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Creditor nations offer moratorium on debt repayments

PARIS -- Rich creditor nations offered yesterday to let tsunami-hit countries halt repayments on billions of dollars of debt, possibly for as long as a year, the chairman of the Paris Club said.

Jean-Pierre Jouyet said the group of 19 wealthy nations, including the United States, would allow any country directly affected by the Dec. 26 Indian Ocean earthquake and tsunami to halt debt repayments if they wanted to.

In a statement, the Paris Club said it agreed to the moratorium "in order to allow these countries to dedicate all available resources to address humanitarian and reconstruction needs."

Only Sri Lanka, Indonesia, and the Seychelles have expressed an interest so far, he said. Indonesia, the most indebted of the affected countries and the one that suffered the highest death toll, would be the biggest beneficiary of the moratorium, saving $3 billion in debt repayments due this year, Jouyet said.

Finance Minister Herve Gaymard of France said earlier that Thailand does not want to take advantage of the offer because of fears it could affect its credit rating.

The moratorium could last up to a year, depending on the results of assessments to be carried out by the International Monetary Fund, Jouyet said.

The five countries affected most by the tsunami -- Indonesia, Sri Lanka, Thailand, India, and the Maldives -- pay $23.1 billion each year in public debt to foreign governments, the IMF, and the World Bank. When debt service to other creditors, such as commercial banks, is added, they pay $45 billion annually.

Leading industrialized nations in the Paris Club regard the moratorium as "completely indispensable" in helping Asia recover, Gaymard said. France has pushed the idea along with Britain and Germany.

White House press secretary Scott McClellan said Tuesday the United States and other industrial powers would not expect debt payments from affected countries seeking a moratorium until the World Bank and International Monetary Fund assess their reconstruction and financing needs.

"We recognize that some countries may be unable to make debt payments," he said. "We'll work on a consensus approach."

But the moratorium raised questions of fairness and possible corruption. Governments and international financial organizations have long wrestled -- with limited success -- with how to relieve debt burdens in developing countries, mainly African nations even poorer than the tsunami-hit countries.

Some economists question whether relief is needed at all, arguing that governments in the affected countries can still pay their debts because the tsunami did no insurmountable damage to local economies nor cause regional stock markets to collapse.

The affected countries were considered too well off to merit World Bank and IMF debt forgiveness for "highly indebted poor countries."

Debt relief advocates criticized the moratorium, saying only cancellation of the affected nations' sizable debts will provide the long-term boost they need.

Foreign Minister Hassan Wirajuda of Indonesia said Tuesday that his country was "perfectly grateful" for the proposed moratorium but suggested cash aid was more important. "Clearly we would equally appreciate any donations instead of newly accorded credit," Wirajuda said.

Thailand was not expected to accept the moratorium "simply because they have lower debt levels than the others and do not want to degrade their standing in the international financial markets," Gaymard said.

Debt relief campaigners said the Paris Club proposals do not go far enough. Members "are failing to take the bold steps needed on debt," aid agency Oxfam said.

Dave Timms, spokesman for the debt relief campaign World Development Movement, said canceling debts would give affected countries a "stream of income which they can use for reconstruction going on five, 10, 20 years into the future."

The Paris Club comprises Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, and the United States.

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