Sri Lanka wants more debt relief

Rebuilding Sri Lanka after the tsunami could take three years

Sri Lanka is lobbying for an extension of debt relief after the Paris Club confirmed it would freeze payments from tsunami-hit nations this year.

The Paris Club of 19 creditor nations on Thursday formally agreed the offer, first made soon after the tsunami.

Sri Lanka's finance minister said he would now be pressing for the payment freeze to run till the end of 2007.

Sri Lanka, whose tourist industry was severely damaged by the tsunami, had already signed up for the 2005 freeze.

More time needed

Finance Minister Sarath Amunugama welcomed the Paris Club's ratification of the prosposals, but said his country needed a longer breathing space.

"Of course, while we are very grateful for this decision, which will help us to tide over the immediate difficulty....we would like to lobby with the G8 to extend this to even 2006 and 2007," Mr Amunugama said in an interview with Reuters news agency.

The G8 grouping of major economies is an influential agenda setting body on global economic issues, as well as having overlapping membership with the Paris Club.

The Paris Club has offered to freeze payments to tsunami-affected nations till the end of this year and allow the deferred payments to be repaid over five years, with a one-year grace period.

Mr Amunugama said Sri Lanka's reconstruction programme "will take anything from three to five years".

"So we would very much like it if the Club could extend this," he added.

Cautious response

The Paris Club first put together the debt freeze proposals in mid-January as part of the international community's response to the giant waves that killed at least 300,000 people, destroyed coastal towns and damaged fishing and tourism.

Sri Lanka and the Seychelles accepted the assistance but other stricken nations did not. India and Thailand both said their economies would be able to cope without it.

Indonesia initially accepted the Paris Club's offer, but the government later changed its mind, saying other forms of international aid would meet its needs better.

Sri Lanka has debts totalling $8.8bn, though not all of this is owed to Paris Club nations. Servicing this debt in 2005 is expected to cost the country $476m.

Indonesia owes $272bn, of which $48bn is owed to Paris Club nations. It suffered by far the highest death toll of any single country.

Mulia Nasution, a senior official in Indonesia's finance ministry, said on Friday that his country would look again at the Paris Club's proposals but was unlikely to accept.

"I think we are going to look at it again, but from a cash flow point of view it would be very hard on us. It would only increase our burden," he said.