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Africa's 'Iron Lady' revitalizes Liberia

UPDATE: On Oct. 7, the Nobel Prize committee announced that Liberian President Ellen Johnson-Sirleaf was one of three women to win the 2011 Nobel Peace Prize for advancing the role of women in society. In April, the Monitor profiled President Johnson-Sirleaf – who faces voters in Oct. 11 national elections – and her record of erasing her Liberia's crushing debt after years of civil war.

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She signed the country up to the Enhanced Heavily Indebted Poor Countries Initiative (HIPC), a program run by the World Bank and the International Monetary Fund that offers debt relief in exchange for compliance with rules on economic governance and institution building.

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To help the fight, Sirleaf persuaded many of Liberia's best and brightest who fled to the US or Europe during the civil war to return to Monrovia, a battered city that until recently lacked electricity and running water.

"A range of actors were involved, but President Sirleaf was the cornerstone of the effort," says Leo. "She knows the guts of how [international financial institutions] work bureaucratically, but at the same time she has the gravitas of a head of state."

Sirleaf negotiated a killer deal with hedge funds and other distressed-debt investors: Their portion of Liberia's debt was forgiven at a rate of 3 cents on the dollar. At the time, World Bank President Robert Zoellick called it "the steepest discount we ever had" with commercial creditors.

The final step came in September, when the Paris Club, an informal group of 19 creditor nations, forgave Liberia's final $1.2 billion of debt.

Fiscal discipline

For the three years it was trying to win debt forgiveness, the Liberian government didn't borrow a cent, only spending the dribble of money that came in from taxes. Now, with the loans erased, the government can finally get access to outside cash.

But Liberian Finance Minister Augustine Ngafuan has vowed that there will be no more irresponsible borrowing. The country will never take out a loan of more than 2 percent of its GDP, he said last year, and any borrowed money will go toward infrastructure development.

In the past five years, Sirleaf's administration has lined up an impressive $16 billion in foreign investment from major players like Chevron, Firestone, and ArcelorMittal, the world's largest steelmaker.

Those outside dollars helped boost Liberia's GDP by 6 percent in 2010, which makes the country one of Africa's fastest-growing economies. Growth projection for 2011? 7 percent.

Foreign dollars won't go very far, however, if they're lost to corruption, an endemic problem in Liberia. And if Sirleaf has an image problem, it's on this issue. A United Nations report released last month blamed "legal bottlenecks" for slowing Liberia's fight against graft and called for "increased political will" to tackle the problem. Locals say she has fallen short on promises to oust corrupt officials.

"What else can we do?" Sirleaf asks. She insists that everyone has the right to a fair trial, and that the process of reform will be gradual. Says Sirleaf: "I'm convinced that we are making enough progress in a very structural and systematic way."

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