The NEWS (Monrovia)
21 April 2008
Monrovia — The Liberian government has announced that it had reached agreement with its Paris Club creditors for a debt relief package, a Finance Ministry statement released last evening said.
The Paris Club agreement follows the clearance of Liberia's arrears with the World Bank and African Development Bank late in 2007 and the clearance of IMF arrears and reaching of HIPC Decision Point last month.
According to the statement, when the agreement with the Paris Club creditors is taken together with comparable debt relief from other categories of creditors, Liberia will eventually have more than 97% of its external debt stock cancelled.
This package was said to have been negotiated in the context of the HIPC (Heavily Indebted Poor Countries) Initiative.
Giving Liberia's external debt background, the statement said, "Previous Liberian administrations borrowed heavily, and at times recklessly, in the late 1970s and early 1980s. Liberia defaulted on its external debt in the mid-1980s and these debts have not been serviced since that time. With interest accumulating for more than 20 years, by June 2007 Liberia's external debt stock had grown to 4.7 billion US dollars. The combination of soaring debt and the collapsing economy resulted in a debt-to-export ratio of 2,300 percent in NPV terms, one of the highest in the world".
Against this backdrop, the statement said the World Bank and International Monetary Fund have calculated (in an analysis released in March 2008) that Liberia would need to receive debt relief from all of its creditors (multilateral, bilateral, and commercial) equal in net present value terms to approximately 97% of the existing external debt stock.
The agreement will result in the cancellation, during the implementation of the HIPC process, of approximately 97% of Liberia's non-ODA (Official Development Assistance) debts owed to Paris Club creditors and that no cash payments will be required in respect of all Paris Club debts pending completion of the HIPC process for Liberia.
Liberia's Minister of Finance Antoinette M. Sayeh said, "The historic agreement that we have reached today with our Paris Club creditors demonstrates the commitment of our bilateral partners in supporting Liberia's ambitious reform and reconstruction program. It signals their willingness to help Liberia make visible progress on reducing poverty amidst significant challenges, including from rising food and fuel prices."
"This agreement reflects the high level of confidence Paris Club countries have in the management of Liberia's economy over the past two years and the confidence our partners have in our future prospects for poverty reduction and sustainable growth and development," the Minister added.
The countries comprising the Paris Club creditors of Liberia are Belgium, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States of America.
Liberia has already commenced discussions with the holders of the country's commercial debts for debt relief on terms consistent with those agreed with the Paris Club today.
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