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Last Updated: Tuesday, 2 May 2006, 12:03 GMT 13:03 UK
Cameroon sees $5bn debt erased
Cameroon still needs to tackle corruption, the IMF says
More than a quarter of Cameroon's national debt has been cancelled by creditors including the World Bank and the International Monetary Fund.

The reduction amounts to about 27% of Cameroon's total debt, worth $4.9bn (2.6bn;3.8bn euros) in cash terms.

The decision makes Cameroon the 19th state to complete the Heavily Indebted Poor Countries (HIPC) initiative.

Cameroon was given the reduction after meeting poverty reduction targets and social services investments.

'Optimal results'

Other requirements imposed by the Bank and the Fund included "progress in privatisation and reform in the forestry and transport sectors".

But further progress is still required for Cameroon to strengthen its economy.

To achieve "optimal results", Cameroon needs to improve its governance through greater transparency, reduced corruption, and stronger accountability, the IMF said.

"A key challenge ahead is to raise investment and economic growth rates to reduce poverty," said Dhaneshwar Ghura, head of the IMF's mission for Cameroon.

Of the total debt written off the biggest single tranche - $176m - came from the World Bank group, while the IMF wrote off $37m.

The African Development Bank, meanwhile, wrote off $79m.

The $4.9bn reduction package is a nominal value, based on what the loan repayments would cost over the 40-year life of the loan.

Taking into account the effect of future inflation, the cost of the loan is estimated at $1.27bn in present value terms.

The figure includes all the country's external debts to other countries.

Launched in 1996, the HIPC initiative was started to create a framework under which creditors could give the world's poorest and most heavily indebted nations debt relief.

At the G8 summit in July 2005, the multilateral lending banks, the IMF, World Bank, and ADB, agreed to take part in the initiative.

Other rich countries had already agreed to write off some of their bilaterial debts. The debt relief will come into effect on 1 July 2006.

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