'Breather' on debt for tsunami nations

THE world’s richest nations yesterday agreed to allow tsunami-hit countries to freeze their repayments on billions of pounds of debt, offering them a "breath of oxygen" in the wake of the disaster.

But only three nations - Indonesia, Sri Lanka and the Seychelles - were expected to accept the offer by the Paris Club of creditors.

Thailand was expected to turn down the moratorium, "simply because they have lower debt levels than the others and do not want to degrade their standing in the international financial markets", said Herv Gaymard, the French finance minister.

France, Britain and Germany have pushed for the proposal.

They and other leading industrialised nations within the Paris Club regard the moratorium as "completely indispensable" in helping Asia’s tsunami-hit countries recover, Mr Gaymard said.

The Paris Club comprises Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.

Debt forgiveness campaigners say only permanently cancelling the tsunami-hit nations’ sizeable debts would provide the needed long-term financial boost.

Paris Club members "are failing to take the bold steps needed on debt", said the aid agency Oxfam.

Cancelling debts would give affected countries a "stream of income which they can use for reconstruction going on five, ten, 20 years into the future", said Dave Timms, spokesman for the World Development Movement, a debt relief campaign group.

Five countries worst affected by the tsunami - Indonesia, Sri Lanka, Thailand, India and the Maldives - pay 12.3 billion between them each year in public debt repayments to foreign governments and to the International Monetary Fund and the World Bank.

Adding in debt to other creditors, such as commercial banks, they pay 24 billion annually.

Indonesia is the most indebted, owing 70.3 billion, equivalent to about 80 per cent of its gross national income.