Press Release: IMF and World Bank Announce US$4.6 Billion Debt Relief for Liberia

IMF News, June 29, 2010

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Canonical URL: Press Release: IMF and World Bank Announce US$4.6 Billion Debt Relief for Liberia

The IMF and the World Bank's International Development Association (IDA) have decided to support US$4.6 billion of debt relief for Liberia.
Of the US$4.6 billion:
- US$1.5 billion is to be delivered by multilateral creditors and the remainder by bilateral and commercial creditors.
Debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative from all Liberia’s creditors was estimated at US$ 2.7 billion in end-June 2007 present value terms.
Specific multilateral contributions cited:
- IMF debt relief: US$730 million (the IMF’s biggest ever HIPC contribution for a single country).
- World Bank’s IDA debt relief: US$374 million.
Additional nominal debt reductions and beyond-HIPC assistance after the HIPC completion point:
- IDA: US$66.9 million.
- African Development Bank: US$17.2 million.
- IMF beyond-HIPC assistance: SDR117.4 million or US$173 million.
- EU Special Debt Relief Initiative: US$0.9 million.

The Boards determined that Liberia has taken the necessary policy actions to reach the completion point, and therefore debt relief from both the HIPC Initiative and MDRI becomes irrevocable.
As a result of this relief, Liberia will no longer face a heavy debt service burden in relation to its revenue and foreign exchange resources.
Expected uses of freed resources (as stated by IMF mission chief Chris Lane and World Bank Country Director Ishac Diwan):
- Mobilize additional resources to rebuild the road network and the electricity supply system.
- Expand the health care and education systems.
- Further develop Liberia’s own financial market and channel private savings to productive uses.
- Support continuation of economic and governance reforms and free up resources for health care, education and other essential services supported by IDA and other donors through the national budget.

Liberia becomes the 29th country to reach the completion point under the HIPC Initiative.
The HIPC process for Liberia started in 2008 when the Executive Boards of the IMF and the World Bank agreed that Liberia had met requirements for reaching the decision point, when countries start receiving debt relief on an interim basis.
Meetings noted:
- The IMF Executive Board met on Liberia on June 23, 2010.
- The IDA Executive Board met on June 29, 2010.

The HIPC Initiative (launched in 1996 by the World Bank and IMF) creates a framework in which all creditors, including multilateral creditors, can provide debt relief to the world's poorest and most heavily indebted countries to ensure debt sustainability and reduce constraints on economic growth and poverty reduction imposed by unsustainable debt-service burdens.
Status to date (as stated in the release):
- 36 HIPC countries have reached their decision points (including Comoros on June 29, 2010).
- 29 countries, including Liberia, have reached the completion point.
The Multilateral Debt Relief Initiative (MDRI), created in 2005, aims to reduce further the debt of eligible low-income countries and provide additional resources to help them reach the Millennium Development Goals (MDGs). Under the MDRI, IDA, the IMF and the African Development Fund provide 100 percent debt relief on eligible debts to qualifying countries normally at the time they reach the HIPC Initiative completion point.

Chris Lane, IMF mission chief for Liberia: “We welcome the concerted efforts made by Liberia to obtain this debt relief—this will help attract new investment and generate much needed opportunities,” and “Liberia can now mobilize additional resources to rebuild the road network and the electricity supply system, providing the infrastructure needed to allow economic growth, while continuing to expand the health care and education systems. Liberia will also be able to further develop its own financial market and channel private savings to productive uses. We wish to acknowledge the efforts by the international community to finance Liberia’s debt relief, with over 100 members of the IMF making exceptional contributions beyond the normal terms granted to heavily indebted poor countries.”
Ishac Diwan, World Bank Country Director: “Liberian authorities are building a credible track record for implementing economic and governance reforms. Debt relief will support the continuation of these efforts, while also freeing up resources for health care, education and other essential services that are supported by IDA and other donors through the national budget.”

Press Release No. 10/267, June 29, 2010 — International Monetary Fund