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Monday, November 9, 1998 Published at 19:50 GMT

World: Americas

Calls grow for debt relief

With the economies of both Honduras and Nicaragua in ruins after Hurricane Mitch, there are growing calls for the stricken states to be given relief on their international debts.

At a United Nations development conference in Lyon, the French Prime Minister, Lionel Jospin, said France would seek international support for a debt moratorium.

Mr Jospin called on bilateral and multilateral creditors to "speed up" debt easing measures and to "introduce a moratorium for the next few years."

For its part, France has promised to cancel all its official debt to Nicaragua and Honduras.

Both Britain and Germany have indicated their backing for such action. The US position is not yet known.

[ image:  ]
Even before Hurricane Mitch ravaged their countries, Honduras and Nicaragua were spending up to 80% of foreign earnings on servicing existing foreign loans, mainly from the World Bank and the International Monetary Fund (IMF).

Nicaragua's total debt is approximately $6bn, Honduras owes $4bn.

There are now two main options for the world's financial communities. Debts could be rescheduled under the Highly Indebted Poor Countries (HIPC) initiative.

This initiative envisages debt relief for poor countries that have established a track record of economic reform. Correspondents say HIPC negotiations would take a long time.

Second option is a debt moratorium. This means suspending the debt payments for a year or two while the nations begin to recover for Mitch.

That is the option supported by the French Government.

Calls for help

Nicaragua, Honduras, Guatemala and El Salvador suffered massive damage and huge loss of life after the deadliest Atlantic storm in 200 years ripped through Central America.

[ image: Repairing the damage could take 15 years]
Repairing the damage could take 15 years
The international response to the devastation wrought by the hurricane, which killed an estimated 11,000 people and left another 13,000 missing and feared dead, has been criticised by aid agencies and the countries themselves as slow and inadequate.

The Nicaraguan government estimates that it will take 10-15 years for it to recover from the catastrophe of Hurricane Mitch.

Speaking to the BBC earlier, Nicaragua's Foreign Minister Eduardo Montealegre said his country wants the international community to write off at least 80% of its debt.

"That would allow us - instead of having significant amounts of our foreign reserves to service our debt - to be invested in schools, health, infrastructure, and economic development," he said

Asked if he meant the Nicaraguan debt should be written off immediately, he said that would be one way the international community could help significantly.

The Paris Club of creditor nations is scheduled to hold its next meeting in early December.

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