WASHINGTON, June 29, 2010 - The International Monetary Fund (IMF) and the World Bank's International Development Association (IDA) have decided to support US$4.6 billion of debt relief for Liberia, of which US$1.5 billion is to be delivered by multilateral creditors and the remainder by bilateral and commercial creditors. This was made possible in part by the exceptional efforts of members of the international community to finance debt relief for Liberia.
Debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative from all Liberia’s creditors was estimated at US$ 2.7 billion in end-June 2007 present value terms. Debt relief from the IMF would total US$730 million—the IMF’s biggest ever HIPC contribution for a single country—and from the World Bank’s IDA, US$374 million.
After reaching the HIPC completion point, Liberia also becomes 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).
As a result of this relief, Liberia will no longer face a heavy debt service burden in relation to its revenue and foreign exchange resources.
The Boards determined that Liberia has taken the necessary policy actions to reach the completion point, and therefore debt relief from both the HIPC Initiative and MDRI becomes irrevocable. Liberia has successfully implemented its poverty reduction strategy and maintained a stable macroeconomic environment, despite the global economic crisis.
“We welcome the concerted efforts made by Liberia to obtain this debt relief—this will help attract new investment and generate much needed opportunities,” said Chris Lane, IMF mission chief for Liberia. “Liberia can now mobilize additional resources to rebuild the road network and the electricity supply system, providing the infrastructure needed to allow economic growth, while continuing to expand the health care and education systems. Liberia will also be able to further develop its own financial market and channel private savings to productive uses. We wish to acknowledge the efforts by the international community to finance Liberia’s debt relief, with over 100 members of the IMF making exceptional contributions beyond the normal terms granted to heavily indebted poor countries.”
World Bank Country Director Ishac Diwan said: “Liberian authorities are building a credible track record for implementing economic and governance reforms. Debt relief will support the continuation of these efforts, while also freeing up resources for health care, education and other essential services that are supported by IDA and other donors through the national budget.”
Liberia becomes the 29th country to reach the completion point under the HIPC Initiative. The completion point marks 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.
Note to Editors
The HIPC Initiative. In 1996, the World Bank and IMF launched the HIPC Initiative 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.
To date, 36 HIPC countries have reached their decision points (including Comoros on June 29, 2010), of which 29, including Liberia, have reached the completion point.
Created in 2005, the aim of the Multilateral Debt Relief Initiative (MDRI) 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.