Thursday, March 20
The Netherlands’ Ministry of Foreign Affairs today confirmed that Gus Kouwenhoven stays on the UN and EU lists of persons facing a travel ban despite being acquitted of smuggling weapons and war crimes in Liberia by a Dutch court last week. In 2001, the involvement of President Taylor in the civil war in Sierra Leone had led to UM arms and diamond embargoes and a travel ban for the Taylor regime, Kouwenhoven included since he was a close associate of President Taylor. In 2004 the UN Security Council also ordered international banks to freeze his – Kouwenhoven’s - assets. The European Union automatically endorses these UN decisions.
The foregoing shows how complicated international law can be. The UN sanctions have legal status and UN member states are obliged to respect and enforce them. Nevertheless, these sanctions have a political rather than a juridical base. The Netherlands’ Ministry of Foreign Affairs is now investigating whether it is justified to inform the UN Security Council of the necessity of removing Kouwenhoven from these lists imposing sanctions.
Wednesday, March 19
The goverment of President Ellen Johnson Sirleaf has succeeded in normalizing relations with the International Monetary Fund (IMF) and the World Bank. In particular, all sanctions by the IMF against Liberia have been lifted. As former World Bank officials she and Finance Minister Antoinette Sayeh know their way in Washington DC; they know how the two Bretton Woods institutions work. From now onwards, HIPC, PRS and PRSP will be household words in Liberia.
HIPC stands for the Heavily Indebted Poor Country (HIPC) initiative. It was launched in 1996 to provide debt relief to the world’s poorest and most indebted countries; it was followed in 1999 by the Enhanced HIPC initiative. One of the conditions to gain access to this debt relief scheme is to have a Poverty Reduction Strategy (PRS) document or Poverty Reduction Strategy Paper (PRSP).
Liberia has a debt of US $ 4.7 billion, owed to global institutions (including the two Bretton Woods institutions), other governments and private-sector creditors. IMF and World Bank officials acknowledge that this huge debt – large part of which was contracted by former Presidents Tolbert and Doe – is unpayable. Moreover, the necessity to rebuild the country after decades of mismanagement, corruption and destruction of infrastructure and institutions makes it essential to free vital resources needed to finance the nation’s reconstruction.
The important step was made possible after Liberia cleared it arrears of Special Drawing Rights (SRD) 543 million, or nearly US $ 890 million to the IMF. Liberia had been in arrears to the IMF since 1984 (under the Doe Administration). Following the clearance of its debt to the IMF, Liberia is now a fully paid up member of the IMF with full voting and related rights and access to IMF financial resources for the first time since 1984.
However, there is a snake in the grass. The clearance of Liberia’s large arrears was financed from a bridge loan provided by the US Government. That is to say, arrears to the IMF were replaced by a debt to the USA. Also, the country is now eligible for new financing arrangements under the IMF’s Poverty Reduction and Growth Facility (PRGF) and other Fund Facilities – all on a loan basis, albeit concessional loans. Moreover, the normalization of relations with the Bretton Woods Institutions (BWI) will pave the pay for Africa’s oldest republic to start receiving funds from foreign governments and commercial creditors.
The HIPC debt relief scheme will enable Liberia to have it’s US $ 4.7 billion debt cancelled, which is a laudable goal. But I am not so sure that replacing old debts by new debts will lead Liberia to the road of economic recovery. In the end, it risks to be the same old story over and again. Liberia’s history is interpersed with loans provided by foreign governments and other external souces that proved to do more harm than good. It started with the 1871 loan which led to the country’s first coup d’état and the death of President Edward Roye, followed by the loans of 1906 and 1912, the infamous 1926 Firestone Loan, and many more.
I hope I will not be misunderstood by the foregoing. In my view, close collaboration with IMF and World Bank is not a bad thing. I just doubt whether financing the financing of Liberia’s recovery by attracting new loans which are not directly productive will provide a long-term solution for the country’s problems. But Liberia faces a Catch 22 situation: either it depends on external funds from international financial institutions and bilateral governments or it has to rely on foreign investments, internal funds (= domestic savings) being unsufficient or absent. It reminds me of a Liberian friend who once wrote to me: ‘We need external funds to develop and foreign troops to keep the peace’. I wonder whether the majority of Liberians share his opinion.