Bulgaria is to waive $57m (£29m) of debt it is owed by Libya following the release of six medics convicted of infecting Libyan children with HIV.
The imprisonment of the medics caused an international outcry
Instead the money will be diverted to an international fund for the victims and their families, officials said.
The five nurses and a Palestinian-born doctor, who served eight years of the life sentences they received, had always maintained they were innocent.
They were pardoned by the president on their arrival in Bulgaria last month.
"With these funds Bulgaria aims to help Libya in its efforts to modernise its medical infrastructure, to contribute for the treatment of the HIV-infected children and for paying financial aid to their families," the BTA news agency quoted a government spokesman as saying.
The medics' release to Bulgaria was made possible by a deal struck in Tripoli for medical assistance and the normalisation of ties between Libya and the EU.
Last month, Libya commuted to life imprisonment the death sentences imposed on the medics after the families of the infected children agreed to a compensation deal.
The Benghazi International Fund provided $1m (£500,000) for each child.
The money was donated primarily by Qatar, Slovakia, Bulgaria and the Czech Republic, according to Libyan Prime Minister Baghdadi Mahmudi.
France is also expected to provide equipment for the new hospital in Benghazi, where the infections took place, and provide training for Libyan medical staff over five years.