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Debt Deal Reunites Myanmar and the Donors

In the last few days, a delicate dance of reconciliation between Myanmar and its estranged foreign creditors reached its final measures. At the Club de Paris---the collective negotiating forum for creditor governments such as Japan and the United States---a press release just announced a debt deal with the poor and long-isolated Asian nation. The creditors committed to what is by Paris Club standards an exceptionally generous deal: cancelling half the debt in arrears---Myanmar defaulted in 1998---and instituting a 15-year repayment schedule for the remainder, including a 7-year grace period. Because the interest rates on most of these the loans are low, typically about 1%, this stretching out of repayment further reduces the debt's economic cost ("net present value" or NPV). Overall, the NPV will fall 60%. Meanwhile the World Bank and Asian Development Bank made their first loans to Myanmar in more than 20 years, in the process erasing their own arrears issues with the country.