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Liberia: Debt Cancellation Overdue

AfricaFocus Bulletin
Feb 9, 2007 (070209)
(Reposted from sources cited below)

Editor's Note

Demonstrators delivered over 10,000 Valentine cards to the U.S. Treasury this week asking the U.S. Treasury Secretary to "have a heart" and cancel Liberia's debt. With the Liberia Partners' Forum in Washington scheduled for next week, even the International Monetary Fund (IMF) has stated that the debt is unsustainable. But more than a year after President Ellen Johnson-Sirleaf took office, Liberia is still being asked to repay arrears on accumulated debt.

This AfricaFocus Bulletin contains a press advisory on the demonstration and the campaign to collect Valentine cards, supported by the named groups as well as by others such as Africa Action; excerpts from a background paper on Liberia's debt from the Jubilee USA Network, and from a "Report Card" issued by nongovernmental organizations on the international response to Liberia over the last year.

For previous AfricaFocus Bulletins on Liberia, as well as additional background and links, visit
http://www.africafocus.org/country/liberia.php

For previous AfricaFocus Bulletins on debt, visit http://www.africafocus.org/debtexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Advocates to US Treasury: Have a Heart and Cancel Liberia's Debt

Center for Democratic Empowerment (Liberia) * Friends of the Earth * Institute for Policy Studies * International Labor Rights Fund * Jubilee USA Network

Press Advisory
February 7, 2007

[excerpts]

Contact:
Institute for Policy Studies, 240-603-7905, joia@ips-dc.org (Joia Jefferson Nuri); Jubilee USA Network, 202-783-0215, debi@jubileeusa.org (Debi Kar)

Washington - Today Wednesday, Feb. 7th leading advocates for impoverished country debt cancellation will call on U.S. Treasury Secretary Henry Paulson to "Have a Heart and Cancel Liberia's Debt." Advocates will deliver more than 10,000 Valentines with this message to Paulson, one week ahead of the Liberia Partners Forum, an international donors' conference in Washington. Advocates have also today released a report card assessing progress by the donor community in aiding Liberia's new president in her first year.

...

President Ellen Johnson-Sirleaf of Liberia, Africa's first female head of state, is working to overcome the devastation caused by two decades of dictatorship and a civil war. Much of Liberia's debts were incurred by the undemocratic regimes of dictators Samuel Doe and Charles Taylor between 1980 and 2003.

After one year in office, President Johnson-Sirleaf continues to face numerous challenges with 85% of the country's population unemployed and more than 75% of Liberians persisting on less than $1 per day. The country's massive debt burden severely restricts Liberia's capacity to combat poverty: the debt totals more than $3.5 billion. Liberia's annual budget is less than one fortieth of that amount, and interest continues to accumulate.

President George W. Bush recently named debt relief as our "best hope for lifting lives and eliminating poverty" in his State of the Union address. Debt relief campaigners are urging his administration to immediately and completely cancel Liberia's debt, rather than forcing the country to be tied up for years in the strings of the International Monetary Fund (IMF) and World Bank's debt relief program, which requires the country to pay off $1.5 billion in arrears, or interest and penalties accrued under the past brutal and undemocratic regimes of Samuel Doe and Charles Taylor, prior to obtaining partial debt relief or full cancellation.

The Institute for Policy Studies, Jubilee USA Network, Friends of the Earth, Africa Action, Center for Democratic Empowerment (Liberia), and International Labor Rights Fund among others have collected these Valentines as part of an effort to draw attention to Liberia's debt crisis. These groups have today jointly released a report card assessing the impact of the donor community, especially the U.S., in the areas of development aid, debt cancellation, investment in workers' rights, environmental sustainability, and HIV prevention and care.


Fact Sheet: Liberia's Debt

October 2006

Jubilee USA Network

http://www.jubileeusa.org

"Liberia, as it stands simply cannot pay this debt. We just have to look it right in the eye and say so. This is the reality. We urge the international community to take the right steps and to cancel this debt." - George W. Wallace, Jr., Liberian Minister for Int'l Cooperation & Foreign Affairs
Africa's 'first republic' has returned to democratic rule after two decades of dictatorship and civil war. There is much hope that Liberia's newly elected president, Ellen Johnson-Sirleaf, will restore stability to Liberia. But the country's economy faces many challenges, first among them an illegitimate and unsustainable debt burden.

Years of civil war have had a devastating impact on Liberia's population over the last decade. A recent United Nations human development report on Liberia found that more than three quarters of the population lives on less than $1 day, while the unemployment rate is as high as 85 percent. Life expectancy is less than 50 years and only slightly more than a third of the population is literate. At least eight percent of the population is infected with HIV/AIDS. According to the UN's human development index, Liberia ranks as among the most impoverished countries in the world.

Recent History

Liberia's recent history is one of brutal leaders and civil conflict. Civil war broke out in 1989 after Charles Taylor took power and lasted for 14 years in two distinct phases of fighting. It is estimated that the conflict killed 270,000 people and displaced almost one million Liberians. Human rights groups documented the forced recruitment of child soldiers who were made to carry out massacres at the behest of Taylor's army. The country currently faces the aftermath of war with badly damaged infrastructure, including limited or no access to clean water or electricity for the majority of the population.

Despite a conflict-ridden past and enormous challenges,, the people of Liberia are moving forward with hope and determination. Africa's first woman president, Johnson-Sirleaf, and her new administration recently established an emergency power grid to enable hospitals to have electricity and to provide a handful of streetlights for a small area in the capital city of Monrovia. The international community is rallying around Johnson-Sirleaf's administration, with promises of aid and other support to her administration.

Liberia's Ballooning Debt

Unfortunately, the new government inherits not only a war-ravaged country, but an economy hamstrung by an enormous, unjust, and unpayable debt burden. Liberia's external debt stands at $3.7 billion, a sum which represents almost eight times the country's annual GDP. During the years of civil war, debt servicing was all but abandoned, resulting in ballooning arrears which now comprise most of the debt burden. Creditors expect Liberia to begin servicing its debts at a cost of $80-100 million per year. Since Liberia's annual government budget stands at $80 million fully servicing these debts means that the country's entire budget would have to be given over to debt service.

Much of Liberia's current external debt is comprised of arrears -- interest and penalties accumulated due to non-payment of past debt service obligations. Both new debts and arrears accumulated over the last twenty-six years, beginning with the autocratic regime of Samuel Doe from 1980-1989. Doe was lent money by the United States and other G-8 (Group of 8) rich countries in exchange for the country's support of US efforts against Libya's Momar Qaddafi in the 1980s. When Charles Taylor took power in 1989, he continued to rack up debt to rich country creditors and international financial institutions. Meanwhile his government failed to make payments on existing debt, resulting in further arrears. It is estimated that Liberia's arrears to the International Monetary Fund (IMF) and World Bank alone amount to around $1.5 billion.

The debts and subsequent arrears contracted by Doe and Taylor should be classified as odious and illegitimate, as the monies loaned to these unaccountable dictatorial regimes were clearly not used for the benefit of the Liberian people. The people of Liberia should not be held responsible for interest and penalties resulting from the mismanagement of debts contracted by past autocratic and brutal regimes.

Debt Today

In recognition of the severity of Liberia's debt crisis, the IMF and World Bank include the country in their debt relief program (the Heavily Indebted Poor Country or HIPC Initiative). However, under the terms of the IMF and World Bank's HIPC program, Liberia is expected to pay the institutions its arrears in full, before obtaining any access to partial debt relief or full cancellation.

Given the desperate needs of Liberia's people, especially in the areas of education and health services, international financial institutions should take immediate action to cancel Liberia's odious debt, without first demanding the payment of illegitimate arrears. The country's debt now stands at almost $3.7 billion and counting. At this rate, over 40% of all export earnings would be required to service the debt, in a country where the average annual income is $83.

Debt Relief Works

The last decade of impoverished country experience with debt relief has shown that release of these in-country resources spurs social sector spending. The UN has identified that such social sector investments are urgently needed for Liberia to prevent a back-slide into conflict. Debt relief granted in 2006 has allowed Zambia to hire 4,500 new teachers and abolish fees for rural healthcare. In Ghana, the money saved is being used for basic infrastructure, including rural feeder roads, as well as increased expenditure on education and health care. Equivalent support for social services is desperately needed in Liberia.

Demanding that the new Liberian government pay off illegitimate and odious arrears to international financial institutions before it can be considered for debt cancellation is not acceptable. The UN has determined that what Liberia requires most is national capacity building -- a goal that would not be served by draining the government's budget for years to come at the behest of servicing illegitimate debts and arrears. The IMF and World Bank should immediately and completely cancel Liberia's debt, without imposing harmful economic conditions.


International Donor Community Report Card; Investment in Liberia's Future

[Excerpts from section on debt. Full report available on http://www.jubileeusa.org This report card was produced by a network of US based individuals and organizations including the Institute for Policy Studies, The International Labor Rights Fund, the Jubilee USA Network, Friends of the Earth-US, Global Aids Alliance, and the Corporation for Economic Opportunity and Rajesh Panjabi, University of North Carolina School of Medicine.] .

A Historic Moment

February 13-14, 2007 in Washington, DC an international donor's conference will take place with a focus on building partnerships with the West African nation of Liberia. In conjunction with this conference US based civil society organizations have collaborated and issued an International Donor Community a Report Card on Liberian Investment as a vehicle to assess the efficacy of many of the projects of the international donor community which are touted as supporting the reconstruction and rebuilding of Liberia.

Years of civil war have had a devastating impact on Liberia's population. According to the UN's human development index, Liberia ranks as among the most impoverished countries in the world. ...

Peace and a new Government

Despite a conflict-ridden past and enormous challenges, the people of Liberia are moving forward with hope and determination. Since the signing of the Comprehensive Peace Agreement (CPA) in August of 2003, the international donor community has sought to assist Liberia in its' post conflict reconstruction. The Liberian government has constructively engaged the international donor community to assist in expanding capacity and creating an enabling environment for peace, economic prosperity and reconstruction.

In January of 2006 the Johnson-Sirleaf government came to power in Liberia after two decades of dictatorship and civil war. With this new government came too, a renewed interest from the international donor community. Since January of 2006 there have been a myriad of conferences directed at ensuring robust investment in Liberia.

International Partners in Reconstruction

To date the United States is the largest single bilateral donor in Liberia, followed by the European Union, the World Bank, the United Kingdom, Germany and Japan. Denmark, Sweden, Norway, the Netherlands, Ireland Spain, France, Italy, and the People's Republic of China are also significant players in international investment. In addition, a growing number of multinational corporations, non-governmental organizations, the Roman Catholic Church and other religious organizations are acting as private-sector donors in Liberia.

...

Issue Area: Aid for Development

Grade: C-

Promises Made and Not Kept

In February 2004, the United Nations held a two day donor's conference on Liberia where UN member states pledged $500 million to rebuild Liberia. To date, only a fraction of those funds pledged have been appropriated.

...

Development Aid is Paltry and Misdirected

Of the 2006 monies promised from the U.S. an estimated $100 million of these funds have been allocated to the US private military company DynCorp to train and equip 2,000 Liberian soldiers. With an illiteracy rate close to 80 percent and the increased vulnerability of women and children to disease and HIV/AIDS, Liberia desperately needs resources for the core building blocks of development: health and education, not for training and equipping an army.

The World Bank Group's investment is critical and should have positive impacts on Liberia and Liberians. Unfortunately the World Bank Group is clear that its investment is predicated on "doing business with Liberia" and will likely benefit international corporations that operate in Liberia more than the people of Liberia. ...

Issue Area: Debt Cancellation

Grade: C-

International Indebtedness: A Story of Odious and Illegitimate Borrowing

Today Liberia's economy is hamstrung by an enormous, unjust, and unpayable debt burden. During the years of civil war, debt servicing was all but abandoned; resulting in ballooning arrears, interest and penalties accumulated due to non-payment of past debt service obligations, which now comprise most of the debt burden.

During the autocratic regime of Samuel Doe (1980-1989), U.S. military aid to Liberia, often in the form of loans, increased 10-fold. The Doe Regime racked up enormous international debts in an effort to fix elections, bribe politicians and build their machinery of repression.

When Charles Taylor took power in 1989, he continued to rack up debt to rich country creditors and international financial institutions while failing to make payments on existing debt, resulting in further arrears.

Liberia's People Carry the Burden

Liberia's external debt stands at $3.7 billion, a sum which represents almost eight times the country's annual GDP. At this rate, over 40% of all export earnings would be required to service the debt. The country's current per capita debt is $1000 per person. The per capita annual income is only $83.

Creditors are demanding that Liberia pay $1.5 billion in "arrears" or back payments and accumulated interest, before being allowed to access any debt relief. Creditors expect Liberia to begin servicing its debt and arrears at a cost of $80-100 million per year. Liberia's annual government budget stands at $80 million which means that to fully service these debts the country's entire budget would have to be given over to debt service.

The Shortfalls and Broken Promises of the International Donor Community

The International donor community has not delivered this year on promises of helping Liberia to emerge from its debt trap. In 2004, a senior US Treasury official promised 100 percent cancellation of debts claimed by the US as well as support for cancellation of Liberia's debts to other international institutions.

Despite assurances from rich country donors and their international financial institutions that Liberia would be assisted towards obtaining debt relief and ultimately full cancellation, Liberia remains at "pre-decision point" in the International Monetary Fund (IMF) and World Bank's debt relief program. This means the country cannot yet access any amount of debt relief.

The continued demands for debt payment are unjust, and runs counter to the supportive rhetoric of creditors towards Johnson-Sirleaf's administration. While World Bank President Paul Wolfowitz and others have acknowledged the damage done by the civil war and the harmful role of Charles Taylor, rich country creditors continue to demand repayment of monies irresponsibly lent to his and Doe's regimes. President Wolfowitz decried Taylor's actions in a July speech to the Liberian legislature, calling Taylor's impending trial at the UN as "rendering justice." Where is this talk of justice from donors in the context of Liberia's odious debts?

In 2007, one year into the Johnson-Sirleaf administration and nearly three years after the pledges, these promises remain unfulfilled. Particularly given President Johnson-Sirleaf's experience as a former senior loan officer of the World Bank, there couldn't be a better time to negotiate the complete cancellation of Liberia's illegitimate debts.

Recommendations to the International Donor Community

  1. The debts and subsequent arrears contracted by Doe and Taylor should be classified as odious and illegitimate, as the monies loaned to these unaccountable dictatorial regimes were clearly not used for the benefit of the Liberian people, and completely cancelled within the next six months.
  2. The Bush administration should also cancel the 10 percent of Liberia's crippling $3.7 billion debt that is claimed by the United States.

Issue Area: Labor Rights/Employment

Grade: C

Job Creation as Peacekeeping: Liberia Emergency Employment Program

With an extremely high unemployment rate, the government of President Johnson-Sirleaf faces a major challenge to create fair jobs throughout Liberia. The availability of stable and dignified jobs is a vital component of ensuring peace and prosperity in post-war Liberia.

As an immediate plan to address this important concern, the Ministry of Labor began a job program called the Liberia Emergency Employment Program (LEEP) in July 2006. While the goal for the project is to employ 50,000 people in the next two years, only about 500 workers have been hired since the program began. ...

In addition to providing immediate employment, offering a living wage is an imperative for the new government. Civil servants have been subjected to very low wages and the new jobs created under LEEP are still roughly $3 a day, which is not enough to cover living expenses. In the summer of 2006, the government passed a new budget which increased the salaries for civil servants, but it is still a poverty wage. The issue of civil servant wages clearly connects to issues like debt cancellation since the government is sending money which could be used to supply living wages to Western governments and financial institutions. ...

Issue Area: Environmental Sustainability

Grade: C

Environmental Neglect and Exploitation

Liberia's forests constitute the largest remaining blocks of the Upper Guinean Forest Ecosystem a threatened global hotspot for biodiversity. They also play a vital role in the nation's economy, generating up to 60% of the nation's foreign exchange earnings and providing homes and livelihoods to more than 7,000 people.

Between 1983 and 1993, Liberia lost 13.2% of its forested and woodland areas due to commercial logging, firewood cutting, and a government land-clearing. In that period Liberia's logging activities were controlled by a small group of multinational corporations that were known to employ indiscriminate clear-felling practices, with no concern for their environmental or social impact. Most of the revenues generated through commercial logging prior to 2003 were used to fund armed conflict in the region which resulted in UN sanctions in 2003. ...

The Farmington River is also being polluted due to the continual dumping of waste from the nearby Firestone Rubber Plantation, a holding of Bridgestone/Firestone North American. Liberia's coastal waters have been polluted by oil residue and the dumping of untreated sewage and waste water.

...

Issue Area: HIV Prevention and Care

Grade: C in urban centers/ F in rural areas.

...

Liberia's Burgeoning HIV Epidemic

... Years of social disruption, interrupted disease control efforts and sexual violence have compounded chronic poverty to produce what may be West Africa's largest HIV epidemic. Country-wide prevalence estimates average 5.9% to 8.2% and could be as high as 12.4%.

The International Donor Response

In the light of harrowing gaps in HIV prevention and care, the response of Liberians and their international partners, including donors, has been deficient, particularly in rural areas. The recent move by the Global Fund for AIDS, Tuberculosis and Malaria (GFATM) to fund Liberia's Round 6 HIV proposal, developed with assistance from the Clinton Foundation, is welcomed support. ...Unfortunately, most of these funds will only support hospital-based treatment, leaving the majority of rural Liberians ,,,


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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