As a meeting on post-hurricane reconstruction opened in Washington, White House officials said Congress would be asked to write-off 90% of the debt owed by Nicaragua, and 67% of that owed by Honduras.

The World Bank also announced an additional $1bn credit to the two countries.

Earlier, the Paris Club of creditor nations said Nicaragua and Honduras would be allowed to suspend several hundred-million dollars of debt repayments for three years.

The Paris Club said Nicaragua and Honduras would be offered further debt relief once they had agreed financial restructuring plans.

The two countries together owe about $10bn. Each year they spend over $600m servicing that debt.

The Paris Club agreement means that most of that money will be saved for the next three years.

BBC Economics Correspondent James Morgan says neither is likely to have to repay any debt at all in that period.

During the three years both governments will try to negotiate improved terms for when debt repayments are resumed.

The World Bank and International Monetary Fund have proposed spreading out interest payments, but many lobbyists favour complete cancellation of debt.

The World Bank and IMF cannot actually cancel debt, partly because the money they lend is not theirs.

There are also fears that debt cancellation for one country will lead to others demanding the same.

Critics of the system, including international campaigns such as Jubilee 2000, argue that most of the debts of the poorest nations were accumulated because of the irresponsibility of lenders.

'It takes a generation to recover

Leaders of countries hit by the hurricane, one of the most powerful storms to hit the region in 200 years, are asking for billions of dollars in aid and debt relief to help them to recover from the crisis.

Hurricane Mitch which killed thousands of people and left an estimated two million homeless.

UN agencies estimate it will cost $5.3 billion just to repair the damage to housing and infrastructure in the region.

Roads and bridges were destroyed and crops wiped out, robbing the countries of valuable export earnings.