Brazil slashes Mozambique's debt

Brazil's president believes other nations should follow his example

Brazil has cancelled 95% of debt owed to it by Mozambique, and called on other nations to make similar financial gestures toward poorer nations.

Brazil said it had forgiven about $332m (£185m; 273m euros) of bilateral debt owed to it by Mozambique.

Negotiations on cancelling the majority of the southern African nation's debt began in 2000.

Brazilian president Luiz Inacio Lula da Silva said other countries should follow his government's example.

'Essentially unpayable'

A deal, outlining Brazil's intentions, was signed in Mozambique last year.

"I think this could serve as an example for other countries similar in size to Brazil to make a like gesture to the poor countries of the world that often have an essentially unpayable debt," President Lula da Silva said.

His Mozambican counterpart, Joaquim Chissano, welcomed Brazil's move.

Earlier this year, the International Monetary Fund (IMF) said it would lend Mozambique $16.6m to support its budget until 2006.

The IMF said Mozambique's economic performance had been "favourable" despite rising inflation.