28 March 2008
analysis
Fresh from winning the leadership contest of war-ravaged Liberia, the Johnson-Sirleaf administration stepped right into the challenge of balancing the debt repayment expectation of financial institutions and lender nations with the recovery expectation of millions of war-devastated Liberians.
It's been more than a year of discussions and compromises now, and the Executive Board of the International Monetary Fund (IMF) says it is providing a growth-enabling environment for Liberia.
There is a resounding "Hooray!" across the nation, but the questions that remain are, "Is Liberia ready to handle the requirements of that environment in order to remain the IMF's trusted partner?" "Is the country's new status a blessing or the benefit of the doubt for Liberia?"
Or better still, "How long will the conditions in Liberia make the IMF compassionate enough to keep engaged - outside the hard core lending and business rules?"
The Analyst Staff Writer has been considering just these questions plus more.
Announcements by the Executive Board of the International Monetary Fund (IMF), last week, leaves as much for delight as it leaves hard questions for reflection and consideration lest the delight is short-lived, observers and analysts have suggested.
The announcement, though, lifted for the 185-nation IMF and the Johnson-Sirleaf administration a chorus of "Hooray!" amongst unsuspecting Liberians across the nation last week. These expect that the administration will now begin to restore basic social services, revamp the private and public sectors, and begin creating new jobs to service the nation's daunting unemployment problem.
"But how realistic are the expectations in the face of crawling realities that comprise troubling contradictions and professional and structural insufficiencies?" is yet another question observers and analysts want answered.
IMF Announcement
IMF Board, in a policy statement, said it has fully restored Liberia's IMF status after 20 years delinquency in loan servicing, approved financial support amounting to US$952 Million, and agreed in principle to designate Liberia as a "Decision Point country" under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
A country reaches decision point, amongst other things, after it had establish a track record of reform and sound policies through IMF- and World Bank's International Development Association (IDA)-supported programs.
This include, foremost, after the country had developed what is called a Poverty Reduction Strategy Paper (PRSP) through a process that involved the IMF and World Bank and all of the country's stakeholders in the private and public sectors.
The IMF eligibility criteria say a country at decision point may immediately begin receiving interim relief on its debt service falling due. In order for the relief to become full and irrevocable, the criteria say, the country must establish a further track record of good performance under IMF- and IDA-supported programs; implement satisfactorily key reforms agreed at the decision point, and adopt and implement the PRSP for at least one year.
Achievement at this level will qualify the nation for what IMF calls its completion point, at which time lenders are expected to provide the full debt relief committed at decision point. The IMF announcement says the Board approved the range of measures to complete the steps necessary for Liberia to fully normalize financial relations after more than two decades of protracted arrears to the IMF.
The decisions, according to the policy statement, also enabled it to commit IMF financial support amounting to a combined SDR 582 million, about US$952 million. SDR is initials for "special drawing right" the current value of which is determined daily by the IMF by summing the values in U.S. dollars, based on market exchange rates, of a basket of four major currencies - the euro, Japanese yen, pound sterling, and the U.S. dollar.
The SDR valuation basket is normally reviewed every five years. Interest on SDR holdings is paid, and charges on net cumulative allocations are collected, on a quarterly basis, and are settled on the first day of the subsequent quarter.
The full restoration of Liberia's IMF status, according to the Board, includes the Executive Board's agreement to restore Liberia's voting and related rights, and its decision to restore Liberia's eligibility to use the general resources of the Fund.
Liberia's suspension rights to use SDRs was also lifted after overdue obligations to the IMF were cleared through a bridge loan amounting to an equivalent to SDR 543 million (about US$888 million) was paid by the U.S. government.
"Financial support approved by the Executive Board includes a three-year, SDR 239.02 million (about US$391 million) arrangement under the Poverty Reduction and Growth Facility (PRGF) and a SDR 342.77 million (about US$561 million) arrangement under the Extended Fund Facility (EFF) in support of the Liberia government's economic program covering 2008-10," the announcement said.
It noted further that the Executive Board's decisions allow an immediate disbursement to Liberia of an amount equivalent to SDR 550.03 million (about US$900 million) under the arrangements. The remaining SDR 31.76 million (about US$52 million) will be drawn in six installments.
What the announcement did not bother to say is whether or not the disbursements would be released directly to the Liberian government through budgetary allocations or would pass through middle UN, US, or NGO middlemen in which case Liberia will have no part in or control over the implementation as was the case in the past.
According to the announcement, details regarding the deliberations of Liberia's Decision Point under the enhanced HIPC Initiative would be released early this week. It said this is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty.
PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments. Assistance under the EFF is given to IMF member nations with economies suffering from serious balance of payment difficulties caused by structural imbalances in production, trade and prices.
Or alternatively, to those countries whose economies are characterized by slow growth and an inherently weak balance of payments position. Drawings can be made over a period of three years under conditions similar to IMF standby drawings.
At the conclusion of the IMF Executive Board's discussion of Liberia's relations with the Fund and the country's requests for three-year arrangements under the PRGF and EFF, Mr. Murilo Portugal, Deputy Managing Director and Acting chair, issued the following statement:
"The government's reform objectives are ambitious, and will require continued strong commitment to the economic program to ensure achievement of key benchmarks. Continued financial and technical support from the international community will be important to support the government's efforts.
"Over the past two years, Liberia has strengthened public expenditure management and financial transparency, and increased government revenues.
Efforts are required to improve budget implementation without weakening the procedures for approving, controlling and monitoring spending. Adoption of a comprehensive public financial management law will be an important step in this regard, and would allow for further improvements in budget preparation and implementation and a more efficient allocation of government resources to achieve Liberia's poverty reduction goals.
"Liberia has also made good progress in strengthening governance. An important step in this regard was the adoption of a comprehensive anti-corruption strategy by the government. Finalization of legal and other arrangements for establishing an independent anti-corruption commission, as called for in the government's economic strategy, is important to firmly establish an environment of zero tolerance for corruption.
"Liberia's monetary policy is anchored on seeking to maintain broad exchange rate stability. However, in view of the still-low level of international reserves, continued efforts to strengthen the available instruments for managing domestic liquidity will be important.
"Liberia has fulfilled the requirements to reach the decision point under the Enhanced HIPC Initiative. Liberia could reach the HIPC Initiative completion point following satisfactory performance under the Fund-supported program, implementation of the poverty reduction strategy for at least one year, and implementation of proposed measures in public financial management, the social sectors, debt management, and governance."
There are indications according to the end-August 2007 update that Liberia is first amongst 9 pre-decision point countries such as the Comoros, Cote d'Ivoire, Eritrea, Nepal, Togo, Somalia, and Kyrgyz Republic to reach the decision-point level.
In a conference call later on last week, IMF's First Deputy Managing Director John Lipsky noted, "With the participation of 102 of our member countries, the funds have allowed Liberia's relations with the Fund to be normalized.
This week using these funds raised from member countries, Liberia was able to clear its arrears to the IMF, and in response, the Fund's Executive Board agreed to restore Liberia's voting rights that had been suspended as a result of the buildup of arrears, as well as restoring Liberia's right to make drawings under the Fund's financing facilities."
He emphasized that reaching the decision point gives Liberia the opportunity toward achieving broad-based debt relief that will cover all of Liberia's creditors including bilateral and private creditors.
"Just to give an idea here, the outstanding stock of Liberia's debt amounts to about $4.7 billion. That's about $1,200 per person for Liberia, and as you can easily understand, most of this debt is simply unpayable and it just has to be forgiven if Liberia is to be able to move forward," he said.
The IMF deputy Director discounted debt relief as a panacea for Liberia and admonished the Sirleaf Administration to design programs that capitalizes private investment and financial support from the donor community.
He emphasized the need for the Executive and the Legislative branches of government to work together to pass the legislation on the Independent Anticorruption Commission in order to cement the vision of zero tolerance for corruption that is a hallmark of the government's policies.
He was however quick to note that the legislation has not been adopted and passed, but that the president and the authorities, the government, was extremely focused at it.
"The net result is that challenges for Liberia still remain immense but we've made some very important steps forward in enabling Liberia's reintegration into the global economy after a long period in the wilderness," Mr. Lipsky said.
He said the challenges remained even though the IMF provided technical assistance to, amongst other things, improve the budgetary process itself, to design and implement effectively a tax program, to ensure the efficiency of spending programs, to help control the flow of cash and cash outlays, to develop legislation, to reform the financial sector.
"The normalization of Liberia's status is important to both giving them access to normal financing facilities, but more broadly is symbolic of Liberia's reentry into normal circumstances. You can imagine the difficulties and in many cases, strict prohibitions, on entering into financial arrangements with the country running arrears to the Bretton Woods institutions.
So it will have importance in terms of actual relationships with other, both multilateral and bilateral institutions, and will be very symbolic in terms of relations with the private sector," Lipsky noted further.
Current Conditions and Expectations
By 2003, most of the country's farm-to-market roads and highways, electricity generation and transmission, and potable water and sewage systems had been destroyed, while consumer prices soared 200% and unemployment rose to 85%.
Observers say consistent with these grave economic conditions, official corruption has reached an all-time high while financial transparency, accountability, and fiscal management remain difficult-to-implement concepts for most of Liberia's financial managers and heads of most agencies and line ministries.
This picture, they say, contrasts vastly with the late 1970s when Liberia's per capita GDP was on par with that of Egypt, Indonesia, and the Philippines and more than double that of India and when a nation qualified for loan simply by stating its position in the Cold War.
It was only recently that the UN removed sanctions on the country's export earners even though, according to IMF deputy director John Lipsky, that along with debt relief will not free up many of the country's resources directly.
Recent IMF and World Bank evaluation rated Liberia "now one of the poorest countries in Africa with estimated 64 percent of the population living below the national poverty line, with 48 percent living in extreme poverty."
"Only an estimated 17 percent of the labor force is formally employed. Net primary school enrolment rates today remain low at 37 percent, while the much higher gross enrolment rate (86 percent) suggests that older children that missed out on education during the war are returning to school. Approximately 50 percent of the population lack access to safe water, and over 60 percent have no access to improved sanitation facilities.
National and local institutions are dysfunctional and plagued by poor governance and widespread corruption," goes the institutions' evaluation. The Fund admitted that the current unsustainable level of public debt makes it imprudent to pursue an active fiscal policy stance, and noted that the government was adhering to a cash-based balanced budget.
It notwithstanding noted that while strengthened revenue administration and better enforcement of the tax code have boosted revenues, budget implementation needed further strengthening.
It said the government has no choice to strengthening budget implementation especially given that the repayment of its US$900 million domestic debt could span 30 years under good practices and more under current conditions. This aside, there is no question in the minds of the IMF and the World Bank that significant challenges remain in establishing a transparent and accountable government in Liberia.
"If the scope for corruption is not reduced, much of the public expenditure donors finance will continue to be executed outside the government's budget," notes John Lipsky last week. Currently, he said, the Sirleaf Administration is unable to formulate policies and monitor their implementation because there were no reliable and timely data.
"A key challenge will be to complete the preparation of the national statistical development strategy and begin its implementation, and strengthen the capacity of the Liberian Institute for Statistics and Geo-Information Services," Lipsky said.
Another challenge, he said, was the reversal of the constraints on the country's health delivery system, which he said presided over a life expectancy of 42 years, below the average for low income countries under stress; infant mortality that is around 117 per 1,000 live births, and child mortality that is around 194 per 1,000 live births.
"Preventable diseases, such as malaria, diarrhea, respiratory infections, and measles, are rife. Malnutrition is considered a key factor in high death rates.
Most medical clinics (80 percent) are supported by humanitarian organizations; along with the closure of camps for internally displaced people, the withdrawal of such relief providers will reduce social services," he said.
In education, he said the school system is unable to absorb the large numbers of children who have enrolled in primary schools since the new government abolished school fees. "Even as progress is made at the policy and ministerial level, delivering services at the local level will be a daunting challenge."
The picture is even bleaker in the area of agriculture where Mr. Lipsky said even though agriculture is the primary source of livelihood for most of the population, few resources are available to smallholders, and the poor transportation network makes it hard for farmers to get products to market.
Even though all of this adds up to a big national challenge, many unsuspecting Liberians believe the US$952 Million the IMF Board has approved in support funds to Liberia is available to service the nation's competing priorities.
Some expect that with the money the government would begin constructing all-weather roads and repairing dams to provide electricity and bridges to provide access ways upcountry. Combined with current structural inadequacy and institutional inefficiency, analysts say, any hope that the nation will ready itself for the enormous challenges that come with the restoration of the IMF status is a long way off.
Reflection and Hard Questions
Indications, according to analysts, are however that not only will the government not be able to draw upon the money to service its own priorities, but that the money is actually what the US government provided to reduce Liberia's debt in order to enable the IMF to restore its status at the global financial institution.
"The U.S. Treasury came through with a bridge loan to clear up the problem. IMF practice is only to lend to countries that are servicing their debt.
Liberia halted payment years ago during the war," a recent report said. Backing up the report, deputy Lipsky told reporters last week that the support fund comprised $900m for an immediate release and $52m to be released over six installments because the primary requirements were to clear the entire arrears.
"The bulk of the amount, that immediate amount, was the amount necessary to completely repay the bridge loan that helped clear the arrears and reestablish their ability to draw.
The additional amounts represent new financing of additional monies. In other words, the bulk of the financing had to come immediately because under our procedures and regulations, we cannot make new lending to members with arrears outstanding," he said.
This explanation, observers say, raises fresh new questions about where all this leaves Liberia's needs and priorities in economic recovery, national reconstruction, and the continued servicing of the nation's domestic and foreign debts.
"How does the new U.S. rescue fund fit in the scheme of things regarding debt servicing vis-à-vis Lipsky's concession that an IMF sensitivity analysis highlights the vulnerability of Liberia's debt prospects?" wonders one analyst.
Mr. Lipsky noted last week that Liberia's ability to service its external debt after HIPC debt relief is found to be vulnerable to increased new borrowing even on concessional terms (which could arise, for example, if Liberia was to compensate for a possible reduction in external grants compared to the baseline), and to a combination of adverse domestic and external shocks.
This brings up another question to back up Lipsky's assertion that debt relief is not going to free up all of the country's resources, analysts said. "Will the vulnerability to increased new borrowing not reverse the debt buildup in a country that is accustomed to borrowing under pressure with runaway, predatory interests?"
That added to the fact that the country is yet to find its bearings in putting a lid on official corruption, the Sirleaf Administration is most likely than not to fall into the same debt trap as its predecessors. "So, in the midst of all this, is the IMF decision a benefit of the doubt or a blessing for the people?" wonders another analyst.
With the nation's competing priorities some of which are barely recognized as such by the international donor community and financial institutions, according to analysts, President Sirleaf will do well to temper Liberia's traditional political patronage with a mastery of feeling the pulse of the international community on most issues.
"The Sirleaf Administration needs to discover the path that led to Liberia's 4.7 billion dollar foreign and 900 million dollar domestic debts and learn the skill of avoiding that path. The skill is essential as the nation 'starts all over again' and as borrowing becomes a sine qua non of national recovery," they suggested.
Besides, they say, the administration must map out the repayment scheme from the start with the input of the lender nation so as to avoid the accumulation of arrears and make repayment easier and affordable. With this, observers say, must come a strong debt management regime that goes beyond current practices, which by many standards, are at best archaic.
Currently, the existing financial management legislation does not clearly specify the different tasks of each institution or its responsibility for designing and implementing a cohesive debt strategy, according to an IMF finding.
The finding says there are four pieces of uncoordinated legislation that constitute the legal framework to regulate debt management in Liberia.
It named the legislation as Article 34 the of 1986 Constitution that says that "no loan shall be raised by the government on behalf of the Republic or guarantees given for any public institution or authority otherwise than by or under the authority of legislative enactment."
The other two, it says, are the executive law creating the Ministry of Finance; the Revenue Code of Liberia Act of 2000 at Section 2300; and 1999 Act to Authorize the Establishment of the CBL.
As the result of the problem of coordination, the IMF has found, there currently exists no comprehensive public debt database currently exists. "There are currently no formal procedures to monitor the contracting of debt by state-owned enterprise. Unless the creditor requires a state guarantee, state-owned enterprise currently do not need ministerial approval to take on new debts.
The last guarantee was provided to Liberian Electricity Corporation in 2002 following a request from ECOBANK," the primary global financial institution said. It then concluded that a significant portion of the government's existing domestic debt has been inherited from state-owned enterprises that have defaulted on their debt obligations.
Analysts say the even bigger question now is does the government know this and doing something about it at this crucial time?
And with this question come other fundamental ones: "Is Liberia ready to handle the requirements of the new IMF environment in order to remain it's trusted partner?" Or better "how long will the conditions in Liberia make the IMF compassionate enough to keep engaged - outside the hard core lending and business rules?"
Transcript of a Press Conference Call by John Lipsky,
First Deputy Managing Director of the IMF on Liberia
Washington, D.C.
March 18, 2008
MS. MBOTO FOUDA: Good day everyone. I'm Lucy Mboto Fouda from the External Relations Department of the IMF and I would like to welcome all of you to this conference call on Liberia. Before I introduce the speaker, I wish to remind you of a few recent developments regarding the Fund's relations with Liberia.
As you may recall, the Executive Board of the IMF last Friday approved a set of important measures designed to complete the steps necessary for Liberia to fully normalize its financial relations with the Fund after more than 2 decades of protracted arrears to the institution. As a result of that normalization, the Board approved financial support of about $952 million.
The Board also agreed in principle to support Liberia's decision under the Heavily Indebted Poor County (HIPC) initiative. I wish to mention that the IMF Board's decision on the HIPC decision will be made available to the public later today after the World Bank's Executive Board's discussions on Liberia.
This conference call will be conducted by Mr. John Lipsky. John Lipsky is the IMF's First Deputy Managing Director. Mr. Lipsky has among other responsibilities within the Fund to overview the work of the institution in Liberia. Mr. Lipsky will offer a few opening remarks and then he will be happy to take your questions.
But before we get to that, let me just remind you of one more point. A video clip of Mr. Lipsky on the Fund's Board decisions on Liberia was posted under embargo early this morning on our Online Media Briefing Center for your convenience. The contents of this conference call and video clip will be strictly under embargo until 3:30 p.m. Washington time today, which is 1930.
GMT. I wish to offer some apologies for not being able to post the joint press release on the HIPC decision early this morning as planned. We will do so as soon as the World Bank Board's discussion on Liberia is over. Without taking too much more of your time, I would like to now give the floor to Mr. Lipsky.
MS. LIPSKY: Thank you, and thank you all for joining us here today. I'll make a few remarks and I'll be happy to take your questions.
Of course, we are very pleased. This has been an historic week for both the Fund and Liberia. We have been able to clear the long-standing arrears of Liberia to the IMF and the Fund is also able to provide significant new financial resources to support the Liberian government's reform programs, and at the same time Liberia has reached a key milestone in its campaign to have its external debts reduced to sustainable levels.
The IMF has been supporting efforts to rebuild the Liberian economy following the civil conflict in that country which had a devastating effect on its infrastructure. As I am sure you aware, many people fled the country, corruption became rampant, and there were barely any resources left for the national government.
When President Johnson Sirleaf took office in early 2006, the Fund quickly agreed on a reform program with the new authorities and it has been implemented effectively. As you can imagine, given the starting point, it has not been easy. Nonetheless, and happily, the Liberian people have already begun to reap real benefits from the reform programs.
Economic growth rates have rebounded, investment is picking up strongly, with this confidence in the much more favorable outlook, donors have provided substantial resources to help the rebuilding process, and the United Nations was able to end the sanctions that limited timber and diamond exports.
Government revenues now have more than doubled and the government now pays its wages and it pays its suppliers on time, which is quite an accomplishment from where we were just a few years ago.
However, given the circumstances of the preexisting very large arrears, the Fund's support for the new government has had to be limited to providing substantial technical support. We have simply not been in a position to be able to provide financial support because of the outstanding arrears that in fact had been building up since the 1980s.
Following a sustained fund-raising effort over the past year from its members, the IMF has been able to garner the resources necessary to finance comprehensive debt relief for Liberia. With the participation of 102 of our member countries, the funds have allowed Liberia's relations with the Fund to be normalized.
This week using these funds raised from member countries, Liberia was able to clear its arrears to the IMF, and in response, the Fund's Executive Board agreed to restore Liberia's voting rights that had been suspended as a result of the buildup of arrears, as well as restoring Liberia's right to make drawings under the Fund's financing facilities.
Another key point this week is that Liberia as a result has reached the so-called decision point under the HIPC or Heavily Indebted Poor Countries initiative. This is the first concrete step toward achieving broad-based debt relief that will cover all of Liberia's creditors including bilateral and private creditors. Just to give an idea here, the outstanding stock of Liberia's debt amounts to about $4.7 billion.
That's about $1,200 per person for Liberia, and as you can easily understand, most of this debt is simply unpayable and it just has to be forgiven if Liberia is to be able to move forward. In our view, Liberia could reach the conclusion of this HIPC debt relief process in only 2 or 3 years, so it is very important at this point that Liberia's other creditors including bilateral and private creditors agree to provide debt relief consistent with this HIPC initiative.
The IMF itself intends to go beyond the requirements of this HIPC initiative. We are going to provide full debt relief on an amount equivalent to the arrears that were outstanding prior to last week's Board meeting.
And Liberia also will be able to begin receiving this relief on payments to the Fund immediately. At the same time, as you already heard, the Fund will be providing Liberia with substantial new financial resources on conditional terms under our so-called PRGF, Poverty Reduction and Growth Facility, equivalent to about $50 million over 3 years.
But we need to be realistic. Debt relief is a huge and important step but it's not a panacea. In fact, as you are probably aware, Liberia has built up arrears and has not been making significant payments on its huge debt for many years.
Therefore debt relief itself will not free up many resources directly. However, the program should be an important step in capitalizing private investment and financial support from the donor community and we encourage donors to ensure new support on concessional terms.
The Liberian government will also need to work closely with the legislature there. Recently proposed legislation to establish an independent anticorruption commission will be important in cementing the vision of zero tolerance for corruption that is a hallmark of the government's policies
These and other reforms included in the reform program more generally will help to ensure that the poverty reduction strategy of the Liberian authorities is implemented as planned. The net result is that challenges for Liberia still remain immense but we have made some very important steps forward in enabling Liberia's reintegration into the global economy after a long period in the wilderness.
The Fund's staff and management will continue to support Liberia in every way we can to build on the significant progress made to date to bring strong and sustainable growth and investment to Liberia. Thanks very much. I'd be very happy to take any questions you might have now.
QUESTIONER: Good morning, Mr. Lipsky. I was curious to know why the Fund decided to release the $900 million in one go to Liberia, leaving $52 million over 6 installments. I was just curious why that happened.
MR. LIPSKY: The primary requirements were to clear the entire arrears and so the bulk of the amount, that immediate amount, was the amount necessary to completely repay the bridge loan that helped clear the arrears and reestablish their ability to draw.
The additional amounts represent new financing of additional monies. In other words, the bulk of the financing had to come immediately because under our procedures and regulations, we cannot make new lending to members with arrears outstanding.
QUESTIONER: May I have a follow-up on this one? One of the issues in Liberia has been the government's capacity, believe it or not, to spend. What has the Fund done to improve that to make sure the budget flows actually get down to the people?
MR. LIPSKY: That is a very good question, but the answer is a very long one in this case. We have been providing technical assistance to improve the budgetary process itself, to design and implement effectively a tax program, to ensure the efficiency of spending programs, to help control the flow of cash and cash outlays, to develop legislation, to reform the financial sector; the list could go on and on.
QUESTIONER: Specifically on that question because Liberia had a surplus, one would want to know why a post-conflict country actually has a budget surplus. I know some of the issues. I've visited Liberia several times and there has been broad criticism against Johnson Sirleaf saying why does this country have a surplus at such a stage of its reconstruction...
MR. LIPSKY: I don't think this is going to be an ongoing problem. This is a country that has very great needs and there is no policy of running a perpetual surplus. The issue of course is that some of the revenues we're talking about represent aid inflows and other resources that need to be spent either for specific purposes or need to be spent efficiently and effectively and that's essentially what's happening here. In other words, we're working along with the World Bank and others to help the Liberian authorities develop control methods and means of spending effectively and prioritizing spending, so again I wouldn't view this as some kind of an intentional policy in running a perpetual surplus.
QUESTIONER: You mentioned that there wouldn't be a huge amount of net new money coming from this debt relief because Liberia hadn't been paying its debt for quite some time. How much of brake do you think the debt has been on private investment and donor investment and what kind of inflows do you think we can anticipate? You cut out very, very briefly when you were explaining how long you thought full debt relief would take. I wonder if you could just go over that point very quickly.
MR. LIPSKY: We think that they will reach the HIPC completion point in 2 to 3 years, so quite quickly. Your first question is of course a very relevant one but one that is very hard to answer definitively because, along with the arrears and clearing the arrears, there are many structural improvements occurring that we think would influence the attitudes of private-sector investors. As you heard, this is as thoroughgoing a reform and change as you can imagine. All the reforms will provide a boost to private-sector investment.
QUESTIONER: I'm coming back to the outstanding stock of $4.7 billion. Can you maybe just explain, I know this has been ongoing, how easily do you think that is going to be to write off that debt, do you think specific segments of it are going to be more difficult, and what sort of things, for example, will the private-sector creditors be looking for to write debt off?
MR. LIPSKY: Negotiations have just begun between Liberia and its private creditors so it's a bit early to foresee what might be the difficult or sticking points here. Of course, Liberia would like as thorough as possible a restructuring or renegotiating of this private-sector debt and the specific terms require 80 percent write-off of these relevant debt agreements I believe.
At this point we have every reason to be optimistic about the outcome of these negotiations, but I guess I'll say it's just too early to be able to indicate whether there are any particular problems.
QUESTIONER: If you don't mind, just one more talking about the interim debt relief that Liberia gets now. How much is that? Because I know once they do the decision point, they do get an interim debt relief don't they?
Ms. SAHAY: We will continue through until the HIPC completion point, and the interim debt relief from us would be about 15 million per annum from the IMF side..
QUESTIONER: Right, except that in the case of the World Bank, they have actually provided debt relief in the form of a grant up front.
MR. POWELL: Both the African Development Bank and the World Bank have provided their HIPC relief as part of their arrears clearance process in December. Regarding new payments falling due, they've indicated that they will provide budget support in order to finance those payments, which will have the same effect as interim relief so that cash payments won't have to be made during the interim period.
QUESTIONER: There are a lot of new things people are trying out, including the World Bank. The one issue, you did mention the anticorruption commission. But do you feel overall that Liberia has done enough right now to assure investors that they've got corruption under control?
MR. LIPSKY: Liberia has made some dramatic progress and improvement in general, as you well know, and so you'll understand very well the context of what we're talking about today and how important it is. Your question on corruption, that's a very good one.
We think of course it's very important that they make real progress and it's important that the anticorruption commission receives broad support from the government and the legislature and at this point, there is little doubt of the seriousness of intent of the government in this area and there can't be a shred of doubt of their intentions.
Again, as you're probably aware, the efforts are so broad based, the improvements to date are so comprehensive, all of these will have a positive impact on the flow of private investment. In the medium-term, I'm sure that the success of the anticorruption effort will be an important determinant of the flow over time.
QUESTIONER: Do you think that the restoration of its status within the Fund has much broader implications? Do you think other creditors or donors will now move more easily toward helping Liberia? And that's my last question. I promise.
MR. LIPSKY: Yes, we absolutely think that the normalization of Liberia's status is important to both giving them access to normal financing facilities, but more broadly is symbolic of Liberia's reentry into normal circumstances.
You can imagine the difficulties and in many cases, strict prohibitions, on entering into financial arrangements with the country running arrears to the Bretton Woods institutions. So it will have importance in terms of actual relationships with other, both multilateral and bilateral institutions, and will be very symbolic in terms of relations with the private sector.
Let me come back and I want to just add one detail on your anticorruption point. That is that the legislation has not been adopted yet, it's still to be passed, so I should be clear about that.
But the president and the authorities, the government, are extremely focused at it. Moreover, there seems to be broad support for this legislation so we're optimistic that it is going to be adopted soon. We anticipate that with the legislation, the authorities will pursue the anticorruption effort with vigor.
MS. MBOTO-FOUDA: Lesley, there is a clarification from our finance department on the figures that were provided to you earlier...
Ms. SAHAY: This is going back to the issue of the interim assistance. I just wanted to clarify that the 15 million that I referred to was in SDR, but it currently translates to US$25 million.
MS. MBOTO-FOUDA: If there are no more questions, we can wrap this up and I would like to thank all of our participants and thank Mr. Lipsky for taking the time to talk to reporters on Liberia today.
MR. LIPSKY: Thank you for your interest and good questions. We hope and expect that the economic environment internationally will stay favorable. This is a case that we will hope will be a sustained success story for years to come.
Thanks very much.
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