IMF Pessimistic About Liberia’s Economy, Emphasizes Transparency Over Debts
Monrovia – The Executive Board of the International Monetary Fund (IMF) has emphasized that future Liberia debt obligations should be undertaken transparently, limiting new debt to concessional terms, with effective implementation of infrastructure projects.
Report by Rodney D. Sieh, [email protected]
No Defined Development Agenda
The June 2018 International Money Fund’s Article IV Consultation says “Liberia remains fragile with poor living conditions for the majority of the population”. In its June 2018 report, the IMF seems deeply concerned that prospects for economic growth are characterized by “….main upside risk is an increase in commodity prices and output, while downside risks include difficulties in mobilizing resources to fill the financing gap and in pursuing structural and institutional reforms”. The IMF is further concerned that the Government’s Medium-Term Development Agenda “have not been fully outline”.
“Directors noted that Liberia’s economy appears poised for recovery, but that significant fragilities remain, as reflected in the pressure on the exchange rate and on fiscal resources resulting from declining aid inflows. Assuming sound policies, Directors agreed that the medium‑term outlook is favorable, albeit with risks. Directors welcomed the authorities’ pro‑poor agenda and noted that macroeconomic stability is essential for advancing this agenda. They stressed the critical need to mobilize resources, ensure debt sustainability, and pursue structural and institutional reforms to achieve higher growth and reduce poverty”.
Factors Key to Improving Spending Efficiency
“Directors underscored the need to anchor fiscal policy with the goal of ensuring debt sustainability over the medium term. Directors urged the authorities to increase efforts to mobilize additional domestic resources, including by enhancing the IT system of the revenue authority to improve tax compliance and efficiency. They also emphasized that improved governance, and greater fiscal transparency and accountability are key to improving spending efficiency”.
The IMF’s latest report while nuancing the challenges facing Liberia’s economy, made it clear that the Fund is deeply worried that the country’s macroeconomic direction is not robust enough to deal with the challenges of fiscal management which will improve the chances of poverty reduction. The IMF is therefore recommending improved fiscal governance including tax compliance and efficiency. This is clearly stating the government’s domestic revenue mobilization is severely limited due to anticipated slow economic growth. In other words, private sector development, the source of economic growth through jobs creation and attracting foreign direct investment is mostly non-existent.
The IMF is concerned that acquisition of new debts is not being done transparently. The Fund demands transparency. “Directors emphasized that future debt obligations should be undertaken transparently, limiting new debt to concessional terms, with effective implementation of infrastructure projects”.
President Weah submitted two loans for ratification by the National Legislatures. The loans which have brought the government to public rebuke include a US$536 million arrangement geared toward the construction of a coastal corridor connection of counties’ capitals road project, via the construction of the Buchanan-Cestos City to Greenville to Barclaryville Road, the Barclayville to Sasstown Road and the Barclayville to Pleebo Road. Other roads to benefit from the loan include; the Medina to Robertsport Road and the Tubmanburg to Bopolu Road. Also to be constructed are ‘rest stops’ and ‘roadside service areas.’
Two Loans Fail Smell Test
The US$536 million loan will also include the construction of a vocational training center in Greenville, Sinoe County; construction of a mini soccer stadium in Harper, Maryland County; Barclaville, Grand Kru County; Greenville, Sinoe County, Cestos City, Rivercesss County; Zwedru, Grand Gedeh County, Robertsport, Grand Cape Mount Count and Bopolu County.
The principal amount of the loan is said to be payable in 15 years by level payments at an interest rate of 1.46 percent per annum, with a seven-year interest and principal free grace period.
The second, a US$420 million loan is aimed at financing the design, construction, and supervision of road corridors in Monrovia(Somalia Drive-Kesselly Boulevard to Sinkor) and northeastern Liberia – Tappita-Zwedru Road, including Toe Town to La Cote D’Ivoire and Zwedru-Greenville.” The transaction, according to the document obtained by FPA has been labeled “The Loan” is between the Liberian government and Mr. Mahmadou Boukoungou’s road construction company, EBOMAF Group.
Both the IMF and the World Bank have previously advised against borrowing above the country’s debt sustainability.
President Weah has come under fire in recent weeks amid concerns over conflict of interest and a clear breach of the code of conduct after granting a US$420 million loan to his Burkinabe businessman friend, Mahmadou Boukoungou whose planes the President has been using for presidential trips.
Critics have taken the government to task over the lack of transparency surrounding the US$536 million loan being processed through an unknown firm out of Singapore called Eton Financial Private Limited.
Investigation by FrontPageAfrica gathered that Eton has been struck off from the Singapore Stock exchange and is pretty much a non-existing financial entity raising the possibility that the money could be tied to money laundering.
The latest assessment by the IMF comes as President Weah and his government have been tearing apart critics and the media who have been raising concerns about to US$536 and US$420 million loans.
Fears Over Repayment
The President, in responding to his critics told residents in Bong not to listen to the critics who he described as enemies of the state. “My people, don’t listen to those criticizing for lobbying for loans. Those doing so are enemies of the country. The loans I am taking will be able to complete the roads in three years. When I am asking partners for loans, any of them who tell me that they want complete the roads in six years, I can say no because I know in the next six years, if I don’t do anything for you, I will not be re-elected”
The IMF’s caution against debt sustainability have prompted economists to fear that in eight years when the two controversial loans are up for repayment, about 25% on the national income may go to debt servicing leaving many in government unable to afford to buy cars and gasoline to drive on the roads, if the two deals materialize.
Economists and financial experts who have seen the latest Article IV Consultation opine that this report appears to be the most pessimistic of its review over the last 12 years of democratic governance. From the language used by the IMF, it appears that the Fund sees worrying signs of inefficiency in the country’s economic management team and if strong steps are not taken to accelerate the pro poor agenda through a robust development plan, Liberia would remain at the bottom of global economic output.