INDRA will provide that service only if creditors extend maturities of firms short term debt into loans with maturities of between one and four years.

3 failure to discharge due liability or

The bulk of that amount comprised long term debt (80 per cent), while short term debt accounted for 18 per cent of the total.

Holders of both state and federal bonds were thus offered a basket of long dated bonds, some with an interest rate of 3 , and others with 6 (with a ten year grace period). The basket was designed in such a way as to result in an average debt service cost of 4 .

In an environment of zero or near zero interest rates, creditors have an incentive to extend and pretend that is, roll over their maturing debt, so that they can keep their problems hidden for longer. Because the debt can be refinanced at such low rates, rollover risk is very low, allowing debtors who would be considered insolvent under normal circumstances to carry on much longer than they otherwise could.

Public and publicly guaranteed debt continued to account for the major share of long term debt, at 83 per cent of the total, but the volume of private non guaranteed debt accelerated by 18 per cent and its share rose from 15 per cent in 1996 to 17 per cent of the total.

The better than expected cash position resulted from additional voluntary contributions received, interest income earned, savings on prior period obligations as well as delays in the liquidation of current period obligations.

Expenditure Liquidation of prior period obligations

Unliquidated obligations current period

Overall, short term debt and total debt service also declined.

With total short term obligations estimated at 68.4 billion,14 the package thus covered 88 per cent of those obligations.

The debt indicators show what would be expected to be a sustainable debt position.1 The debt service ratio measured 13 per cent, the debt stock to exports ratio 114 per cent, the debt stock to GNP ratio 31 per cent, and short term debt to foreign exchange reserves ratio 53 per cent as noted, however, those figures obscure diverse trends at the country level.

Recognizing that commodity prices are an important element for heavily indebted poor countries that are commodity dependent in maintaining long term debt sustainability,

In such a situation, the only option available for the Government was to seek debt restructuring to alleviate the debt burden or to have short term cash flow relief.

On the subject of debt, the United Nations is requested to support the efforts currently being made by the Commission of the African Union for a thorough review of debt, leading to debt cancellation for the heavily indebted poor countries and to debt reduction or cancellation for middle income indebted countries.

This obligation expired 31 12 2004 and no further provision has been made.

Savings on, or cancellation of, prior periods obligations

Therefore, only current maturities and arrears were treated, and an agreement was reached that the consolidated amounts would be reimbursed over a period of 14 years, including a grace period of three years.

Public deficits must be brought down to sustainable levels on a permanent basis, with a view to stopping the escalation of public debt.

Bond holders are to receive 456 million in bonds due in 2011 (with the same coupon of 9.5 per cent) and 574 million in bonds due in 2018 (with the same coupon of 9.04 per cent).

The issue was not only the aggregate level of debt it was also a question of balance between private and public sector debt, their maturity structure, the level of contingent liabilities, reserve management and pursuit of macroeconomic policies consistent with development objectives.

The long term sustainability of debt also depends on the growth and export prospects of debtor countries.

As of 31 December 1993, the interest owed on the external public debt totalled some B 1,518 million. Adding this to the principal outstanding on the contractual public debt gives a total public sector debt of B 7,228.9 million at the end of 1993.

Savings on or cancellation of prior period obligations

Current period obligations related to peacekeeping operations remain valid for 12 months following the end of the financial period to which they relate.

Unliquidated obligations prior periods

We welcome the initiative of the finance ministers of the Group of Eight to cancel the debt of 18 heavily indebted poor countries. We hope to see further debt relief for other heavily indebted countries so that financial resources can be released to meet urgent development needs.

Unliquidated obligations prior periods

Savings in liquidation of prior period obligations 13 617 9 403

The commercial banking debt, principal and interest combined, comes to about B3,222 million.

Furthermore, the type of debt that required restructuring was different in the case of Mexico, debt took the form of short term government bonds, while in the three most affected Asian countries, it was short term debt contracted by the private sector from foreign banks.

(h) Savings on or cancellation of obligations from the prior biennium

Long term sustainability of debt depends mainly on the growth and export prospects of debtor countries.

The mechanics of debt restructuring are straightforward. Governments can offer a menu of new bonds worth some fraction of the value of their existing obligations.

Governments can offer a menu of new bonds worth some fraction of the value of their existing obligations. Bondholders can be given a choice between par bonds with a face value equal to their existing bonds but a longer maturity and lower interest rate, and discount bonds with a shorter maturity and higher interest rate but a face value that is a fraction of existing bonds face value.

It was noted that the stay was meant to cover all actions capable of affecting the assets of the debtor or increasing the debtor s liabilities.

Sovereign Debt at Square One

Noting with concern the continuing debt and debt servicing problems of heavily indebted developing countries as constituting an element that adversely affects their development efforts and economic growth, and stressing the importance of alleviating once and for all, where applicable, their onerous debt and debt service burden with the aim of attaining a sustainable level of debt and debt service,

The Administration stated that the entire amount was paid in one lump sum to utilize the unliquidated obligations created in the biennium 1992 1993, which could be carried over to only the first year of the next biennium.

The package was then large enough to provide complete cover for maturing debt obligations (as interbank debt was rolled over), and the crisis could therefore be overcome.

We are grateful to several countries for cancelling some of our debt and for offers of moratoriums on repayment of debts.

Recognizing that commodity prices are an important element for heavily indebted poor countries that are dependent on commodities for maintaining long term debt sustainability,

For starters, when it comes to public debt, there is a big difference between the gross and net figures. While Japan s gross public debt, for example, is a massive 246 of GDP, the net figure, accounting for intra government debts, is 127 of GDP.

As Daniel Gros recently pointed out, debt that can be rolled over indefinitely at zero interest rates is no debt at all. This is an extreme example but the closer a fixed interest rate gets to zero, and the longer the maturity becomes, the lower the burden of the stock of debt.

(f) Declaration of a general moratorium on the remaining debt