Struggling to recover from years of brutal civil war, Liberia is saddled with $3.7 billion in inherited debt, about 30 times the country’s annual export earnings. CGD senior fellow Steve Radelet and others from the Center have been advising Liberian president Ellen Johnson Sirleaf and senior members of her government since December 2005, the month before she took office, on issues such as aid coordination, aid quality, debt relief, poverty reduction and growth, capacity building, and civil service reform. The work is part of an unusual CGD initiative: Supporting Liberia's Reconstruction and Development.
In a new essay, Liberia's External Debt: Moving Towards Comprehensive Debt Relief, Radelet describes Liberia's debt situation and the key issues in moving forward on debt relief with the IMF, World Bank, African Development Bank and bilateral creditors. He explains why it is important for Liberia's recovery that the international community act quickly and outlines the key steps necessary for Liberia to achieve a debt deal before the end of 2007.
Some observers have argued that the issue is not particularly pressing, since Liberia is not making any debt service payments. However, Radelet argues that there are three reasons that the international community should act quickly to resolve Liberia's debt:
- First, resolving the arrears issue will open up sources of new funding for development programs, most importantly from the African Development Bank, but from other donors as well.
- Second, Liberia is in a delicate transition from 14 years of war to a new democracy, and it is important that Liberians see tangible results as soon as possible. Since the debt burden is one of the most visible signs of the gross mismanagement of the past, resolving that issue quickly will provide a significant political boost to the government.
- Third, the Liberian government faces a wide range of critical challenges, and has only a small number of skilled personnel to solve them. The details of moving towards debt relief are eating up large amounts of the valuable time of senior officials. The sooner the debt issue is resolved, the sooner the government can devote more of its attention to other key issues of financial management, good governance and poverty reduction.
Beyond analysis and advice, CGD support to the Liberian government also includes helping to arrange the Scott Family Liberia Fellowships. Each year for the next three years, the Scott Family Liberia Fellows program will provide an opportunity for five or six young professionals to work for one year as special assistants to top officials in Liberia. The program is funded by a generous $1 million contribution from the family of CGD chairman and co-founder Edward W. Scott, Jr.
This level of engagement in a developing country is unusual for CGD, because the Center's primary focus is on improving the policies and practices of the rich world towards development. In addition to being helpful to Liberia, the relationship has provided CGD a unique opportunity to observe the complex interactions between donors and a developing country in the early stages of recovery from conflict.
For more information, including links to video of a CGD event where president Sirleaf thanked the donors and appealed for quicker support, see the CGD initiative, Supporting Liberia's Reconstruction and Development