HM Treasury News Release
184/98 10 November 1998
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TRUST FUND FOR HONDURAS AND NICARAGUA
NEW UK GOVERNMENT PROPOSALS
A new trust fund for Honduras and Nicaragua, with #10 million
backing from the UK, was proposed today by Chancellor of the
Exchequer, Gordon Brown and International Development Secretary,
Clare Short. It is one of three proposals for international
assistance put forward by the UK following the recent natural
disaster in those countries.
The proposals, outlined in letters to G7, IMF and World Bank
colleagues, are to consider urgently :
a trust fund to which bilateral and multilateral creditors
can contribute assistance to meet short term debt service
obligations, with a UK contribution of #10 million.
shortening the timetable for completing debt relief
programmes for post-catastrophe countries as for post-
conflict countries
a moratorium on official bilateral debts.
The #10m UK contribution is additional money for Nicaragua and
Honduras. The Treasury has guaranteed access to the reserve for
this extra money.
A copy of the joint letter is attached. Announcing these
proposals, Gordon Brown said:
"In addition to emergency relief aid which many countries
and agencies are already giving to the victims of Hurricane
Mitch, it is essential to consider longer term assistance
to help the countries affected back on track towards
sustainable development.
"The proposals announced today will do a great deal to
support the aid efforts. We shall continue to work closely
with other Governments and international financial
institutions to deliver practical, effective assistance."
Clare Short said :
"We are willing to explore the possibility of providing
help to Honduras and Nicaragua through some kind of
moratorium on official bilateral debts with other bilateral
creditors.
"It is essential that the post-catastrophe countries
themselves, not other creditors, benefit from any actions
taken. Any combination of IFI and bilateral aid will be
designed to achieve this vital safeguard."
Reminding members of the public how they can most effectively
support Government efforts, the Chancellor said :
"Individual contributions to help Honduras and Nicaragua
can be made free of tax through the Millennium Gift Aid
scheme. This scheme, which came into effect earlier this
year, enables anyone giving at least #100 to qualifying
projects before the end of the year 2000 to reclaim tax on
their gift.
"I know that many thousands of people have been moved by
the plight of the people of these countries and wish to add
their own contribution to that being provided directly by
Government. Through Millennium Gift Aid, we shall help them
to make their assistance go that much further."
10 November
1998
M. Michel Camdessus
Managing Director
International Monetary Fund
700 19th Street N W
Washington DC 20431
WASHINGTON
USA
POST-CATASTROPHE COUNTRIES
We are all aware of the terrible devastation that Hurricane
Mitch has caused to the social and economic infrastructure in
Honduras and Nicaragua - two countries that were amongst the
poorest in the world even before this disaster.
Many countries have already made emergency contributions to the
international aid effort, and these donations must continue.
It is essential that emergency aid is delivered immediately to
help the homeless and injured and to minimise the chances of
further damage being caused through disease.
However, it is not too early to begin to think about how to put
these countries back on a sustainable track towards
development. The catastrophe caused by Hurricane Mitch has
left both Honduras and Nicaragua in need of substantial sums of
money. Given the drastic reduction in their exports as a
result of the hurricane, this money is necessary to finance
essential imports as well as to allow the necessary rebuilding
of the countries' infrastructure. We must now consider how
this money is best delivered.
For the reasons above, in addition to providing rapid
disbursing assistance under existing mechanisms for disaster
relief, we ask you to look urgently at possible mechanisms that
could mitigate the debt service payments that these countries
are due to make to International Financial Institutions over
the coming months. We would support the temporary suspension
of debt service payments to the International Financial
Institutions.
We suggest one way forward is to set up a Trust Fund for
Honduras and Nicaragua into which bilateral and multilateral
creditors could contribute to help meet the debt service
obligations that these countries have to these Institutions in
the near future. The UK stands ready to provide money for any
such fund alongside its continuing emergency aid donations.
In the longer term, it is also important to ensure that these
post catastrophe countries receive the debt relief that they so
desperately need. We therefore urge you to look at how we
might ensure that the HIPC initiative is used as effectively as
possible as a means for providing debt relief for these post
catastrophe countries, as you have constructively begun to do
so for post conflict countries. It is important that debt
relief is not stalled for these countries because of Hurricane
Mitch and that creditors are ready to provide the full debt
relief necessary at the decision or completion points to ensure
that their debt burdens are reduced to sustainable levels. In
particular we would press for consideration of shortening the
timetable to permit an earlier completion point.
The UK is also willing to explore with other bilateral
creditors the possibility of providing help to Honduras and
Nicaragua through some kind of moratorium on official bilateral
debts. Any combination of IFI and bilateral aid will of course
have to be designed so that the beneficiaries of any actions
are the post catastrophe countries themselves, and not other
creditors.
We have written in similar terms to James Wolfensohn and
Enrique Iglesias, and am passing a copy of this letter to G7
and EU Finance Ministers.
GORDON BROWN CLARE SHORT
# = pounds sterling