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6 Aug, 2007 19:45

Russia writes off Afghanistan's debt

Russia and Afghanistan have signed an agreement writing off up to 90% of Afghan debt. The announcement coincides with a visit by the Islamic republic's finance minister to Moscow.

The debt relief was agreed within the framework of the Paris Club of Creditors in July 2006.

Afghanistan owes Russia around $US 11 BLN, by far the country's biggest debt.

Most of it dates back to Soviet times, when the USSR supplied the Afghan government with military equipment.

Last year, Russia along with its fellow Paris Club members and the U.S. and Germany, agreed to provide debt relief to the country.

The document confirming that some of the debt will be wiped out was signed by the finance ministers of the two countries. Its aim is to improve the economy of Afghanistan and increase trade volumes with Russia.

Russia has written off Afghanistan's debt to fulfill its obligations as a member of the Paris Club of creditors which it joined in 1997. In this way we support the Afghan government in accomplishing its task of building a new and better life for its people.

Aleksey Kudrin,
Russian Finance Minister

The decision was made under the Heavily Indebted Poor Countries initiative and is aimed at boosting the economy devastated by lengthy civil war.

“Debt relief to poor countries is common practice. Heavy debts are often the main obstacle to their development. Debt relief and re-structuring always lead to re-organisation of the country's financial system, supported by the International Monetary Fund. Last year a similar programme was adopted for Afghanistan, and the IMF allocated credit for its further development,” commented Evsey Gurvich, the Head of Economic Expert group, Moscow.

Russian diplomats say Moscow is supporting further the recovery of Afghanistan because it is interested in a reliable security partner in the area.

“We do not want the Taliban to take control over Afghanistan once again. This could lead to instability for other countries as well,” observed in his interview to Vremya Novostey daily Aleksandr Grushko, Deputy Minister of Foreign Affairs.

Being one of the leading creditors to third world countries, Russia is participating in the International Monetary Fund and World Bank programme on debt relief, and has already written off many countries' debts.

It also hopes to negotiate over the debts of North Korea and Iraq. 

Iraq's debt to Russia is an estimated $US 10 BLN and, according to Russia's Deputy Finance Minister, an agreement over that could be signed before the end of the year.