The World Bank and the International Monetary Fund have announced they will forgive more than 90 percent of Sao Tome and Principe's public debt. A small twin-island state with fewer than 200,000 inhabitants, aid-dependent Sao Tome and Principe has high hopes for offshore oil development. Naomi Schwarz has more on the story from VOA's regional bureau in Dakar.

The government of Sao Tome and Principe is celebrating the news that much of their international debt, staggeringly high considering the twin-island nation's tiny economy, will be forgiven.

Foreign Affairs Minister Carlos Gustavo Dos Anjos said it was with great joy that the government received the news late Thursday, during budgetary meetings at Parliament. He said it is something the country has waited a long time for.

The World Bank and the International Monetary Fund have agreed to forgive hundreds of millions of dollars of debt under their

Highly Indebted Poor Countries initiative.

Foreign Minister Gustavo says Sao Tomé will continue negotiations with lending countries to forgive the remaining debt. He says the remaining loans are with countries that are not part of the World Bank initiative. He says Sao Tomé is trying to negotiate debt-forgiveness deals directly with these countries.

Sao Tomé's main export, cocoa, brings in about five million dollars. They receive more than $25 million a year in foreign aid, and have one of the world's highest debts per person. They have also received tens of millions of dollars in signature bonuses for the rights to explore in joint Nigieran and Sao Tomé waters.

Foreign Minister Gustavo says debt relief will help Sao Tome focus their resources on development. He says it allows Sao Tome and Principe to invest in other sectors, such as education, health, and other social programs.

The oil money has created a bit of a false economic boom, says analyst Nicholas Shaxson.

"Some of the oil money has been coming already, and this has been coming into the government's budget," he said "But a lot of the money seems to have been spent already. A little bit of it has been saved, but it is not going to go a very long way. And no discoveries have been made yet. So it is quite an uncertain position in terms of the future."

Shaxson says debt relief is largely symbolic for Sao Tome.

"There is no obvious way that the government is able to repay that [their debt] other than through further foreign aid and maybe the discovery of oil," he said. "And so in some sense it has been a little bit of an academic exercise because if the government cannot repay its very large debts than it will not repay and debt relief in practical terms will not necessarily make a huge difference."

But he says it will change the terms of foreign aid in the future.

The most recent investors to begin preparations for exploration are Chinese oil company Sidopec and Switzerland's Addax. The two companies are to begin offshore drilling next year using a specially adapted ship made by an Indian company.