Belgrade, Nov. 16, 2001 - Serbian Minister of Finance and Economy Bozidar Djelic said in an interview to our site that the Paris Club of sovereign countries agreed this morning to write off 66 percent of the $4.562 billion Yugoslavia owes the group of creditors.
"This is a historic event for Serbia and Yugoslavia," Djelic said in an interview to the official web site of the Serbian government from Paris. "This is the largest debt forgiveness for a moderately developed country the Paris Club has granted in the past 45 years. We are returning to Belgrade, exhausted but more than pleased."
According to the agreement signed, 51 percent of the debt ($2.362 billion) is to be written off immediately, in combination with a medium-term arrangement to be signed between Yugoslavia and the International Monetary Fund. The arrangement is due to be signed in February or March of 2002 and would last 18 or 36 months depending on the conditions negotiated, Djelic said.
"The rest, $648 million, will be written off at the expiry of the IMF arrangement," he said. "So, at the end we will be left with $1.8 billion of debt to the Paris Club of creditors."
The $1.8 billion will be repaid over 22 years with a grace period of six years. Under the grace period Yugoslavia is not obliged to make any repayments.
Djelic also said that in addition to $4.562 billion in long-term debt, the Paris Club creditor countries rescheduled $648 million in short term debt over a period of eight years, with a four-year grace period.
"Now that we have lower interest and favourable grace periods, we must immediately step up the privatisation process and further economic reforms to attract as much investment as possible, so that we can create the economic means to start repaying our debts," Djelic said. "We received great praise from World Bank and IMF representatives during the talks for both the political and economic reforms that the country has been carrying out since last October."
Djelic also said that in ten days time, the Yugoslav delegation is due to resume talks with the London Club of commercial creditors. The country hopes for similar treatment as that won in the Paris talks, in negotiating the $2.2 billion of the debt it owes to London Club members, Djelic said.
Djelic, speaking after four days of discussions behind closed doors, said that this is the first debt servicing agreement with the Paris Club since Yugoslavia halted paying and servicing its liabilities in 1992. The main creditors are the United States, Britain and France.
Yugoslavia's total foreign debt was estimated at around $12.2 billion. One fourth of the
total debt is owed to multilateral organisations, approximately the same to commercial banks at the London Club, and the largest part, some 45 percent was owed to the Paris Club. The remaining roughly four percent is a recently made debt to the Russian federation. The majority of the country's debt was accumulated during the communist leader Tito era, and was not serviced in the past ten years.
