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Last Updated: Friday, 7 January, 2005, 23:45 GMT
G7 supports tsunami debt freeze
A man surveys damage to his property in Phuket, Thailand
The damage to Asian countries is extreme
The G7 group of industrialised nations has announced a freeze on debt payments from the countries affected by the Asian tsunami.

UK Chancellor Gordon Brown unveiled the accord on Friday, ahead of a meeting of the Paris Club of creditor countries on 12 January.

British officials said it would last for at least a year and could save debtor countries about $5bn (2.6bn).

The deal will only freeze repayments, rather than cancel the debt itself.

The G7 is also likely to urge the Asian Development Bank (ADB) to speed up its assistance to the stricken countries.

"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," Mr Brown told reporters.

"So for afflicted countries that request it, the G7 is proposing an immediate suspension of debt repayments.

DEBT AS % OF GDP
Indonesia 80%
India 21%
Thailand 48%
Sri Lanka 59%
Maldives 45%
Source: World Development Movement

"And depending on the conclusions of the needs assessments, I believe that the G7 and Paris Club must also stand ready to consider all options for further assistance."

The moratorium could be a vehicle to tackle debt in the longer term, the BBC's correspondent Carole Walker has learned from a source in the British Treasury.

The UK has said it wants restructuring as well as an immediate freeze, suggesting that Sri Lanka's debt - among others - should be cancelled altogether.

Billions owed

More than 150,000 people are thought to have been killed by the tsunami, which hit countries all around the Indian Ocean on 26 December after an earthquake off Indonesia.

The countries affected owe some $272bn (144bn) between them in external debt.

Indonesia, the biggest individual debtor and the worst affected nation, owes $48bn to the members of the Paris Club.

Its debt repayments this year have been estimated at $4.1bn, plus interest.

So far, governments have offered more than $4bn in aid, with almost $1bn pledged by private individuals, companies and non-governmental groups.

European Union finance ministers met on Friday to talk about aid to the stricken region, and a "rapid response" humanitarian force for future catastrophes.

Switzerland and Kuwait have also offered to reschedule the debt owed to them.

The ADB has promised up to $500m (265m) in grants and heavily discounted loans to Indonesia, Sri Lanka and the Maldives, as well as $175m taken from existing projects.




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