IMF Debt Relief for Liberia

Overview

For decades, poor nations have spent billions of dollars trying to pay back loans from wealthy nations and international financial institutions -- billions that could be going to fighting poverty and investing in their own people. Many of these loans were made to corrupt governments during the Cold War, with little hope of repayment. These still unpaid debts created a legacy of poverty in the developing world and particularly in Africa. Liberia is a sad case study of this tragic dilemma.

In 1980, Samuel Doe staged a military-coup in Liberia, beginning a decade-long brutal dictatorship. During his time in power, Doe borrowed billions of dollars from international creditors to consolidate his power. Eventually, his regime collapsed into a bloody civil war lasting 14 years and claiming the lives of hundreds of thousands of Liberians.

The peace accord came in 2003, and in 2005 Ellen Johnson-Sirleaf, once a political prisoner during Doe's regime, won a free and fair presidential election making her the first elected female Head of State on the African continent. But this desperately poor country founded by freed American slaves was still trapped by Samuel Doe's $4.5 billion debt obligation.

Liberia owed US$842 million to the International Monetary Fund (IMF) alone. By mid 2007, Liberia had met all the IMF conditions to have its debt cancelled and join the Heavily Indebted Poor Country (HIPC) debt cancellation initiative which other poor nations had used as a pathway out of debt and towards significant anti-poverty investments. But bureaucratic inertia and reluctance on the part of IMF funders prevented Liberia from sealing the deal on a final debt relief package.

By the autumn of 2007, Liberia had been waiting 18 months for the IMF to finalise its debt relief agreement. ONE members around the world joined an international call for debt relief for Liberia, sending more than 48,000 emails to the IMF demanding that the global financial body end the delays and forgive Liberia's debt.

A few weeks into the campaign, the IMF took action, working out a financing arrangement to cancel Liberia's remaining debt. This was a major victory for ONE members and debt cancellation advocates everywhere who were working on behalf of the Liberian people. In an extraordinary step, the IMF published an open letter at the time of the debt cancellation announcement, acknowledging the positive role public pressure played in the process.