Liberia secures vulture victory

Liberia secures a victory as its reaches agreement with its commercial creditors to eliminate $1.2 billion of its debt burden.

Liberia has taken the next step on its long journey to freedom from crushing debt by 'buying back' nearly all of its commercial debt from its creditors, some of whom were vulture funds, at a vastly reduced rate. Liberia was able to negotiate a deal to pay its creditors only 3 cents for every dollar owed through the World Bank-managed Debt Reduction Facility. This has wiped out $1.2 billion in debts, at a cost of $38 million, which is being covered by donors including the World Bank and the UK Government.

This deal, which has been in negotiation for several years, is important as much of the debt was held by hedge funds and other secondary creditors rather than the original lenders. These types of lenders have typically refused to take part in debt relief processes. Creditors holding 97.5 percent of Liberia’s foreign commercial debt participated in this deal, one of the largest rates of participation in a sovereign debt buy-back in recent memory.

Campaigners point out that a change in the law is still the best way to prevent vulture funds, as legislation would mean these creditors would not have to be paid off at all, and there would not be a small minority, however tiny, of creditors who can hold out for full repayment.

Jubilee Debt Campaign and its supporters have been raising the call for total cancellation of Liberia's illegitimate debts for several years. Much of Liberia's debt was built up by oppressive former rulers, Samuel Doe in the 1980s and Charles Taylor from 1989 to 2003. It is struggling to rebuild after the ravages of war, and should not have to pay off the illegitimate debts of oppressive former regimes that were recklessly funded by rich countries.

Together, we have already helped secure the clearance of Liberia's arrears to the IMF, World Bank and African Development Bank in late 2007, so that it could start the Heavily Indebted Poor Countries (HIPC) Initiative. This debt buy-back deal marks another important victory for Liberia.

Liberia is not in the clear yet, though. It still must finish the HIPC scheme - with all its harmful requirements and conditions - in order to get total cancellation of most of its remaining debt. Together, we must continue to push for immediate cancellation of Liberia's illegitimate debt.