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Tanzania US$ 623 million Debt Buy Back

The Government of the United Republic of Tanzania, represented by Mr. Raphael O S. MOLLEL, Permanent Secretary of the Treasury at the Ministry of Finance and Mr. Daudi T.S. BALLALI, Governor of the Bank of Tanzania visited the Banque Nationale de Paris (BNP), acting as agent for the commercial banks, in Paris on October 25th, 1999 to launch the external commercial debt reduction operation of the United Republic of Tanzania, also called the Debt Buy Back operation.

The launching of this operation was made possible following the approval on June 29, 1999 by the Board of Directors of the World Bank of a grant of US$ 40.2 million from the Debt Reduction Facility for IDA-Only countries, and which led to the signature on October 5th, 1999 of a Grant Agreement between the International Development Association (IDA) acting as Administrator of the Debt reduction fund for IDA-Only countries, and the United Republic of Tanzania represented by the Ministry of Finance and the Bank of Tanzania. The grant will be funded by the KfW acting as agent for the Federal Government of Germany (DM 26 million), the State Secretariat for Economic Affairs, Government of Switzerland (SwFr. 10 million), and an IDA grant (US$ 19.2 million).

The total debt eligible under the operation amounts to US$ 623 million, of which USD 324,6 Million represents principal and USD 298,6 million, interests. It represents arrears accumulated in the 70's and 80's towards foreign creditors when Tanzania failed to meet much of its external payment obligations due to foreign exchange problems. Under the operation which also includes a Debt for Development option, Tanzania will offer to purchase eligible debts at a price of 12% of the eligible principal outstanding.

Acceptance of the offer by the relevant creditors will extinguish all principal and accrued interest.

Tanzania is one of World's poorest countries, with a committed external debt outstanding of around US$ 8.3 billion. This operation represents an important step towards the implementation of the Government's Debt Reduction Strategy. Following a preliminary review, Tanzania has recently qualified for consideration of additional debt relief under the Highly Indebted Poor Countries (HIPC) program, thanks to the Government's sustained macroeconomic program.