Italy cancels Rs.856m debts

An agreement was signed yesterday between the Italian Republic and the Government for the cancellation of Sri Lanka's debt to facilitate tsunami recovery.

Italy will cancel the total outstanding debt concerning soft loans granted to Sri Lanka amounting to euro 7,134,698.00 (Rs. 856 million) including principal and interests of the loans.

The savings generated by the cancellation of debt will be utilised for tsunami damage recovery projects implemented by the Government, the Finance Ministry said yesterday.

In addition, Italy so far signed three MOUs with the Government for the rehabilitation and reconstruction work of tsunami damaged infrastructure, schools and fisheries sector.

Italy was the first country which announced a debt cancellation for Sri Lanka immediately after the tsunami.

Italy's Ambassador in Sri Lanka Pio Mariani and Treasury Secretary Dr. P.B.Jayasundera signed the Agreement.

Earlier in the year, the Paris Club of creditor nations offered an unconditional freeze on debt repayments for Indonesia, Sri Lanka and the Seychelles to help them recover from the catastrophic tidal waves.

Club president Jean-Pierre Joyuet stressed at a press conference that "this decision is an exceptional measure. It is justified by the scale of the catastrophe."

Debt payments owed this year amount to three billion dollars for Indonesia, 328 million for Sri Lanka and five million for The Seychelles.

The 19-member Paris Club is an informal cluster of some of the world's richest creditor nations.

"This measure takes effect immediately. It will allow countries affected to use all available resources for humanitarian needs and reconstruction," Jouyet said.