Thursday, November 22, 2007

IMF’s debt cancellation a huge relief for Liberia

Sources:
Financial Times: IMF agrees to cancel Liberia debt
Afrol News: Liberia’s debt cancellation approved


This week, the IMF agreed to begin eliminating Liberia’s outstanding debts after a bureaucratic hold-up of more than a year. The announcement follows $842 million in pledges from donor member nations, which will help put the West African country back on track. Liberia accrued huge debts totaling $4.5 billion during the 14 years of brutal civil war. The debt includes approximately $2 billion in arrears to financial institutions such as the World Bank, IMF, and the African Development Bank, $1 billion in debts to commercial banks, and $1 billion to the Paris Club of creditor nations.

It is a huge vote of confidence for Liberian President Ellen Johnson-Sirleaf. In order to qualify for debt relief, Liberia had to meet certain political and economic requirements. Therefore, the IMF’s cancellation of Liberia’s debt marks a promising step forward for Liberia’s comprehensive debt relief.

Additionally, the IMF’s new managing director, Dominique Strauss-Kahn, noted that “IMF staff are currently finalizing discussions with the Liberian authorities on a three-year, IMF-supported program, so that Liberia can build upon the initial economic recovery, maintain the strong growth needed to reduce poverty, and restore debt sustainability.”

Discussion questions:
Does the debt relief confirm that Liberia has achieved the necessary political turnaround under President Johnson-Sirleaf? What other steps will Liberia and the international community need to take to help Liberia sustain its economic reconstruction?

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