Liberia's ratio of debts to exports is estimated at about 2,600 percent

Reuters:

Liberia's war-damaged economy faces "daunting" challenges despite a modest recovery in 2005, but it was too early to set a timetable for debt relief, the International Monetary Fund said on Wednesday.

Announcing the agreement in principle to monitor Liberia's progress through September, IMF mission chief Robert Powell said a recent IMF mission to the West African country concluded that implementation of the so-called Staff-Monitored Progam (SMP) would be a first step to canceling any debts.

"While it is too early to be precise about the timetable for debt relief for Liberia, successful implementation of the SMP is an important first step in achieving this goal," Powell said in a statement.

In November, Ellen Johnson-Sirleaf -- a former finance minister and World Bank official -- became the first woman elected to lead an African country and was sworn in as president last month.

Liberia's civil war ended in August 2003 with a peace agreement and the exile of former strongman Charles Taylor to Nigeria.

The IMF said money from foreign donors since the war and a gradual improvement in security in rural areas had helped inflation-adjusted gross domestic product growth almost double to 5 percent last year from 2.6 percent in 2004.

Further modest economic recovery was expected this year as economic reforms take hold, it said.

But the fund said heavy donor inflows had recently added to fresh inflation pressures and the country's external trade and debt accounts were deep in the red.

Exports remain well below levels seen prior to the most recent conflict, in part due to sanctions on timber exports, while donor flows had boosted imports sharply, the IMF said.

But it noted that Liberia's overseas indebtedness was stark.

"Liberia's external debt has been in arrears for more than two decades and is unsustainable; at the end of 2005, the ratio of debts to exports was estimated at about 2,600 percent," it said.

The IMF said its monitoring program would focus on re-establishing good economic governance and adequate budget management, which suffered badly in the run up to formation of the new government.

The IMF also expressed concern about a lack of transparency in the granting of concessions and contracts associated with natural resources.

It welcomed the new government's endorsement of an agreement on improved governance with the international partners overseeing Liberia's return to democracy, a so-called Governance and Economic Management Program, that would address much of the budget issues outlined by the IMF.

The IMF said a key short-run government strategy needed to be rebuild government institutions and to construct a functioning, transparent and accountable budgetary process.

Trading Places: Liberia's Pompous Slaves

Conflict Imperils Liberia's Reproductive and Child Health Programs

Over 200,000 Infected With HIV/AIDS In Liberia

Liberia: Extremely Vulnerable to HIV