Paris Club cancels more than half of DR Congo's debt

The Paris Club of creditor nations and Brazil have agreed to cancel $7.35-billion of debt owed by the Democratic Republic of Congo (DRC), representing more than half of the nation’s foreign debt.

The agreement came after a meeting between Paris Club members and senior officials from the DRC government.

The Paris Club said that the agreement to write-off DRC’s debt was made in order to contribute to the country’s debt sustainability, but it listed problems it wants addressed. The statement said “Paris Club creditors expressed their concern over the business environment and urged the DRC to carry out further reforms to improve governance, strengthen the rule of law, and fight corruption”.

DRC has also called on its remaining creditors to write off their debts at a similar ratio. The country’s foreign debts totaled about $13.7 billion at the end of 2009, roughly the same size as its economy.

Earlier this summer, The World Bank and International Monetary Fund (IMF) agreed to support debt relief for Congo under the Heavily Indebted Poor Countries initiative. Last month, the IMF said it expected the African nation’s debt to fall to about $3 billion by the end of this year.

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

DRC, the third-largest country in Africa, boasts immense natural resources, but is still reeling from the after-effects of a bloody a civil war between 1998 and 2003. The eastern region of the country remains plagued with significant militia violence.

The DRC is seeking to achieve political stability as it embarks on an ambitious economic program ahead of presidential and primary elections in 2011.