Debt freeze eyed for tsunami-hit nations

LONDON — The world’s seven leading industrial nations called yesterday for freezing debt payments owed by countries devastated by the Indian Ocean tsunami.

Britain’s Treasury chief, Gordon Brown, said the Group of Seven nations would seek agreement for the plan at a meeting Wednesday of the Paris Club, an informal group of creditor governments that helps decide on debt restructuring.

“We ask creditors at the Paris Club meeting on 12 January to positively consider assisting affected countries in this way,” a statement released by the U.S. Department of Treasury said.

The British government, which this year is the head of the G-7, said the group will quit collecting about $3 billion a year from countries including Indonesia, Thailand and Sri Lanka until the costs of reconstruction have been assessed by lenders such as the World Bank and International Monetary Fund.

The ministers said that they recognized that some countries would be unable to make repayments this year.

On Thursday, both the World Bank and International Monetary Fund came out in support of a debt moratorium.

Yesterday’s announcement bridges differences between European nations, which sought an immediate moratorium, and the United States, which said it was willing to support such an arrangement but first wanted to study whether it was in the best interests of the Asian governments involved.

Extending the freeze on repayments will be taken up when officials from the Paris Club, a group of 19 creditor nations, meet Wednesday and the G-7 finance ministers convene in London Feb. 4 and 5.

“This is a very sensible and desirable measure,” said Tony Killick, a senior research associate at the Overseas Development Institute, a London research group. “There are reasonable assurances that the money would be put to good use.”

The G-7 members, which together with Russia make up the G-8 and have a rotating chairmanship, called on the IMF, World Bank, Asian Development Bank and other multilateral institutions to provide financial assistance to the tsunami-affected countries.

They also called for urgent consideration of an early-warning system for tsunamis in the Indian Ocean.

“We must ensure that those countries are not prevented from paying for essential reconstruction because they are having to fund the servicing of their debts,” said British Chancellor of the Exchequer Gordon Brown.

“So, for afflicted countries that request it, the G-7 is proposing an immediate suspension of debt repayments.

“And depending on the conclusions of the needs assessments, I believe that the G-7 and Paris Club must also stand ready to consider all options for further assistance,” he said.

Mr. Brown said on Tuesday that the proposal aimed to freeze about $3 billion in annual debt repayments from the affected countries.

Story Continues →