Sierra Leone
- Total external debt after debt cancellation: $100 million
- Total debt cancellation: $1.6 billion
- Population: 5.5 million*
- Percentage of adults who can read and write: 25.1%*
- Average life expectancy: 41.1 years*
Where did Sierra Leone's debts come from?
Sierra Leone has been politically unstable since the 1970s, but the situation worsened in the early 1990s. A brutal civil war began in 1991, devastating the social, political and economic structure of the country. The war resulted in thousands of deaths and the displacement of more than 2 million people. The civil war ended in 2001 and Sierra Leone had its first multi-party elections in 2002.
The war itself was fuelled in large part by the rampant corruption of the former government, in turn propped up by loans from the rich world. Even after this corruption was explicitly pointed out, rich countries and the World Bank carried on funding the regime, and have since been demanding this money back in debt repayments. There is therefore a strong argument to say that the creditors lent irresponsibly in the first place, and should never have had any of these 'illegitimate' debts repaid. Sierra Leone should not have to service unsustainable foreign debt in these circumstances, diverting scarce and precious resources to pay much richer foreign creditors.
Debt cancellation status
Sierra Leone qualified for the Heavily Indebted Poor Countries initiative in February of 2002, at which point many rich countries stopped asking it to service its debts, and although the World Bank and IMF reduced the sums, they were still demanding debt service. However, it was another 4 years before it completed the HIPC process (in December 2006), during which time Sierra Leone paid millions of dollars in debt service. At this point it got cancellation of debts worth $1 billion through the HIPC initiative, and more than $600 million from the Multilateral Debt Relief Initiative initiative, which is also available to countries that complete HIPC. This amount represents about 90% of Sierra Leone’s $1.7 billion debt, leaving $100 million of external debt to be paid off. The total cancellation presumes that all Sierra Leone's creditors actually give the relief outlined in the terms of the HIPC scheme: there is a serious problem in getting commercial creditors - banks and other companies - to give relief on debts owed to them. For Sierra Leone, companies hold less than 10% of the debt to be cancelled - but getting cancellation of this last 10% may be problematic.
Conditions
To complete the HIPC process, Sierra Leone had to meet certain conditions set by the World Bank and IMF. These included maintaining 'macroeconomic stability' and a privatisation programme being pushed to cover 24 enterprises, including basic public utilities such as water, electricity and telecommunications. In a country that has been devastated by civil war there is a need to invest money in public services like health, education, infrastructure; services that have been neglected for the last decade. If a peaceful and economically sustainable environment is to develop in Sierra Leone, it needs as much support as it can get.
Previous news on Sierra Leone:
Sierra Leone gets debt cancellation, finally (December 2006)
Last updated: April 2007
