MAPUTO, October 11, 2007 - The World Bank welcomed the announcement that Mozambique has secured the cancellation of its $153.2 million of remaining eligible medium and long term public and publicly guaranteed commercial external debt through a Second Commercial Debt Reduction Operation of the World Bank. This amount was cancelled through a buy-back under which it was paid 9 cents for each dollar of debt. These debts were contracted in the 1970s and 1980s to finance commercial imports by former state enterprises, but could not be serviced. The buy-back operation was entirely financed through a grant totaling $13.8 million from the Government of Norway, making use of the World Bank Group's Debt Reduction Facility. This operation is part of the country’s external debt management strategy and builds on other debt reductions initiatives from which Mozambique has benefited such as the Heavily Indebted Poor Countries Initiative (HIPC), the Multilateral Debt Relief Initiative (MDRI), Paris Club agreements, and the First Commercial Debt Reduction Operation of 1991, which resulted in a cancellation of $123.8 million of the country’s long-term commercial debt. “This second commercial debt buyback is an important step in stabilizing Mozambique's external financial relationships and in reconfirming its position as a secure place to trade and invest. We are pleased to note that the country’s eligibility for this operation comes as a result of its coherent macroeconomic policies, and represents a commitment by the Government of Norway and the World Bank to support Mozambique’s economic development.” said Michael Baxter, Regional Country Director for Angola, Malawi, Mozambique, Zambia and Zimbabwe. The Debt Reduction Facility for IDA-only countries provides grant funding to eligible Governments to buy back - at discount - the debts owed to external, commercial creditors. It also finances the legal and financial advice that Governments need to implement such buybacks. Since its inception, the DRF has supported 22 completed buyback operations, extinguishing about $8.0 billion of external commercial debt. By reducing sovereign debt burdens, the DRF facilitates the improvement of creditor burden sharing under the HIPC Initiative and helps countries normalize their external financial relations.
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