The IMF and Civil Society
Liberian schoolchildren: Debt relief frees up government funding for social spending including education (Image courtesy of Curt Caremark/World Bank)
Liberia Eligible for HIPC Assistance
February 8, 2008
On January 31 and February 1, the respective Executive Boards of the World Bank and IMF approved Liberia's eligibility for assistance under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
To qualify for debt relief under the HIPC Initiative at the decision point, Liberia will need to continue satisfactory performance under the current Staff-Monitored Program (SMP). The debt relief process will be undertaken through the following steps:
- Liberia's arrears to the IMF are expected to be cleared through a bridge loan obtained from a bilateral donor.
- The IMF will then approve new financing for Liberia. The new financing by the IMF of approximately $920m would be used to repay the bridge loan (approximately $860 million) and allow for some additional funds to be disbursed over a 3 year period.
- Because of its satisfactory policy record, Liberia is also expected to reach the HIPC decision point at that time. That will allow the country to receive interim debt relief. Liberia is expected to clear its arrears to the IMF and reach the HIPC decision point in March 2008.
On reaching the completion point, Liberia will qualify for unconditional debt relief under the HIPC Initiative. The relief is intended to reduce Liberia's debt to sustainable levels. In addition, Liberia will also qualify for beyond-HIPC debt relief from the IMF (including on the portion of new financing from the IMF used to clear the arrears to the IMF), the World Bank's International Development Association (IDA) and the African Development Fund (AfDF). Most Paris Club creditors are also expected to provide further relief to Liberia.
At the conclusion of an IMF staff mission to Liberia, Robert Powell, IMF Mission Chief for Liberia, said in a January 24 statement: "The mission reached understandings with the Government on a three-year macroeconomic reform program that could be supported by financial assistance from the IMF. The Executive Board is expected to discuss Liberia's request in March 2008.The government continues to make good progress in implementing key policies under the SMP, despite severe capacity limitations. The economy is expected to continue to recover during 2008, with projected real GDP growth reaching about 9.6 percent, and inflation falling to single digits. Effective implementation of this program will be critical to achieving the government's economic goals, including continued strong and sustained growth and obtaining comprehensive debt relief on the full stock of outstanding debt."