Stephen Odoi-Larbi
26 March 2008
Liberia over the weekend reached its decision point under the enhanced Heavily Indebted Poor Countries (HIPC) initiative.
Liberia then becomes the 33rd country to reach its decision point and now qualifies for debt relief under HIPC initiative.
According to the World Bank and IMF, this step taken by Liberia meant that it can now apply for temporary debt relief from some of its creditors.
But a release issued in Washington by the World Bank indicates that for Liberia to be granted full debt relief, it has to implement broad sets of reforms including maintaining macroeconomic stability as evidenced by satisfactory performance under the IMF's Poverty Reduction and Growth Facility (PRGF), prepare and implement a Poverty Reduction Strategy for at least one year.
The country is also expected to implement a pivotal reform in the areas of governance, public financial management, debt management, as well as other structural and social measures.
According to the release, Liberia will also be eligible for assistance under the Multilateral Debt Relief Initiative (MDRI) from the World Bank and the African Development Bank and beyond HIPC assistance from the IMF upon reaching the HIPC completion point.
This according to the release will further increase the resources available to the Government in order to reduce poverty.
Mr. John Lipsky, first Deputy Managing Director of the IMF commended Liberia for reaching its decision point towards debt relief.
"This has been a historic week for Liberia and the Fund. We have seen Liberia's long-standing arrears to the IMF cleared and the Fund has been able to provide significant new financial resources in support of the Liberian Government's reform program. Liberia has also reached a key milestone in its campaign to have its external debts reduced to sustainable levels by reaching the decision point under the Enhanced Initiative for Heavily Indebted Poor Countries," he added.
To date, 33 HIPC countries have reached their decision points, of which 23 have reached completion point.
Following the approval of the decision point the Boards of IDA and IMF, are expected immediately to begin to provide Liberia with its share of HIPC assistance of US$732million of which US$32million would be delivered through the concessional element of its arrears clearance operation over the interim period.
The IDA has already provided its share of HIPC debt relief (US$375million in NPV terms) through the grant element embedded in the clearance of arrears to both IBRD and IDA. Under the HIPC Initiative's burden sharing approach, the remaining estimated HIPC debt relief (US$1.7 billion in NPV terms) would be provided by Liberia's other creditors.
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