Cambodia asks US to cancel $339 million in debt from 1970s, or turn it into aid

via CAAI News Media

From The Associated Press, February 9, 2010

PHNOM PENH, Cambodia (AP) - Cambodia asked the United States on Tuesday to cancel $339 million in debt that dates to loans from the 1970s — or consider converting most of it into development aid for the impoverished country.

The proposal, which came during a visit by U.S. Deputy Assistant Secretary of State Scot Marciel, was the latest in a long-running exchange about how to handle the debt and how the money was used 40 years ago.

"Cambodia has asked the United States government to cancel the debt but if it cannot do that, at least turn 70 percent of the debt into aid for the social development of the country," Deputy Foreign Minister Ouch Borith said after the meeting. He said if the latter option were accepted, Cambodia would discuss repayment plans for the remaining 30 percent.

Marciel, who is Washington's ambassador to the Association of Southeast Asian Nations, later explained to reporters that the debt could only be waived if Congress passed a law authorizing it.

The low-interest loans financed rice, cotton and other agricultural commodities during the regime of Gen. Lon Nol, who came to power in a 1970 coup that ousted Prince Norodom Sihanouk. The United States was the main financial and military supporter of Lon Nol's regime until it was toppled by the genocidal Khmer Rouge movement in April 1975.

Cambodia's government says the money was also used to "buy weapons and support the war, which caused great suffering to the Cambodian people," Ouch Borith said.

The countries have not set a repayment plan in part because the Cambodian government refuses to accept responsibility for debts incurred by the Lon Nol regime and because they disagree over the amount owed.