23 October 2007
It is only a little over 72 hours since President Ellen Johnson-Sirleaf returned home after sitting with the patrons of the donor community, the leader of Liberia's mentor state, and officials of major international financial institutions to discuss the substance and urgency of debt relief and socio-economic development in postwar Liberia.
The sheer force of the promises of goodwill garnered from those discussions compelled President Johnson-Sirleaf to note in one recent statement that "Liberia is on the way to building a sustainable, equitable, peaceful society that demonstrates the value of democracy and open markets."
But at the heel of her departure from Washington, the IMF boardroom swarmed with enemies who would prefer to see a Liberia poor and steep in debt rather one ridded of debt and toiling at reconstruction.But why?
The Analyst Newspaper pieces together media reports of what transpired Sunday, October 21, 2007 at the IMF.
Clutch of countries resist Liberia debt relief
By Lesley Wroughton
Pressure mounted on Sunday on a clutch of mainly developing countries to sign off on debt relief for Liberia held up over how to finance the International Monetary Fund's portion of the deal.
Approval to write off the $900 million Liberia owes the IMF has been resisted by Belgium and large developing countries including Brazil, Turkey, Indonesia and India, which are haggling over how the debt relief should be funded, government sources said.
The IMF has proposed to fund the debt relief by shuffling around internal funds among accounts, which would not require additional funding from member countries, World Bank President Robert Zoellick told a news conference during meetings of the bank and fund.
"We are held up because of the action of a few countries," Zoellick said, adding, "Some of them may have a few legal issues they have to check at home but I think it would be good tomorrow if we move this as far as we can."
Liberian President Ellen Johnson-Sirleaf said after a meeting last week with President George W. Bush that her country had fulfilled all the economic and political requirements to enter a global debt relief program to write off Liberian debts yet was still waiting for donors to make good on their promises.
After her election in 2005, she inherited a country ruined by a 14-year civil war, rampant corruption and foreign debts of about $4.5 billion, which creditors promised to cancel. Until a country has cleared its arrears to the IMF and World Bank, it cannot borrow further from the institutions, unless it is a grant that need not be paid back.
IMF Managing Director Rodrigo Rato said an agreement on debt relief for Liberia was close, "but not yet there." "This is a country that is helping itself and deserves to be helped by the international community," Rato told a news conference during the IMF and World Bank meetings.
Zoellick, describing Johnson-Sirleaf as a "genuine heroine," said until debt relief was approved by the IMF, the bank could not proceed with its development programs in the West African country.
"This is an honest case of a post-conflict country trying to move forward on democracy," Zoellick said. "While we have been able to offer some financial support, Liberia cannot move to ... debt relief and we can't move forward with all our programs until the IMF arrears are cleared," he added.
"We can solve this and we just need a little bit more effort by a few other countries who often seek voice and representation but also need to assume some of the responsibilities that go with that," Zoellick added.
The World Bank chief said he was trying to make the countries understand the approval of debt relief would not cost them additional funding to the IMF.
German Min. Calls On IMF, ADB To Speed Up Debt Relief
Germany welcomes the positive trends in the debt situation in many developing countries, but all parties involved, including multilateral lenders like the International Monetary Fund and the African Development Bank, must speed up debt relief to such countries, a top German official said Sunday.
"The implementation of debt relief initiatives needs to be further accelerated," Heidemarie Wieczorek-Zeul, German minister for economic cooperation and development, said in a prepared statement to the World Bank's development committee during the annual meetings of the IMF and World Bank.
"That is particularly true in the case of countries that have just come through long years of civil war, like Liberia," she said. "It is simply not acceptable for the debt relief process to be further delayed."
Wieczorek-Zeul also said there is the need to work on "common principles for responsible lending," and that the availability of information on lending and the terms applied must be enhanced.
"Going beyond debt cancellation, ensuring debt sustainability in low-income countries is an important common challenge for the future," she said. "Ensuring high lending standards is particularly important.
The discussions about common minimum standards for all lenders should be concluded quickly." The minister also stressed that the World Bank needs stronger involvement with "middle-income countries" - better-off developing countries such as China, Mexico and Brazil.
"The real challenge is not just to make the Bank's capital easier to access by lowering supply side thresholds, but to make the Bank more relevant in middle-income countries," she said.
"We support greater emphasis on financial innovation (including at sub-national levels). The Bank has to develop, and offer more pro-actively, financial products that countries with poorer credit profiles are not able to obtain from the private market," she said.
"In addition to protecting against environmental risks, in the future an extended range of products should also be directed towards risks that arise in connection with capital and goods markets."
Wieczorek-Zeul said Germany recognizes its obligations for gradually increasing the country's official development aid, or ODA, to 0.51% of gross national income by 2010 and to 0.7% by 2015.
In this context, however, she said the World Bank, the IMF and partner countries "need to work together more closely in order to analyze the impacts of alternative financing scenarios on macroeconomic stability and targeted development outcomes."
The IMF must do more to help countries create the scope for additional productive and cost-effective public investment that is also consistent with macroeconomic stability and debt sustainability, she said.
She called on the IMF to set up "a pertinent working program" on the matter together with the World Bank and important donors.
"Capacity development in our partner countries is vital in order for increased ODA funding to lead to sustainable development and the achievement of the MDGs (Millennium Development Goals)," she said.
"All donors are therefore called upon to step up their efforts over the next few years to help our partner countries identify and address capacity bottlenecks," Wieczorek-Zeul said.
Vultures in pursuit of £1bn threaten debt-relief deal
Larry Elliott in Washington
Legal action worth almost £1bn by "vulture funds" against some of the world's poorest countries poses a threat to the debt cancellation deal agreed by the G8 at Gleneagles in 2005, the International Monetary Fund warned at the weekend.
The IMF said it was concerned that private creditors were buying debt owed by highly indebted poor countries (HIPCs) at cheap rates and then suing them for a profit.
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