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External Debt

Government external borrowings through the mid 1970s had been generally conservative and consisted mainly of loans on concessional terms low interest rates and for extended periods from other governments and the multilateral agencies. At the end of 1975 the outstanding debt was $219 million, equivalent lent to about 30 percent of the monetary GDP, Over 90 percent was on concessional terms; the remainder consisted of suppliers credits and loans from private financial institutions. A major shift in this position began in 1977 as the government sought funds for preparations and financing of the 1979 OAU summit conference to be held in Monrovia. Some part of the loans was reported to have been used to offset lower government receipts because of declining iron ore exports and to meet higher expenditures for petroleum imports. In contrast to the earlier period, a substantial amount of the new loans came from private commercial sources. Interest rates ranged above 10 percent some almost double that figure and repayment terms ranged from one to 10 years. '

After the military coup budgetary requirements for rice im ports in particular and for funds to cover the large pay increases given the military and the civil servants led to rapid use of available credits. At the end of 1980 the external public debt had risen to $537 million, a sum equal to 48 percent of GDP. A debt service crisis arose, and the government sought relief from creditor countries. In December 1980 an agreement was reached with the members of the Club of Paris (a group of representatives of the Western industrialized nations and Japan). This resulted in the rescheduling 'of commercial credits and loans guaranteed by member governments that had been accepted by the Liberian government before January 1980. Although the relief was substantial, it proved inadequate under the depressed condition of the Liberian economy, and a further rescheduling occurred in December 1981, covering the 18 month period between January 1982 and June 1983. The two reschedulings reduced debt service demands by an estimated $44 million. In December 1982 a meeting of the Club of London, a group of commercial creditor financial institutions, also resulted in the rescheduling of about $27 million in payments on the government's commercial debt that were due by mid 1983. These actions postponed the problem only temporarily, however, and the government remained faced with the overwhelming job of finding a way to continue payments of interest and principal on an overall external debt that by April 1 1984 had reached about $810 million.

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