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Germany cancels Pakistani debts through Global Fund initiative

30 November 2008

Doha – Germany, Pakistan and the Global Fund to Fight AIDS, Tuberculosis and Malaria signed a new type of debt swap on the sidelines of the UN Conference on Financing for Development. Under this “Debt2Health” agreement, Germany writes off €40 million of Pakistan debt on the condition that Pakistan invests €20 million in domestic health programs supported by the Global Fund.

The agreement was concluded by Heidemarie Wieczorek-Zeul, the Special Envoy of the UN Secretary-General for the con­ference and Federal Minister for Economic Cooperation and Development, Germany, Hina Rabbani Khar, Minister of State for Finance and Economic Affairs, Pakistan, and Dr Michel Kazatchkine, Executive Direc­tor of the Global Fund.

“The Debt2Health initiative allows us to turn debt into urgently needed new resources for health in Pakistan,” said Hina Rabbani Khar. “We hope other creditor countries will join this initiative and offer Debt2Health agreements to Pakistan and other countries strug­gling with high disease burden and high levels of debt service.”

Pakistan is only the second country to benefit from the Debt2Health financing instru­ment. In September 2007, Germany agreed to cancel €50 million of Indonesian debt, allowing half that amount to be invested by Indonesia in Global Fund-supported programs

"Debt2Health is a win-win situation for Pakistan, Germany and the Global Fund, Pa­kis­tan receives more investments in health, the Global Fund increases predictability for its work and Germany contributes its share to the global fight against AIDS, tuberculosis and ma­laria,” said the German minister, “I am proud that Pakistan and Germany are among the pio­neers in this new initiative which testifies to the good relations between our countries."

The Global Fund’s Executive Director, Michel Kazatchkine, also hailed the agreement.

“Debt­2Health goes beyond traditional financing for development. It combines the well known instrument of debt swaps with the tested and proven disbursement mechanisms of the Global Fund to deliver high quality health care and prevention to people in need through programmes fully owned by Pakistan.”

The idea behind Debt2Health is to use debt swaps as a model for financing public health programs using the performance-based systems of the Global Fund. Debt2Health allows creditors to write off a portion of the debt owed to them on the condition that beneficiary countries invest an agreed-upon amount in local programs approved by the Global Fund. Debt conversion enables poor countries to free up more resources to fight HIV/AIDS, TB, and malaria while strengthening their own health systems.

The Global Fund looks for opportunities for debt conversions and then facilitates a three-way agreement among creditors, the debtor country and the Global Fund.

HIV/AIDS, tuberculosis and malaria remain public health threats in Pakistan with approximately 85,000 people living with HIV and many lives lost every year due to malaria and tuberculosis. To date, the Global Fund has approved funding for six pro­grams fighting HIV/AIDS, tuberculosis and malaria in Pakistan worth more than US$ 130 mil­lion over five years. Of this amount, approximately US$37million has already been disbursed to the country.

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