Press Release: IMF, World Bank Agree Liberia Eligible for HIPC Assistance
February 4, 2008Press Release No. 08/16
The Executive Boards of the International Monetary Fund (IMF) and World Bank have deemed that Liberia is eligible for assistance under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative based on a preliminary assessment.
To qualify for debt relief under the HIPC Initiative at the decision point, Liberia will need to take the following actions:
• continue satisfactory performance under the current Staff-Monitored Program (SMP);
• reach understandings on appropriate completion point triggers pertaining to key economic, governance, and structural reforms that would support development in Liberia;
• clear the arrears to multilateral creditors, or reach agreements with them on a strategy for arrears clearance.
On reaching the completion point under the HIPC initiative, Liberia would qualify for unconditional debt relief under the HIPC Initiative. It would also qualify for debt relief under the Multilateral Debt Relief Initiative (MDRI) from the World Bank's International Development Association (IDA) and the African Development Fund (AfDF), together with beyond-HIPC assistance from the IMF. Some Paris Club creditors are also expected to provide further relief and cancel 100 percent of their claims against Liberia.
Following the World Bank Executive Board discussion on January 31, 2008, Managing Director Juan Jose Daboub said: "Access to debt relief is critical for Liberia, and we are very pleased with the strong support expressed by our Executive Directors for the country's progress on the path from post-conflict recovery to sustainable growth and development. As confirmed by President Zoellick on his visit to Liberia last week, the World Bank Group will continue to help ensure that the peace and democracy enjoyed by Liberia translates into tangible socio-economic benefits for all Liberians. Towards this end, the Bank will maintain its strong program in public financial management, infrastructure and community-driven development to support the country's dynamic transformation and progress towards achievement of the Millennium Development Goals."
Following the IMF Executive Board discussion on Liberia on February 1, 2008, John Lipsky, First Deputy Managing Director and Acting Chair, said:
"Today's discussion was another important milestone in the process of normalizing Liberia's financial relations with the Fund. The Executive Board's agreement that Liberia is eligible for debt relief under the enhanced HIPC Initiative paves the way for consideration of the HIPC decision point in the near future and multilateral debt relief going forward . Sustained macroeconomic policy performance along with continued stability in the security and political situation will provide essential support for sustained recovery and durable poverty reduction. Financial and technical support from the international community will contribute critically to the achievement of this goal."
The HIPC Initiative
In 1996, the World Bank and IMF launched the HIPC Initiative to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world's poorest and most heavily indebted countries, and thereby reduce the constraints on economic growth and poverty reduction imposed by the debt-service burdens in these countries. The Initiative was modified in 1999 to provide three key enhancements:
Deeper and Broader Relief. External debt thresholds were lowered from the original framework. As a result, more countries have become eligible for debt relief and some countries have become eligible for greater relief;
Faster Relief. A number of creditors began to provide interim debt relief immediately at the "decision point." Also, the new framework permitted countries to reach the "completion point" faster; and
Stronger Link Between Debt Relief and Poverty Reduction. Freed resources were to be used to support poverty reduction strategies developed by national governments through a broad consultative process.
To date, 32 countries have reached their decision points under the enhanced HIPC initiative, of which 23 have reached the completion point.