Italy will write off debt owed by Cambodia as part of a $2 billion debt relief plan to 22 poorer nations, an Italian news agency reported.
But while Italy’s generosity is welcomed by the government here, Cambodia’s debt to Italy, estimated by one government official to be less than $500,000, is only a fraction of the $2 billion Cambodia owes to foreign countries.
“Our debt to Italy is very, very minor,” said a senior official at the Ministry of Finance, who spoke on condition of anonymity. “But it’s a great example for other creditors. [The Italian move] is politically significant.”
Cambodia’s main creditors are the US and Russia. The US aided Cambodia during the Lon Nol regime while Russia provided funding during Vietnam’s occupation of the country from 1979 to 1989.
The Ministry of Finance official estimated that the two countries hold nearly 90 percent of Cambodia’s debt.
Cambodian leaders have said on many occasions that rich nations should write off debt owed by the poorest countries as the gap between the rich and the poor widens in the global economy.
Italy, which holds the presidency for the Group of Eight this year, will urge other industrialized countries to follow its example, Italian Treasury Minister Vincenzo Visco told the ANSA news agency last week.
Visco said the Italian government recently initiated a law that cancels the debt of 22 nations, including some of the poorest countries in the world, ANSA reported.
The relief is part of a $4.5 billion to $6 billion debt-relief package over the next two and a half years. In addition to Cambodia, countries that applied for the debt cancellation include Vietnam, Albania, Yemen, Kenya and Haiti, according to the report.
The gesture will be rescinded for any countries that fail to respect human rights or that engage in armed conflicts, the foreign minister said.
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