Liberia buys back $1.2 bln in debt: World Bank

Liberia has bought back 1.2 billion dollars in government debt at a steep discount, the World Bank, which helped finance the buyback, said Thursday.

The impoverished African country has "significantly reduced its foreign debt" at a discount of nearly 97 percent of face value, "the steepest ever negotiated on developing country commercial debt," the World Bank said in a statement.

The multilateral development lender said the deal, capping two years of negotiation, was concluded with the payment of 38 million dollars to retire 25 outstanding commercial claims.

The World Bank said it had contributed half of that money through the International Development Association (IDA) Debt Reduction Facility, and Britain, Germany, Norway and the United States contributed the other half.

"The successful resolution of this inherited debt, which had ballooned through interest and penalty charges during a period when my country was wracked by civil war, is an important step on our road to recovery," Liberian President Ellen Johnson Sirleaf said in the statement.

"This puts us on a firmer footing to attract investment and accelerate economic growth."

The deal cuts Liberia?s foreign debt to 1.7 billion dollars, representing a reduction of more than 3.0 billion in the past two years, the bank said.

"Most of the remaining debt will be cancelled when Liberia reaches its Completion Point under the Heavily Indebted Poor Country (HIPC) initiative, probably in 2010," the 185-nation lender said.

World Bank president Robert Zoellick said the lender's support to the buyback "is part of our commitment to help heavily indebted poor countries reduce their debt burden."

The debt that was bought back had been in default since the mid-1980s when Liberia was beginning to descend into civil war, and had been sold on the secondary market.

The Liberia deal is the first successful debt buyback in which most of the debt was held by hedge funds and other distressed debt investors rather than by the original creditors, the World Bank noted.

The agreement also marked one of the largest rates of participation in a sovereign debt buyback in the last several decades, with creditors holding 97.5 percent of Liberia?s foreign commercial debt participating.

Liberians are among the poorest people in the world, with an average annual per capita income of 150 dollars, according to the bank.