Congo Signs Deal Cancelling
The "London Club" of private sector creditors signed a deal with Congo Republic on Thursday cancelling 80 percent of debts owed it by the oil-producing central African country, a London Club representative said.
The figure was a touch higher than the 77 percent of debts the country's finance ministry had on Wednesday announced would be cancelled in the latest step to ease Congo's multi-billion dollar debt burden after sovereign lenders forgave most debts.
"This cancellation allows Congo to have a sustainable debt because it was over-indebtedness that was hindering the country's development," Thierry Desjardins, chairman of the coordination committee of Congo's private creditor banks, said after signing the agreement in Brazzaville.
The Finance Ministry said Congo's debts to the London Club were 288 billion CFA owed ($643.6 million) before forgiveness.
The cancellation is the fruit of more than a year's negotiations which began after Congo secured an International Monetary Fund programme and qualified for the Heavily Indebted Poor Country's (HIPC) debt-relief scheme last year.
That led some of the Paris Club of sovereign lenders, which had already agreed to cancel 67 percent of its debt, to increase forgiveness to 90-100 percent, wiping out a huge chunk of a foreign debt mountain that stood at $5.5 billion in 2004.
"The funds freed up by the cancellation of this debt will be lodged at the central bank for financing pro-poor sectors: water, health, electricity, infrastructure and education," said Congo's finance minister, Pacifique Issoibeka, at the ceremony.
Desjardins said more than 90 percent of London Club creditors had already agreed to restructure the debt of the small country of 4 million people, which lies across the Congo river from the vast Democratic Republic of Congo.
The former French colony's debts have become legally and politically sensitive due to a string of foreign legal suits.
Last month a U.S. federal appeals court ruled that a racketeering case in the United States against Congo's national oil company SNPC could not proceed, but sent the case back to a lower court to see if former company head Bruno Jean-Richard Itoua was also immune from prosecution in U.S. courts.
The case was brought by Kensington International Ltd, a Cayman Islands registered company that buys and sells debt.
It accused SNPC, Itoua and French bank BNP Paribas <BNPP.PA> of diverting oil revenues to powerful public officials and protecting oil revenues from seizure by legitimate creditors. Kensington is pursuing the case against BNP Paribas and Itoua.
London-based anti-graft watchdog Global Witness published documents which it said showed Congolese President Denis Sassou-Nguesso's son had spent hundreds of thousands of dollars derived from oil sales on what appeared to be personal items.
London's High Court refused to grant an injunction against Global Witness, ruling "It is an obvious possible inference that his expenditure has been financed by secret personal profits made out of dealings in oil".
President Sassou-Nguesso is being investigated by French police over the origin of funds used to buy property in France.
Sassou-Nguesso dismissed the proceedings as "gratuitous racism and provocation," adding that "all the world's leaders have chateaux and palaces in France, whether they are from the Gulf, from Europe or from Africa".