Agreements signed with Bolivia to cut the country's external debt by US$39 million

(Caracas, October 22, 1998).– Bolivian Minister of Finance Herbert Muller, and CAF President & CEO Enrique García today signed in Caracas an important agreement to reduce the balance of external public debt which this country maintains with the Corporation by US$39.1 million.

Emphasizing the importance of this event for Bolivia, García said it would contribute to the long-term sustainable development of the country, and to its participation – at private and public level – on international capital markets, as demonstrated by the risk ratings which have been assigned to the country: B1 by Moody’s and BB- by Standard & Poor's.

This month, CAF will disburse a first tranche from the funds managed by the Corporation, but without affecting the capital of the institution. This will reduce the Bolivian debt by US$13 million, he added.

The operation is part of a decision by the CAF Board last July to authorize participation in the Heavily Indebted Poor Countries Debt Reduction Initiative – HIPC whose objective is to help these nations in their efforts to improve their profile with the international community.

Minister Muller said the operation of the HIPC program was doubly important for Bolivia because it helps the country with its balance of payments, but, above all, the Bolivian government has decided to use this relief exclusively for social programs, with priority for education and health.

The cooperation that the multilateral organizations are providing, particularly CAF and the Andean countries, to Bolivia is a contribution to the fight against poverty, which is the number one issue, not only in our country, but in all Latin America, the minister added.

HIPC is a commitment by the international financial community, led by the World Bank and the International Monetary Fund (IMF), to reduce the net present value of sovereign debts with bilateral and multilateral organization of relatively less developed countries, which meet the very strict methodological criteria established by these organizations.

Bolivia, together with a select group of countries, meets the criteria for access to the HIPC initiative given its track record of success with macroeconomic stability reforms over 12 years, combined with prudent and responsible management of its external debt, elimination of its commercial debt with private banks and successive restructurings of its public debt with the Club of Paris.

In the case of Bolivia, the HIPC will reduce the balance of its external public debt by US$448 million at net present value, including a contribution from bilateral institutions of approximately US$157 million and US$291 million from multilateral organizations.