World Bank provides $49.7 million to buy back debt

The World Bank has approved a US $49.7 million soft loan to help Cameroon reduce its commercial debt so that trade and foreign investment will improve and the country's private sector will find it easier to borrow fresh money.

The cash would be used by Cameroon to buy back US 953.5 million of commercial debt and suppliers credit at 14.5 percent of its face value, the World Bank said in a statement.

Just over a third of the debt to be redeemed is principal. The rest represents arrears in interest payments.

The World Bank noted that Cameroon has been unable to make debt service payments to its commercial creditors for several years. But it said that providing creditors accept the buyback terms proposed, the West African country will be able to improve its international credit rating.

This would make it easier for Cameroon to attract new foreign investment and trade credit and would help the country's emerging private sector to borrow fresh funds.

"Creditors from commercial banks and suppliers of vital imports will be paid, allowing for the elimination of commercial debt arrears and the liberation of domestic resources for critical development concerns, Noel K. Tshiani, World Bank Team Leader for the operation said.

He added: "With debt arrears eliminated, the country can accelerate the rebuilding of its credibility with the international financial community and create conditions to attract more foreign investments."

The credit is on standard International Development Association (IDA) terms. Repayment is over 40 years, with a 10-year period of grace.