nicaragua, said that, "This puts us in a better financial situation as a country. The sustainability of the debt will be greatly improved." In spite of the fact that Nicaragua had received debt relief in 2004 under the Heavily Indebted Poor Countries (HIPC) Initiative, the country still carried a foreign debt that most observers regarded as unsustainable in that it would not be able to both make debt service payments and develop economically. In order to qualify for the present debt cancellation, Nicaragua and all the other beneficiary countries have had to pass through years of harsh structural adjustment policies; and the G-8 countries made it plain that for 20 more countries to be granted multilateral debt cancellation, they would also have to complete years of structural adjustment.

In addition, Humberto Arbulú Niera, IMF representative in Nicaragua, explained that the decision to cancel this debt would only become effective in the case of Nicaragua when the government presents its program for this year to the IMF concerning how the country's budget will allocate savings from debt cancellation. This program is already two weeks late because of disagreements between the executive and the legislature about financial administration and taxes.

In the National Assembly, Miguez Lopez Baldizon, of the Blue and White bench, which supports President Enrique Bolaños, stated that he interpreted the G-8 decision "more in the political sense, as support for the efforts that the present government has made in the sense of conducting Nicaragua along the correct path."

Economist Roger Cerda said that he was not certain if 100% of the multilateral debt would be cancelled. He stated that, in the case of Nicaragua, the Inter-American Development Bank and the Central American Bank of Economic Integration should be included as well, which as noted above, they are not. And economist Adolfo Acevedo explained that the funds freed by the cancellation must go in their entirety to alleviate the situation of the country in which 78% of the population lives on less than US$2 per day and 43% lives on less than US$1 per day. These are figures that are not even found in many parts of Africa, he noted.