HONDURAS: Camdessus to Recommend Write-Off of 80 Percent of Debt

By Thelma Mejía Reprint | | Print |

Thelma Mejia

TEGUCIGALPA, Nov 20 1998 (IPS) - IMF Managing Director Michel Camdessus promised Friday to recommend the cancellation of 80 percent of Honduras’ foreign debt of around 4.3 billion dollars.

Camdessus, on a tour to the Central American countries hit hardest by Hurricane Mitch, said in Tegucigalpa that a total write- off of Honduras’ external debt was improbable. But he announced that he would press for mechanisms allowing for a significant reduction of the country’s multilateral debt.

“We’ll come up with something” to achieve a substantial partial cancellation or a restructuring of Honduras’ debt, he said.

Before heading off to El Salvador Friday, Camdessus told the press that he would bring up the issue at the Inter-American Development Bank (IDB) conference which gets underway Dec. 10 in Washington.

He also pledged to propose major debt relief for Honduras before the Paris Club, which links the 15 biggest bilateral creditor countries. “I am leaving dismayed to see the destruction here, and I think reconstruction work” must be supported somehow, he said.

According to Camdessus, under normal conditions, a country can aspire to a 50 percent write-off of its debt, but in this case “the ideal” would be to recommend that 80 percent be written off.

“I don’t want to promise anything, I’m just saying we will intercede and that the IMF will have to recommend or come up with something,” he added.

The pledge gave rise to a collective sigh of relief among the government officials and representatives of civil society who on Thursday had been told by Camdessus that rather than forgiveness of its debt, the country should seek resources for reconstruction.

But before boarding a plane to San Salvador Friday he said he would push within the IMF for a review of Honduras’ situation.

“I am going to show the IMF board of directors photographs of the disaster in this country, which cannot pull out of this with its own resources, which it does not have. We are going to try to do something to reduce the multilateral debt burdern. I don’t know, we’ll come up with something,” he repeated.

Camdessus had a few run-ins with the press in Honduras, when reporters questioned him on structural adjustment policies. On one occasion, he quipped that the IMF was not responsible for the poverty of developing countries.

To demonstrate the IMF’s “generosity,” he pointed to the approval of 65 million dollars in “unconditional” assistance for imports of medicine, tools and other instruments needed for reconstruction.

But he also emphasised that Honduras would have to strive hard to show that the funds it obtained for reconstruction were handled with “transparency.”

“I hope no one is enriched by the aid received,” he stressed. “That is something I want to make very clear, as well as the need to deepen economic adjustment measures in the country in order to draw investment, achieve stability and face up to the challenge of progress.”

Two weeks ago, Tegucigalpa issued an appeal to the international community to cancel Central America’s debt, especially that owed by the countries hit hardest by Mitch’s visit, which set back the economic integration initiatives underway in the subregion over the past eight years.

Besides bearing the brunt of the devastation caused by Mitch, Honduras and Nicaragua have the largest foreign debts in Central America – a combined total of around 10 billion dollars.

In the case of Honduras, the possibility of a write-off is more difficult because most of its 4.3 billion dollar-debt is owed to multilateral institutions.

But the initiative to get the debt of the two countries written off has been gaining strength. France, Spain and Canada announced that they would cancel the debt owed them by Honduras and Nicaragua.

More than 40 percent of the Honduran budget goes toward servicing the foreign debt. But Mitch made it impossible for repayments to continue, because the country will lack export capacity over the next two years.

The international community has sent the subregion large shipments of medicine, blankets and food, and has pledged resources to help it rebuild.