(c) The need for debt reduction

The benefits of debt relief do not increase linearly with the amount of debt servicing reduced they materialize when debt reduction exceeds a critical mass.

Debt service reduction, normally in the form of interest reduction bonds, has been offered in three ways.

We reduced them through debt write off and debt relief, as well as through the method of reducing our own debts.

Promising steps on debt relief have already been taken by the Bretton Woods institutions, and we look forward to their implementation.

However, the debt reduction mechanisms, eligibility criteria and the time frame for implementation could be improved.

The terms of debt reduction had been too slow to take effect since they applied only to servicing obligations during the consolidation period.

The other option lets creditors restructure the debt at concessional interest rates so that the net present value of the debt servicing payments due on the debt will be reduced by half.

The principle of debt reduction was fundamental to any lasting international strategy and should be extended to all categories of debt.

The debt strategy should include, among other things, a drastic reduction of debt and debt servicing.

The strategy has encouraged debt and debt service reduction by the banking community for heavily indebted countries undertaking macroeconomic and structural reforms.

Undoubtedly, debt reduction and increased aid have a role to play in this process.

Over the years, we have allocated a considerable amount of aid resources for debt reduction schemes and activities, and we continue to argue that debt reduction of up to 80 per cent of the stock of official and officially guaranteed bilateral debt should be granted to the poorest developing countries.

Commercial banks, for their part, agree to provide debt and debt service reduction (DDSR), although sometimes individual banks extend new loans instead of reducing the debtor apos s obligations.

The international community responded with an international debt strategy that evolved as it came to be realized that deeper debt and debt service reductions were needed.

The need for debt stock reduction in these countries is now widely accepted.

They can also co finance DDSR operations, although Japan has been the only creditor Government to have done so to date.

To achieve this, there should be a full cancellation of all bilateral and official debt, as well as a substantial reduction of the debt stock and the debt service burden owed to multilateral financial institutions and commercial creditors.

The 41 HIPC countries among the poorest of the poor saw their total indebtedness increase from US 60 billion in 1980 to US 105 billion in 1985 and to US 190 billion in 1990 in the absence of debt reduction, the figure would have reached nearly US 200 billion in 2000.

and for a substantial reduction of all types of debt, including multilateral debt, for all categories of developing countries.

57. A new approach in official bilateral debt calls for bolder measures in two key areas, debt reduction and the institutional framework for debt relief.

Also stresses the need for the implementation of additional debt relief measures, including further reduction and cancellation of debt and debt service related to official debt, and for more urgent actions with regard to, inter alia, the remaining commercial debt owed by the developing countries

Debt reduction and an increase in ODA will allow beneficiary countries to commit more resources for the promotion of development and the fight against hunger and poverty.

Latin America, on the other hand, has been reducing its external debt to GNP ratio mainly through reduction of debt levels and only slowly undertaking new borrowing.

On the question of resolving the debt crisis, we feel more attention should be given to the substantial reduction of official bilateral and multilateral debts of developing countries, particularly the least developed countries.

59. Mr. AKPLOGAN (Benin) said that the rising level of debt and arrears among sub Saharan African countries testified to the lack of progress that had been made in reducing the debt burden on that continent.

Two main options are offered for the treatment of non concessional debt, both of which reduce the net present value of the debt by half.

3. Calls upon the international community to explore ways to implement additional measures, including further cancellation or reduction of debt and debt service related to official debt, and to take more urgent actions with regard to, inter alia, the remaining commercial debt owed by the developing countries

Rumors have swirled about a possible downgrade of France s sovereign debt, accompanied by speculation about the consequences for French banks.

They are still in the process of reducing their claims on debt crisis countries through negotiated agreements and buy backs. 13 See the report of the Secretary General, (A 48 345), entitled quot The international debt strategy as of mid 1993 quot .

The combination of debt reduction and economic reforms has helped jump start Latin American economies and has produced major capital flows and fiscal benefits.

This led to the formulation of the international debt strategy, an evolving set of international policies that now incorporate debt and debt service reduction, as well as new financial flows and adjustment cooperation.

These terms treat the debt owed by lower middle income countries and do not involve any write off of debt or reduction in net present value of debt servicing.

The time has come for the donor community and the multilateral financial institutions to heed Africa apos s call to reduce or totally cancel the debt stock.

Furthermore, it welcomed United States efforts to join the other G 7 creditors in non concessional debt reduction.

It is already clear that the EU s recently agreed fiscal compact will not constrain budget deficits or reduce national debts.

Delays in starting debt reduction facility (DRF) operations and in mobilizing sufficient bilateral donor support have compounded the problem.

Debt reduction can involve buy backs at discounts or swaps of debt for bonds with a lower face value than the original loans (discount bonds).

One solution could be to adopt regulatory and tax measures and to put pressure on Governments to induce banks to agree to debt reduction.

In order to develop, the poorest and low income countries, especially those of sub Saharan Africa needed the support of the international community in the form of a reduction and elimination of the debt burden.

However, the Facility was broadened at the time of the extension, to cover for example, consultation fees to prepare for the debt reduction operations and to cover short term debt.

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