France to offer Cuba more debt relief during Castro visit - source

PARIS (Reuters) - France is to sign a deal with Cuba next week to ease the Caribbean island nation's bilateral debt to Paris during a visit by the Cuban president to the French capital, a diplomatic source said on Friday.

Raul Castro is due to arrive on Saturday in Paris for a five day stay, in what will be the first official visit to France by a Cuban president since the country's independence.

With ties between Washington and Havana warming, France is eager to further improve relations with Cuba starting with a visit by French President Francois Hollande to the island last year.

As Havana's biggest creditor, France played a key role in December in a debt relief deal between Cuba and the foreign governments it owes money to.

Its Paris Club creditors agreed to forgive $8.5 billion in late interest payments of Cuba's $11.9 billion in debt, including $4 billion in late payments due to France.

The bilateral agreement to be signed next week will allow for part of the principal that Cuba still owes France to be converted into financing for development projects, the source said.

"It's an additional gesture on France's part after forgiving the late interest payments," the source said, adding that France's development agency would set up an outpost in the country.

Several commercial and development agreements are due to be signed during Castro's visit, the source said.

(Reporting by Elizabeth Pineau; writing by Leigh Thomas)