Liberia Gets Debt Relief, DR Congo on Hold

  • by Matthew O. Berger (washington)
  • Wednesday, June 30, 2010
  • Inter Press Service

The news came as part of a spate of debt relief decisions by the Washington-based financial institutions.

Earlier in the day Tuesday, they determined Comoros had reached its 'decision point' in the debt relief process, meaning it can start receiving debt relief on an interim basis. The news was not as rosy for the Democratic Republic of Congo.

After a decision was delayed the day before, it was postponed further Wednesday. DRC President Joseph Kabila had hoped a decision would come in time for his country's 50th anniversary of its independence from Belgium, to be celebrated Wednesday.

But, after a request from Canada that the decision be postponed, the war-ravaged country was left without what would have been eight billion dollars in debt relief.

On its golden anniversary, though, that it was copper and cobalt that ruled that day.

A legal dispute between Canada-based First Quantum Minerals and the DRC government over the ownership of one of the deposits of these minerals in DRC is seen as the main motivation behind Canada's postponement request. Critics have argued a decision on debt relief should not be tied to a commercial deal. Canada has said it must protect its country's investments and has concerns regarding governance and the rule of law in DRC.

The copper and cobalt project was reportedly closed last September by DRC and its Supreme Court annulled First Quantum's rights to two other mines last month.

DRC's bid for debt relief may still be considered by the IMF Wednesday, but the decision would need to be approved by both international financial institutions before going into effect.

The story is much brighter in Liberia.

Noting that the country 'has successfully implemented its poverty reduction strategy and maintained a stable macroeconomic environment, despite the global economic crisis', the Bank and IMF made Liberia the 29th country to reach the 'completion point' of the Enhanced Heavily Indebted Poor Countries Initiative (HIPC).

The debt relief is expected to free up resources for Liberia to rebuild its social services following years of civil war.

'Liberia can now mobilise additional resources to rebuild the road network and the electricity supply system, providing the infrastructure needed to allow economic growth, while continuing to expand the health care and education systems,' IMF mission chief for Liberia Chris Lane said in announcing the decision. 'Liberia will also be able to further develop its own financial market and channel private savings to productive uses.'

The HIPC programme was launched in 1996 in acknowledgement of the fact that excessive debt was undermining the development prospects of poor countries. Critics have alleged that countries which want to take advantage of HIPC have to satisfy too many requirements — and that too little debt forgiveness has occurred, as a result.

Reaching the HIPC completion point means Liberia is also now eligible for further debt reductions from Bank, the IMF, the African Development Bank and the EU Special Debt Relief Initiative.

In 2007, the U.S. - whose freed slaves founded the country in 1821 - cancelled 358 million dollars in debt incurred by Liberia's previous, undemocratic regimes. The U.S. Treasury Department has said it will cancel all its remaining claims against the country after the Paris Club meets in September.

The Paris Club includes wealthy countries which, since 1956, have met under the chairmanship of the French Ministry of Finance to discuss debt rescheduling.

There, the country is expected to ask for the cancellation of the country's remaining debt.

Tuesday's announcement will reduce Liberia's debt by 90 percent, according to the IMF, relieving 4.6 of the 4.9 billion dollars it owes. Liberian President Ellen Johnson- Sirleaf has said that the country's 2009-10 budget is only 350 million dollars, meaning it would have taken the equivalent of 28 years of paying the country's entire budget to repay that 4.9 billion dollars.

On the other side of the continent, the tiny Indian Island state of Comoros becomes the 36th country to reach its 'decision point' under the HIPC

The Bank and IMF say Comoros has committed to implement a set of reforms in order to reach its 'completion point'.

These reforms would include maintaining macroeconomic stability, implementing a poverty reduction strategy 'comprising key pro-growth and pro-poor structural and social measures', and improving management of public funds.

'In the last two years, Comoros has made progress on political and economic reforms,' said Mbuyamu Matungulu, IMF Mission Chief for Comoros. 'Growth is trending up, and the Comorian authorities are endeavoring to strengthen macroeconomic stability by putting public finances on a firmer footing and improving public financial management.'

© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service

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