FINANCE: Sierra Leone Debt Package Comes with Strings Attached

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Mar 20 2002 (IPS) - Strife-torn Sierra Leone, one of the world’s poorest countries, has become the latest to qualify for debt reliefso long as it enacts more pro-market measures.

Creditors have agreed to write off nearly 600 million dollars of the country’s external debt, making it the 27th to be certified for relief under the Heavily Indebted Poor Countries (HIPC) initiative.

The World Bank Group’s International Development Association (IDA) and the International Monetary Fund (IMF) said in a statement late Tuesday they would begin providing the relief immediately.

Assistance committed by IDA will be 122 million dollars and will be delivered over 20 years. The relief will cover on average 89 percent of debt-service obligations, the statement said. Debt relief provided by the IMF will be 123 million dollars delivered over the next ten years.

The bulk of assistance from other creditors under the enhanced HIPC Initiative will be delivered “when Sierra Leone completes a number of agreed measures, paving the way for reaching a completion point in a few years’ time,” the lenders said.

The Zimbabwe-based African Forum and Network on Debt and Development (AFRODAD) estimated the West African country’s total debt at 1.2 billion dollars. About half of this is owed to the IMF, IDA and the African Development Bank. Roughly one-third is owed to bilateral creditors, with arrears accumulating, and private lenders claim a small portion.

The Bank said Sierra Leone’s per capita gross domestic product (GDP) was about 134 dollars in 2000, less than half the figure for 1989. Only the Democratic Republic of Congo and Ethiopia have lower figures in sub-Saharan Africa.

Life expectancy at birth is 37 years and the lowest in the world, according to Bank statistics. Sierra Leone is also ranked last of the 174 countries on the U.N. Human Development Index, a poverty indicator. Around 66 percent of the country’s 5.4 million people remain without access to safe water.

AFRODAD, which lobbies for debt forgiveness, said Sierra Leone spends 1.7 percent of its GDP on health and 1.9 percent on education but 3.2 percent on debt service.

Jubilee Research, an arm of the London-based New Economics Foundation, estimated that the government in Freetown pays 0.70 dollars in debt service for every dollar it receives in aid grants.

About two-thirds of the working-age population engages in subsistence agriculture. Manufacturing consists mainly of the processing of raw materials and of light manufacturing for the domestic market. Bauxite mines have been shut down by civil strife and diamonds, mostly smuggled, remain the country’s main export.

The Fund and Bank, in the statement, said: “Sierra Leone has also made strong structural reforms in recent years.” These have included tax policy and administration reforms that support private sector redevelopment and fiscal stability, and improved public expenditure management.

Other standard prescriptions of the two Washington institutions that the government of President Ahmad Tejan Kabbah will have to follow include trade liberalisation and what the Bank and Fund term “effective delivery of social services”, meaning, among other things, that the government must charge fees for these services.

Anti-debt campaigners, who complain of a suffocating debt burden on poor nations, have said total debt cancellation of both bilateral and multilateral debt is the only way out in order to free up funds for real economic and human development in Sierra Leone and other African nations.

Sub-Saharan Africa’s total external debt stands at about 370 billion dollars, according to AFRODAD. HIPC assistance now stands at nearly 40 billion dollars, according to the Bank and Fund.

Earlier this month, several African civil society groups said they wanted to see a new court mechanism to help settle the continent’s debts.

Thirty-three of the 41 countries classified as HIPCs by the IMF and Bank are in Africa.

Launched in 1996, the scheme aims to reduce the debt – particularly that part of the debt owed to multilateral agencies like the Bank and the IMF – of the world’s poorest countries, initially below 200 percent of the value of each debtor’s exports.