G7 backs temporary freeze on tsunami countries' debt

The world's richest nations have called for an immediate freeze on debt repayments by countries hit by the Asian tsunami disaster…

The world's richest nations have called for an immediate freeze on debt repayments by countries hit by the Asian tsunami disaster.

The G7 group of industrialised nations says the countries should be able to put payments on hold in a move which could save them about three billion dollars a year.

It will put the proposal to creditor nations at a meeting in Paris next week.

If they agree, countries such as Indonesia and Sri Lanka could then ask for their multi-billion pound repayments to be put on hold - the equivalent of a "mortgage holiday".

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But the move would not cancel the debts themselves as some campaigners have demanded.

The proposal was announced by the British Chancellor, Mr Gordon Brown. The G7, together with Russia, makes up the G8. Britain took over the presidency of the G8 on New Year's Day.

The G7 has also called on the World Bank and the International Monetary Fund to carry out an urgent assessment of the reconstruction needs of the countries devastated by the tsunami, to be completed by the end of the month.

G7 finance ministers said they would consider "all appropriate measures" for further assistance when they meet in London next month.

The G7 also urged the IMF, World Bank and Asian Development Bank to make "the strongest possible efforts" to provide the financial help needed by the countries.

And it backed calls for "urgent consideration" to be given to an early-warning system for further tsunamis in the Indian Ocean.

Announcing the proposals, Mr Brown said: "In the wake of this tragedy the true test of the international community will be how we can fund and assist both the immediate day-to-day emergency services needs but also the long-term reconstruction of the countries affected by the tsunami.

"We must ensure that those countries are not prevented from paying for essential reconstruction because they are having to fund the servicing of their debts. So, for afflicted countries that request it, the G7 is proposing an immediate suspension of debt repayments.

"And depending on the conclusions of the needs assessments, I believe that the G7 and Paris Club must also stand ready to consider all options for further assistance."

The Paris Club of creditor governments from major industrialised countries includes all of the G8. It meets every month in Paris with debtor countries for talks on restructuring their debts.

Countries such as Thailand, Indonesia and Sri Lanka together owe hundreds of billions of pounds.

Indonesia alone owes $132 billion according to figures from the World Bank.

The annual repayment costs run to tens of millions of pounds.

PA