Clutch of countries resist Liberia debt relief

By Lesley Wroughton

WASHINGTON, Oct 21 (Reuters) - Pressure mounted on Sunday on a clutch of mainly developing countries to sign off on debt relief for Liberia held up over how to finance the International Monetary Fund's portion of the deal.

Approval to write off the $900 million Liberia owes the IMF has been resisted by Belgium and large developing countries including Brazil, Turkey, Indonesia and India, which are haggling over how the debt relief should be funded, government sources said.

The IMF has proposed to fund the debt relief by shuffling around internal funds among accounts, which would not require additional funding from member countries, World Bank President Robert Zoellick told a news conference during meetings of the bank and fund.

"We are held up because of the action of a few countries," Zoellick said, adding, "Some of them may have a few legal issues they have to check at home but I think it would be good tomorrow if we move this as far as we can."

Liberian President Ellen Johnson-Sirleaf said after a meeting last week with President George W. Bush that her country had fulfilled all the economic and political requirements to enter a global debt relief program to write off Liberian debts yet was still waiting for donors to make good on their promises.

After her election in 2005, she inherited a country ruined by a 14-year civil war, rampant corruption and foreign debts of about $4.5 billion, which creditors promised to cancel.

Until a country has cleared its arrears to the IMF and World Bank, it cannot borrow further from the institutions, unless it is a grant that need not be paid back.

IMF Managing Director Rodrigo Rato said an agreement on debt relief for Liberia was close, "but not yet there."

"This is a country that is helping itself and deserves to be helped by the international community," Rato told a news conference during the IMF and World Bank meetings.

Zoellick, describing Johnson-Sirleaf as a "genuine heroine," said until debt relief was approved by the IMF, the bank could not proceed with its development programs in the West African country.

"This is an honest case of a post-conflict country trying to move forward on democracy," Zoellick said. "While we have been able to offer some financial support, Liberia cannot move to ... debt relief and we can't move forward with all our programs until the IMF arrears are cleared," he added.

"We can solve this and we just need a little bit more effort by a few other countries who often seek voice and representation but also need to assume some of the responsibilities that go with that," Zoellick added.

The World Bank chief said he was trying to make the countries understand the approval of debt relief would not cost them additional funding to the IMF.