Monday, August 2, 1999 Published at 13:07 GMT 14:07 UK
Mozambique debt written off
Mozambique is one of the countries most affected by debt
The main countries to which Mozambique owes money have agreed to reschedule the country's international debt.
A spokesman for the UK Export Credit Guarantee Department (ECGD) confirmed the decision by what is known as the Paris Club to write off $112m (£70m) of the African country's debt.
The spokesman said creditor governments had signed a memorandum agreeing to write off a total off 90% of Mozambique's Paris Club credit stock.
It is believed the UK played a leading role in securing the signatures.
An additional $32m debt write off for Mozambique was agreed by the governments earlier this year.
Mozambique's total foreign debt is estimated to be around $5.5bn. In June, a debt initiative sponsored by the World Bank and International Monetary Fund agreed to cut $1.44bn from the country's debt stock.
The debt to the Paris Club group of creditors is only a proportion of the country's total debt.
'Onerous type of debt'
But Kevin Watkins, senior policy advisor for Oxfam, which has long campaigned for easing the debt burden, welcomed the debt write off as a major step forward.
Speaking to BBC News Online, he described export credit type debt as the most "onerous kind of debt" because it is charged at market rates. "There are no concessionary rates at all," he said.
"Symbolically, Britain's lead sends a clear signal to other countries," said Mr Watkins. "It proves that we are committed to leading by example."
He said the export credit debt would not have been possible without Britain's lead because other governments had been committed to writing off aid, or concessional, debt, which has a very low interest rate. He said they been reducing export-credit debt on a very conservative basis.
"France was the slowest of all and this new move puts the French position in an ugly light. While all other creditors are moving in the right direction, France is moving in the wrong one," he said.
Mr Watkins also described the move as a victory for "social justice". He said money that was "being used in the name of export promotion" was being put towards "hairbrained development schemes" or "arms exports".
The spokesman for the ECDG said the write-off was part of the UK's commitment to help achieve sustainability for highly indebted countries. He said the move to play a leading role in helping countries emerge for debt and poverty included increasing the level of write off.
The decision, which is expected to be part of wide-ranging review of the ECGD's export credit policies, comes in the wake of an international summit in Cologne in June.
The G7 summit, which brought together leaders from the US, Britain, France, Germany, Italy, Japan and Canada, was dominated by a discussion of measures to relieve Third World debt and plans to ensure stability in the world economy.
Mozambique ranks alongside the Democratic Republic of Congo, Ivory Coast, Ethiopia and Nicaragua, in the top-five worst-off countries in the world.
In its 1997 report, the United Nations Development Programme (UNDP) said that governments in Africa alone, if relieved of their debt obligations, could use the funds "to save the lives of millions of children by 2000".