Besides the peace and stability Liberians enjoyed under the 12 years of President Ellen Johnson Sirleaf’s administration, one of the major gains that Liberians and the country’s bilateral partners will continue to remember is the speed with which she was able to secure the country’s debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Before her ascendency to power in January, 2006, Liberia was indebted to creditors both bilateral and multilateral to the tune of US$4.6 billion.
The HIPC Initiative was launched in 1996, by the World Bank and IMF to create 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 thereby reduce the constraints on economic growth and poverty reduction imposed by the unsustainable debt-service burdens in these countries, Liberia included.
By June 29, 2010, the same date Liberia reached its decision point; about 36 countries including Liberia had reached the completion point. In addition to the World Bank and IMF’s move to launch the HIPC initiative in 1996, Multilaterals in 2005 also created the Multilateral Debt Relief Initiative (MDRI).
The move is 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, three multilateral institutions—the World Bank’s 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.
So it is un-debatable that former President Sirleaf did not only inherit a broken economy, but she also inherited a huge pile of debt accrued under previous administrations to the tune of US$4.6 billion.
By the third year of her Presidency, President Sirleaf had moved swiftly and Liberia became the 29th country to reach the completion point under the HIPC Initiative. The completion point marked the end of the HIPC process, which 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.
Thus on June 29, 2010, the International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) announced that they have decided to support US$4.6 billion of debt relief for Liberia, of which US$1.5 billion was delivered by multilateral creditors and the remainder by bilateral and commercial creditors
After reaching the HIPC completion point, Liberia also became eligible for further nominal debt reduction from IDA (US$66.9 million) and the African Development Bank (US$17.2 million) under the Multilateral Debt Relief Initiative (MDRI) and beyond-HIPC assistance from the IMF (SDR117.4 million or US$173 million) and the EU Special Debt Relief Initiative (US$0.9 million).
The completion of the HIPC initiative and subsequent announcement by the Briton Woods institutions to support Liberia’s debt relief program and the eligibility of Liberia for normal debts saw the constructions of several road networks and bridges.
The collapse of the old bridge and its reconstruction by the Chinese Company Chico, saw how resilient the former President was in ensuring that Liberia was once again ready to do business with its international partners this time in a more responsible way. To be continued next Wednesday.
By Othello B. Garblah