U.S. plans to cancel $391 million in Liberia debt

By Sue Pleming and Lesley Wroughton

WASHINGTON (Reuters) - The United States plans to cancel $391 million in outstanding debt owed by Liberia, U.S. Secretary of State Condoleezza Rice said on Tuesday, and she urged others to help the struggling West African nation.

"We will cancel that debt, all of it, under the framework for highly indebted countries," Rice told a donors conference on Liberia held at the World Bank in Washington.

"We hope that this will help to relieve Liberia's crippling debt burden, a debt burden that today's leadership do not deserve," she said.

An on-off conflict from 1989 to 2003 devastated the once prosperous West African state, wrecking infrastructure and leaving more than 200,000 dead. The country has a total of $3.7 billion debt.

Rice also announced that President Bush had asked the U.S. Congress to provide more than $200 million in additional aid for Liberia for fiscal year 2007 and 2008.

"The United States is determined to continue and to expand our support in Liberia," said Rice, who attended the inauguration little over a year ago of Liberian President Ellen Johnson-Sirleaf, Africa's first woman president.

Speaking at the same conference, World Bank President Paul Wolfowitz said the debt burden was too great for Liberia and he appealed to other nations to forgive the money owed to them.

"Much more remains to be done and the clock is ticking," Wolfowitz said.

Johnson-Sirleaf told the conference debt relief was critical for her nation, adding that the risk of a return to war was always high in post-conflict countries and a peace dividend was needed.

"Please tell your finance ministers to speed up the process," she said, adding that it took up a lot of time dealing with the debt issue and writing letters appealing to nations to forgive this money.

Rice said it was a time of optimism in Liberia and she praised Johnson-Sirleaf's administration for its work in rooting out corruption and trying to rebuild the country.

"We are putting our full support behind Liberia's government," Rice said.

The Liberian president said she was working hard to revitalize the country's agriculture industry and to reduce poverty in a nation where Wolfowitz said the annual income is just $120 -- about 30 cents a day.

"Liberia today is at one of those key moments. We are not out of the woods yet, not by a long shot," said Johnson-Sirleaf. "We are convinced that Liberia can be a success story," she added.