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Debt Relief Essential to Liberia’s Recovery and Development

November 9, 2007

Africa’s ‘first republic’ has returned to democratic rule after two decades of dictatorship and war. Liberia’s current President, Ellen Johnson-Sirleaf, has already restored some stability to the country. As the first African woman to be elected head of state, she has energetically set the country on a new course, putting transparency, good governance, accountability, and economic opportunities for all Liberians at the center of her agenda [1]. But despite the president’s good efforts, the economy still faces many challenges, and first among them is an illegitimate and unsustainable debt burden [2].

Liberia’s debt to the IMF, the World Bank, and other creditors totals more than $4.5 billion. Much of its current debt is comprised of interest and penalties accumulated over the past twenty-six years, due to non-payment of past debt service obligations [3]. As a result of Samuel Doe’s autocratic regime from 1980-1989, and Charles Taylor’s regime in 1989, Liberia now suffers an enormous debt burden. These undemocratically elected dictators received loans for monies which were used for military spending to brutally repress Liberia’s people. In the recommendations suggested by the IIJD’s 2006 International Conference on the State of Affairs of Africa, the unbelievable debt surmounted in sub-Saharan Africa is reiterated: “Countries received $540 billion in loans between 1970 and 2002; and, despite having paid back $550 billion over the same period, they still owe another $293 billion. Some of these loans directly supported corrupt governments, while other loans were expressly given for geopolitical reasons serving the interests of wealthier countries” [4]. The bottom line is that this money never benefited the people it was intended for.

Liberia has been waiting over 18 months for the IMF to act on its promise of cancelling $838 million of debt, which the One Campaign has classified as illegitimate [5]. Emira Woods, Board Chair of Africa Action and Co-Director of Foreign Policy in Focus, expresses her frustration: “Liberia has met all of the onerous requirements demanded by the IMF to access debt cancellation, and they still have gotten nothing in return. Meanwhile, the impoverished majority in Liberia pays the price for the IMF’s inaction” [6].

In a public letter, the ex-Managing Director of the IMF, Mr. Rodrigo de Ratio reassured, “The IMF has already approved a financing package for Liberia’s debt relief. Now it is up to our member countries to provide the necessary funding… What is needed urgently is further commitments from countries to fill the gap” [7]. De Ratio’s demands do not go unfounded, as IMF shareholders are currently debating which countries should cover the remaining costs. Some argue that the G-8 countries ought to contribute more; others argue that the IMF should use its substantial internal resources to make up the differences, including its $70 billion in gold reserves. Still others contend that middle-income countries, such as Belgium, should do more to contribute their fair share [8]. But every day the institution stalls the realization of its promised debt-forgiveness, while Liberian development efforts continue to suffer under financial constraints.

The IIJD demands that the IMF stay true to its promise and bring the process of cancelling Liberia’s debt to full fruition. It supports the call for a speedy conclusion of the current debate over the financing of Liberian debt-forgiveness, and urges the United States and other countries to make debt-relief a priority on their agenda. Immediate debt-relief must be secured at once.

Further, the IIJD recommends that all debts from loans given directly to support undemocratic regimes be canceled, and that all loans for foreign aid to dictatorial regimes be stopped. Development grants ought to be made available to those needy countries making efforts and achieving substantial progress toward democratic governance. By relieving countries of the burden of financing debt that is illegitimately owed, countries like Liberia can focus their government spending on essential social services, such as healthcare and education - services whose availability directly benefit the people.

The lending of money to dictators continues to be a problem. As an example, the World Bank is giving loans to the government of Uzbekistan, where the United Nations has found corruption and human rights abuses, including the use of torture. More recently, illegitimate lending can often show a political face, when loans are given to support dictators who are allies in the ‘war against terror’. Banks and international financial institutions will be forced to stop making illegitimate loans if they are penalized by not being able to collect past improper loans [9].

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