Italy to waive $1.6 billion poor country debt

In an interview at the International Monetary Fund's spring meeting on April 25, 1999, the Italian Treasury Minister Carlo Azeglio Ciampi said that Italy would write off 2.8 trillion lire (US$ 1.6 billion) in loans to its poorest debtors. He said that about 40 debtor countries with per capita annual income of $300 or less will benefit.

He called for the total write-off of aid debts, and a 90% cancellation of commercial debts. He also wished to consider the complete (100%) write off of all aid and commercial credits for debtor countries with average per capita income of less that one dollar per day. In return he expected to see from the poorest countries a commitment to increase social expenditure and cut non-productive spending. This would mean that countries such as Ethiopia, Rwanda, Burundi, Somalia and Sudan would be asked to give up armed conflicts and apply respect for human rights.

The 2.8 trillion lire is made up of 2.1 trillion lire in export credits and 725 billion lire in aid credits. Mr Ciampi said that the operation would have an impact on Italy's budget this year but “in a bearable way” since the majority of these credits cannot be easily repaid and the cost would be spread over a number of years.

He said that the HIPC Initiative needed revision, and he would argue for a shortening of the time taken before debt relief is delivered. He also said that private capital must assume its share of the cost of the initiative and be involved in the establishment of an emergency fund at the IMF for tackling financial crises. Italy would meet its share of the cost of the HIPC initiative by contributing to the HIPC Trust Fund.