Liberian Debt Forgiveness

IMF urges Agreement to cancel Liberia’s massive debt
Lesley Wroughton
Feb 8, 2007

An International Donor Conference on Liberia is scheduled in Washington D.C. this week. Speaking before the event, John Lipsky, IMF’s First Deputy Managing Director said that it is essential that the international community be willing to forgive part of Liberia’s $3.7 billion debt.

Liberia’s President Ellen Johnson-Sirleaf, has been trying to build the country shattered by a devastating conflict which ended only recently after almost 14 years of fighting. In recent decades, the international community has not adopted a friendly approach to the country - the IMF initiated sanctions against Liberia more than 16 years ago for failing to repay its debts. Only last year the IMF eased its sanctions against the country, with the adoption of an IMF monitored economic program that supported a recovery in GDP growth, fostered price stability and helped improve the financial position of the Central Bank of Liberia. Any measures adopted during the Conference to forgive the country’s debt would go a long way in helping integrate Liberia into the international community.

Questions
1. The issue of debt forgiveness is critical – what parameters should donor countries adopt for debt-forgiveness? Should the World Bank and IMF adopt a more pro-active role with respect to debt forgiveness? For example should these global institutions be willing to pay off loans taken from donor countries on behalf of developing countries?