Inter-American Development Bank Forgives Most of Nicaragua's Debt
The Inter-American Development Bank will forgive between US$700 million and US$900 million  of the US$1.4 billion  owed by Nicaragua, drastically reducing the country's debt before former revolutionary Daniel Ortega takes office.

Nicaragua had an overall foreign debt of about US$2.4 billion before the bank's action, President Enrique Bolaños said Friday.

Ortega's government will take office Jan. 10 with about US$1.58 billion in foreign debt, Bolaños said, a fairly healthy situation given the estimated US$1.2 billion (€.94 billion) in exports Nicaragua is expecting this year.

The debt forgiveness will cut payments to the bank by about US$26 million a year in 2007 and US$28 million in 2008. Bolaños said the money can be added to next year's national budget of about US$1.6 billion for roads, schools and other projects — although Ortega will decide how it is spent.

Nicaragua's debt has been on a roller coaster ride since 1978, a year before Ortega's Sandinista National Liberation front toppled dictator Anastasio Somoza.

In that year, the debt was US$1.3 billion, twice its exports of US$650 million.

The country's debt skyrocketed under Ortega's government, which fought a war against U.S.-backed Contra rebels, and by the time Violeta de Chamorro defeated Ortega in 1990 presidential elections it was at US$12 billion — leaving Nicaragua an economic basket-case with one of the highest per capita foreign debts in the world.

Chamorro was able to get half of that debt forgiven.

The World Bank and the International Monetary Fund forgave about US$4.5 billion in Nicaraguan debt in 2004.

Bolaños said the Western Hemisphere's second-poorest nation sought to have its debt forgiven because it cannot afford to pay it off and fund social programs for its poor.

Bolaños added that Nicaraguan representatives at the development bank, who are meeting in Washington this week, told him the bank also is helping Honduras, Haiti, Bolivia and Guyana.

The bank is still working out the details of Nicaragua's debt forgiveness plan, Bolaños said.