Sierra Leone gets debt cancellation, finally

Sierra Leone has finally finished the international debt relief scheme - which means that after years of meeting onerous conditions imposed by the rich world, it will now get cancellation of debts totalling 1.6 billion US dollars.

This cancellation will make a huge difference to Sierra Leone, one of the poorest countries in the world, where average income per person is around 30p a day. The cancellation includes nearly $1 billion from the Heavily Indebted Poor Countries (HIPC) initiative, plus more than $600 million from the Multilateral Debt Relief Initiative agreed after massive campaigner pressure ahead of the 2005 G8 summit. All in all, it will cancel approximately 90% of Sierra Leone's debt.

However, it has been a painful process for Sierra Leone to get there. It has had to spend many years meeting the conditions set down by rich world creditors. These included, for instance, a requirement to introduce a new law paving the way for privatisation of at least 24 state-owned enterprises, including water provision: this is something that Sierra Leonean charities and campaigners have complained about.

The HIPC process, and the conditions with which Sierra Leone had to comply, did not take account of the fact that Sierra Leone has recently emerged from a brutal civil war, which has displaced half its population and ravaged infrastructure. Moreover, 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 has 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.

The total cancellation of $1.6 billion also assumes that all Sierra Leone's creditors actually give the relief assumed 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 it is still an issue that needs to be resolved.