IMF Survey: Liberia Wins $4.6 Billion in Debt Relief from IMF, World Bank

IMF News, June 29, 2010

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The IMF and the World Bank decided to support the final stage of debt relief for Liberia that in total amounts to $4.6 billion in nominal terms.
Debt relief reduces Liberia’s external debt stock by more than 90 per cent to about 15 percent of GDP.
The IMF’s share of this debt relief amounts to about $730 million in end-June 2007 present value terms—among the largest IMF country commitments under the enhanced HIPC Initiative, representing over one-fifth of the total financial support for the HIPC process.
Liberia’s graduation from the HIPC process brings to 29 the number of countries reaching the HIPC completion point.

The HIPC Initiative was launched in 1996 by the IMF and the World Bank to ensure that no poor country faces a debt burden it cannot manage.
In 1999, the initiative was modified to provide faster and broader debt relief and to strengthen the links between debt relief, poverty reduction, and social policies.
Liberia reached the interim stage, or decision point, under the HIPC Initiative in March 2008 and embarked on a three year IMF-supported financial program as part of the process toward completion.

Macroeconomic conditions are broadly favorable for a recovery of growth in 2010, based on a revival of iron ore mining, forestry, and commercial agriculture.
Immediate investment priorities identified to unblock bottlenecks that inhibit private sector investment:
- Roads
- Electric power
- Ports

Following prolonged conflict, Liberia had a shattered economy and the highest debt-to-GDP ratio in the world; external financial controllers were appointed in key agencies during a donor-funded governance and economic management program and later withdrawn as domestic capacity improved.
Since January 2006, under President Johnson Sirleaf, Liberia established an encouraging track record of macroeconomic management and structural reform under an IMF staff monitored program, with additional support through intensive technical assistance and policy advice.
Key domestic reforms cited by President Ellen Johnson Sirleaf:
- Building institutions
- Passing public financial management law
- Establishing a general auditing commission
- Making anti-corruption effective

Debt relief would allow Liberia to secure additional financing, in initially modest amounts, to help deliver critically needed services and infrastructure.
Continued priorities highlighted by Liberian and IMF officials:
- Consolidate macroeconomic stability while pursuing expansionary fiscal policies
- Strengthen governance and the rule of law
- Catalyze external financing with high quality public investment plans
- Develop the financial sector to support private savings and investments
- Gain cost competitiveness outside of extractive industries
- Strengthen institutions and medium-term budgetary planning
The next IMF program review will address the main risks to successful implementation of the authorities’ growth strategy.
IMF mission chief for Liberia Chris Lane: IMF involvement has been sustained and intensive and will remain so for some time to come; after this debt relief milestone, the Fund program should catalyze further financial support from the donor community.

Source: IMF Survey online, June 29, 2010 — "Liberia Wins $4.6 Billion in Debt Relief from IMF, World Bank".