GUINEA-BISSAU Debt Treatment - July 06, 2010

• repayment of non ODA credits over 23 years , with 6 years of grace
• repayment of ODA credits over 40 years with 16 years of grace

On an exceptional basis, considering the Republic of Guinea-Bissau’s limited capacity of payment, creditors have also agreed to defer until after 31 December 2012 the repayment of maturities due by the Republic of Guinea-Bissau on short term and post-cut off date debts, as well as a very significant part of the arrears on those claims. They also agreed to defer all the interest due on the amounts treated.

These measures are expected to reduce by more than 98% the debt service (including the arrears) due by the Republic of Guinea-Bissau to Paris Club creditors between 1st January 2010 and 31 December 2012.

possibility to conduct debt swaps

On a voluntary and bilateral basis, the Government of each Participating Creditor Country or its appropriate institutions may sell or exchange, in the framework of debt for nature, debt for aid, debt for equity swaps or other local currency debt swaps:

(i) the amounts of outstanding loans, as regards ODA loans;

(ii) the amounts of other outstanding credits, loans and consolidations, up to 20% of the amounts of outstanding credits as of 31 December 1994 or up to an amount of SDR 20 million, whichever is higher.

good will clause

Given the decision by Paris Club Creditors to contribute to the exceptional assistance in favour of the Government of the Republic of Guinea-Bissau under the Enhanced HIPC Initiative, the Participating Creditor Countries declare their readiness in principle to hold a meeting following the Completion Point designed to examine the question of the Republic of Guinea-Bissau’s outstanding debt stock and to make the necessary effort in favour of the Republic of Guinea-Bissau to allow it to reach the objective of its debt sustainability in the context of an equitable burden sharing among creditors, provided that:

- the Government of the Republic of Guinea-Bissau maintains satisfactory relations with the Participating Creditor Countries and a sound adjustment track record;

- the Executive Boards of the IMF and the IDA decide that the Republic of Guinea-Bissau has reached its Completion Point under the enhanced HIPC initiative.

Phases

• First phase : From January 01, 2010 up to December 31, 2010 implemented at the signature of the agreement
• Second phase : From January 01, 2011 up to December 31, 2011 not implemented yet
• Third phase : From January 01, 2012 up to December 31, 2012 not implemented yet

The Republic of Guinea-Bissau was declared eligible to the Enhanced HIPC initiative by the IDA and the IMF in 1998 and was declared to have reached its Decision Point in December 2000. In this context, the Government of the Republic of Guinea-Bissau commits to seek promptly from all its external creditors which are not participating in the Agreed Minutes dated 6 July 2010, their appropriate contribution in terms of debt relief to the enhanced HIPC initiative, on top of traditional debt relief mechanisms and consistent with the proportional burden sharing based on their relative exposure in net present value of total external debt at Decision Point after the full use of traditional debt relief mechanisms.
 
The appropriate nature of the debt relief provided will be assessed not only on the basis of the reduction in the net present value of the debt as computed under Appropriate Market Rate, but also on the terms of repayment of the debts not cancelled. For this purpose, all relevant elements will be taken into account, including the level of cash payments received by those creditors as compared to their share in the Republic of Guinea-Bissau’s external debt, the nature and characteristics of all treatment applied, including debt buy backs, and all characteristics of the reorganized claims and in particular their repayment terms whatever forms they take and in general the financial relations between the Republic of Guinea-Bissau and creditor countries not listed in the Agreed Minutes dated 6 July 2010.

Consequently, the Government of the Republic of Guinea-Bissau commits not to accord any category of creditors -and in particular creditor countries not participating in the Agreed Minutes dated 6 July 2010, commercial banks, suppliers, bondholders and litigating creditors- a treatment more favourable than that accorded to the Participating Creditor Countries.

Participating creditors

Observers

Press release