January 29, 2007 / 12:43 AM / 12 years ago

Debt relief raises hopes, fears in Sierra Leone

BONTHE, Sierra Leone (Reuters) - Once a thriving trading center, the remote island of Sherbro in southeast Sierra Leone has seen better days.

Dilapidated colonial-era residences and stores are crumbling into the sea in the local capital Bonthe. Rusting wrought-iron lamp-posts and water hydrants stand dormant and there is no electricity.

Several churches dot the settlement, but the fervant missionaries who raised them have long since departed.

“When the white people were here, this town was so beautiful,” said Bestman Kpaka, who works at a small fishing lodge in Bonthe that hopes to attract tourists now a horrific 1991-2002 civil war has ended.

Once a site for exporting to Europe palm nuts and piassava — a course palm fibre used for making ropes and brushes — islanders now struggle to feed themselves as Sierra Leone reels from the war, which killed 250,000 people and left tens of thousands mutilated by drug-crazed child soldiers.

“The biggest problem here is food affairs. It’s very difficult if you have a government that can’t provide us with enough food,” said the 34-year-old. “Not everybody here knows how to fish.”

But Bonthe and towns like it across Sierra Leone could benefit from extra funds after foreign lenders, including the World Bank and the International Monetary Fund (IMF) agreed in December to end crippling payments on decades-old debt.

Sierra Leone’s debt was slashed by a nominal $1.6 billion, delivering an estimated $90 million annual windfall to the impoverished West African country. In January, the Paris Club group of creditor nations forgave a further $218 million.

“Repaying old debt doesn’t work for a country in Sierra Leone’s situation and it makes no sense. It takes crucial resources away from other more important things like health and education,” Engilbert Gudmundsson, World Bank representative in Sierra Leone, told Reuters.

“We’d rather be able to tell the government to use that money for the legitimate things for the people here rather than repay it to us.”

VOTE OF CONFIDENCE

Sierra Leone became the 21st nation to benefit from the Enhanced Highly Indebted Poor Countries (HIPC) initiative, launched in 1996 to allow Third World states to shed unbearable debt burdens and redirect scant resources to poverty reduction.

The country also benefited from the Multilateral Debt Relief Initiative (MDRI) launched at a G8 summit in Scotland in 2005. This cleared remaining debt to the World Bank, the IMF and the African Development Bank (AfDB).

The decision was a vote of confidence for government efforts to fight corruption, reduce poverty and boost economic growth. Last year, Sierra Leone’s economy grew by an estimated 7.5 percent and it is forecast to expand 6.5 percent in 2007.

Like many African states, debt problems in the former British colony began in the 1970s and 1980s, as money was poured into ill-advised projects such as the construction of a new village in the capital, Freetown, to house delegates to the 1980 Organization of African Unity (OAU) Conference.

Low growth, falling commodity prices and economic shocks meant that by 1992 the 33 most indebted low-income countries, Sierra Leone included, had seen debt grow to six times their annual exports.

With 21 countries already qualified for multilateral debt relief and a further nine in the pipeline, IMF officials insist the scheme is making a difference.

IMF Africa Director Abdoulaye Bio-Tchane said in October the HIPC scheme had helped boost social spending by three percent of GDP on average, in those countries affected.

CORRUPTION FEARS

Many Sierra Leoneans, however, worry that ministers will again squander funds, safe in the knowledge that they can borrow as much as they want without the need to repay.

Doubts linger on the streets of Freetown over whether the debt relief will benefit Sierra Leone’s 5 million inhabitants, who have the world’s highest rate of maternal mortality.

Since UN peacekeepers pulled out at the start of 2006, the country has remained stable, but life remains hard. With a presidential election scheduled for July, many people are frustrated with the lack of progress.

“Now what’s going to happen to that money?” said Isatu Thorlu-Bangura, a Freetown businesswoman. “If it’s going into the wrong pockets, we may as well continue the way we were.”

There is a perception of widespread government corruption, reflected by Sierra Leone’s low rating in the 2006 Transparency International index: it came 142nd out of 163 countries.

She sees a parallel with her own business, having paid off a $20,000 loan to a national bank at the end of 2006.

“At last we should be able to use that amount we were paying into the bank to improve on the place. If it’s not going to make any improvements then what have we been doing?”

In Bonthe, Kpaka fears that a scramble for the extra cash among politicians might mean his isolated town misses out: “They want the money for their own areas.”

But he is reluctant to criticize the government too much. His younger brother, a pastor, was murdered on the island during the war, and he remembers the desperate days of the conflict.

“I can say it’s done well. It’s tried very hard to have peace for the country. For that reason I love this government.”

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