DEBT RELIEF FOR POOR COUNTRIES

UNCLAS BRATISLAVA 000242

SIPDIS


SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN EAID LO
SUBJECT: DEBT RELIEF FOR POOR COUNTRIES

REF: SECSTATE 31823

SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY


1. (SBU) On March 1, the post delivered talking points per
reftel to the Ministry of Finance's (MOF) Department of
Coordination for Relations with the EU. Representatives of
the MOF replied several weeks later and expressed a great
deal of enthusiasm for a 100 percent debt relief program on
all official bilateral pre-cut-off-date (pre-COD) claims on
Heavily Indebted Poor Countries (HIPCs). The MOF is
currently drafting Slovakia's position towards the World
Bank's International Development Association (IDA-14)
replenishment, as well as Britain's proposals for gold sales
and the creation of the International Finance Facility (IFF)
to increase development assistance. The position paper is
subject to approval by the Slovak cabinet, which has already
indicated support for IDA-14, but a negative opinion towards
the two British proposals.

PRE-COD CLAIMS
--------------

2. (SBU) Currently, Slovakia has outstanding pre-COD (pre-
1999) claims against Laos, Nicaragua, Myanmar and Sudan.
Settlement of the Laotian debt followed an intergovernmental
agreement between Slovakia and Lao People's Democratic
Republic. The claims against Nicaragua and Myanmar are
being settled on the basis of mandate (factoring) contracts.
The MOF is contemplating reopening these contracts to
provide 100 percent debt relief, and it also intends to
propose that the GOS forgive the debt against Sudan in line
with the EU commitment. Sudan has not replied to the GOS's
inquiries.

IDA-14
--------------

3. (SBU) Slovakia contributed a combined SDR 1,320,000 (USD
2,013,330) to IDA-13 in 2003 and 2004. The MOF has proposed
that the GOS accept a 30 percent increase above its IDA-13
contribution as agreed upon during the IDA-14 meeting in
December 2004. The ministry proposed that this amount be
paid in installments over a three-year period starting in

2006. Slovakia will also contribute to the repayment of all
HIPC's debts that were forgiven in a 1999 decision in
proportion to its voting rights.

GOLD SALES
--------------

4. (SBU) The MOF agrees with the USG that sales of IMF gold
reserves are unnecessary and could harm the IMF's financial
viability. According to the Slovaks, the "cold" response of
central banks in general to the British proposal for gold
sales suggests that it is unlikely to be supported by the
IMF Board.

INTERNATIONAL FINANCE FACILITY (IFF)
--------------

5. (SBU) Representatives of the MOF expressed concern that
the IFF would negatively impact the World Bank's budget
after 2015 when IFF must be paid. They were also concerned
about the IFF's influence on global interest rates and its
accounting procedures. Slovakia will not present its
position regarding the French and German proposals for
global taxation (taxes on kerosene, aviation fuel, air
tickets, etc.) until an analysis detailing the anticipated
revenues and impact on air transport is completed.
THAYER


NNNN