Paris Club agrees to cut Afghanistan's debt

By Reshmi Basu

New York, July 20 - Paris Club members and the government of Afghanistan said they have agreed to a "significant reduction" of the country's external debt.

The agreement will cancel $1.6 billion and reschedule $800 million of the sovereign's public debt.

Paris Club creditors stressed the importance that Afghanistan continues to implement economic programs as well as poverty reduction strategies, as outlined by the International Monetary Fund.

The agreement is concluded under the so-called "Naples terms." Official development assistance credits are to be repaid over 40 years, with 16 years of grace. Meanwhile 67% of commercial credits will be cancelled while the remaining 33% will be rescheduled over 23 years, with a six-year grace period.

Additionally, the government will seek comparable treatment from its other external creditors.

Formed in 1956, the Paris Club is an informal group of creditor governments from major industrialized countries.

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