Liberia signs historic debt deal

Earlier this month, the Government of Liberia signed an historic agreement that wrote off some $1.2 billion in commercial debt. Impressively, the Government was able to purchase this debt -- held by private foriegn creditos, such as banks and hedge funds -- at a steeply discounted rate of 97%. According to my colleague Steve Radelet, who has played an instrumental role over the past two years in securing the debt buy-back, this is the "deepest discount ever negotiated on developing country commercial debt." The deal amounts to an enormous victory for Liberia.

According to Steve's recent blog post, much was at stake in the deal.

"The amount of debt was huge – nearly twice Liberia’s GDP, far more than the country could ever repay. And many of the creditors had legal judgments or other recourse that could have derailed the process and led to delays, litigation, or the seizure of Liberia’s meager assets. The negotiations have been unfolding for two years, and at many points it was far from clear that the deal would be successful."

Steve Radelet with President Sirleaf

Steve goes on to explain the origins of the commerical debt buildup and the key steps that had to be taken to arrive at the debt deal. In highlighting the key factors that underpinned the successful deal, Steve notes:

1. The official debt reduction process known as "HIPC" imposed restrictions limiting a country like Liberia from paying more than a very small percent of the face value of debt without undermining the HIPC debt process.
2. President Sifleaf's international reputation and credibility made a big difference.
3. The liquidity-constraint financial institutions were more eager to accept readily available cash from the debt deal in the wake of the global financial crisis.

Liberia is not out of the woods quite yet. Just two years ago, Liberia had the highest debt ratio (compared to GDP and exports) in the entire world. Thanks to several important milestones in reducing multilateral and bilateral debt since 1997, this debt burden is slowly but surely being eased. According to Steve's analysis, "with this week’s commercial debt buyback, Liberia’s total foreign debt is down to $1.7 billion, a reduction of over $3 billion. You can see the Liberian Ministry of Finance official data on debt here, which they released earlier today. Most of the remaining debt will be wiped out when Liberia reaches the HIPC Completion Point, hopefully later this year or early next year."

President Sirleaf reflected on what this debt write-off will mean for Liberia: "The successful resolution of this inherited debt, which had ballooned through interest and penalty charges during a period when my country was wracked by civil war, is an important step on our road to recovery. This puts us on a firmer footing to attract investment and accelerate economic growth.”

Congratulations to Liberia.

Want to work in Liberia?

Ed Scott with some of the first Liberia fellows in 2007

If you are interested in making a difference in Liberia and are keen to gain hands-on policy experience in President Sirleaf's historic government, I strongly encourage you to apply to the Ed Scott Liberia fellows program. (See here for job description and application instructions). The program is a fantastic year-long fellowship -- run jointly by JSI, the Government of Liberia and the Center for Global Development -- that places fellows as special assistants for senior-level members of the Government of Liberia. The fellowship is named after the original funder, Ed Scott -- a very generous and committed philanthropist who is the founding chairman of, among other initiatives, the Center for Global Development. I have known Ed since the earliest days of the Center for Global Development, where I first started my career in development nearly seven years ago (and, incidentally, where I again work now). He is a wonderful human being, and with this program continues to impact development across the globe.

**Note: Resumes + cover letters are to be submitted by close of business Monday, April 27, 2009.

Moderate Pomp: an essay by (my sister) Colleen Kinder

My wondrous sister Colleen recently published her timeless essay about Liberia's 160th independence day celebration. The essay, entitled "Moderate Pomp," was featured in Witness Magazine's 2008 Africa issue, and has been nominated for the 2008 Pushcart Prize , the country's most prestigious literary award for best essay in a small press.

I love this essay, and have re-read it countless times. For those who have never before stepped foot in Liberia, or in a post-conflict country for that matter, Colleen's powerful imagery is like a specially guided tour to a time and place your imagination could alone not lead you. And even for those who have spent years in Liberia, Colleen's perceptive eye for detail and her ability to capture that Liberian moment -- equally fleeting and timeless, mundane and monumental -- will shed new light on a familiar backdrop.

A must read!