Afghanistan gets debt cancellation

On 19 July, Russia, Germany, and the US agreed to cancel most of the debts, totalling $11 billion, that Afghanistan was still paying to them.

Afghanistan had total debts to the three countries of $11.3 billion, the vast majority owed to Russia and dating back to the Soviet era. The cancellation agreed wipes out most of this, reducing the total to $800 million, which will be repaid over 40 years. Campaigners point out that - especially given the origins of much of the debt in Soviet-era 'loans' of dubious legitimacy - all the debt should be cancelled.

It is in fact still possible that all the remainder of Afghanistan's debts to these countries - along with most of its debt to the World Bank and IMF - will be cancelled if it qualifies for the Heavily Indebted Poor Countries (HIPC) initiative. The list of countries eligible to enter HIPC was supposed to have been closed for good in April 2006 - but the details of the exact amounts of Afghanistan's debts were not clear at the time. If, when they are finalised, the World Bank and IMF judge Afghanistan to be 'indebted enough', then it too will qualify. Entering HIPC is controversial: debt cancellation is welcome, but the conditions attached are not.

The cancellation by Russia, the US and Germany was agreed through the 'Paris Club' - the informal group of 19 creditor countries which get together to discuss, behind closed doors, what they will do about poor countries' debt problems. These three countries were the only Paris Club members to which Afghanistan was still paying debts. Afghanistan has no debt to the UK.