Monrovia – President-elect George Weah is set to take office on January 22 and he will be inheriting several daunting challenges that include fixing a sinking economy.
Creating job and learning opportunities for the country’s nearly 85 percent-unemployed youth is another challenge he would encounter.
Weah’s 61.5 percent victory in the presidential election comes with huge expectations from the population, especially amongst the youth and satisfying their expectation is a massive task.
Expectations that were built up over a decade overshadowed by the lack of opportunities for middle and lower class has now influenced an overwhelming demand for improvement of people’s livelihood.
Alas, the soccer legend is taking the steering wheel of one of the world’s poorest country at a time when the economy is crushing.
Right after signing the 2017/18 National Budget, President Ellen Johnson Sirleaf called a special meeting with members of the Legislature, requesting them to revisit the budget due to government’s inability to raise the US$563.6 million budget.
That was an emphatic sign of an out-of-control economic woos but the Sirleaf’s government kept mute although the writings on the wall were becoming clearer.
The President and her advisers argued that the decline in global prices of commodity was the source of Liberian liquidity crisis.
It prompted the decline in prices of major exports like rubber and iron ore on the world market, which had already been compounded by the impact of the Ebola outbreak in the country.
After the Liberia recovered from the Ebola outbreak, budget shortfalls had already exposed the country’s fiscal indiscipline. Experts advised the slicing of recurrent expenditure and move to an agro-based economy, but all were falling on deaf ears.
Over the past few years, the country has witnessed continuous depreciation of the Liberian dollar against the U.S. dollar, which is now trading at a street value of LD$130.00 to US$1.
In a recent analysis, a Certified Public Account, J. Yanqui Zaza, catalogued the reasons for the depreciation of the Liberian dollar between 2005 and 2017.
He wrote: “The demand for the US dollar has contributed to the decline of the value of the Liberian dollar since 2006.
It declined from LD 62 to US $1 dollar in 2006, to LD 108 to US$1 in 2016, and in 2018, it is now LD$126 for US$1.
“The exchange rate decline is now been exacerbated by the liquidity crisis."
"Nowadays, due to the shortage of cash, commercial banks are reluctant to cash government checks or provide credit lines to government contractors, according to the President of the Liberian Banking Association when he served as a panelist at the Governance Commission Seminar on 12/15/17,” Zaza said.
Mr. Milton Weeks has recently suggested that the over US$400 million liquidity crisis was due to outflow of remittance.
However, Zaza argued that if the CBL Governor’s theory, which mentioned that “the outflow of US $444 remittance is responsible for the shortage of US dollars is true,” how come Liberia’s exchange rate did not improve when the Liberian market received abundance of US dollars in 2006 through 2015 from donors and our International partners?
Instead, the value of the Liberian Dollar continued to decline, from LD 62 in 2006 to LD 126 in 2017.
He wrote, “Most importantly, the Governor of the Central Bank of Liberia should remember that the Bank was established to reduce the impact of capital flight, impact of exchange rate, impact of trade deficit, impact of global influence on import and export prices, etc., but not to focus on the source of the problem.”
The signs of a turbulent economy became more glaring when President Johnson-Sirleaf made a policy decision to freeze all payments of bonuses, severance allowance, and incentives to members of the Board of Directors, Managing Directors, Deputy Managing Directors, and all other Officials of similar standing, in the employ of the State-Owned Enterprises (SoEs), Commissions, and other Autonomous Agencies of the Government of Liberia (GoL) due to the current economic situation of the country.
Further in her attempt to put things under control, President Sirleaf mandated that all expenditures save for salaries and allowances, for the daily operations of all Government Ministries in the amount US$10,000 and above must be approved by her office.
The situation with the economy has reached a point where government employees are now receiving truncated salaries and government checks are bouncing on vendors.
This is the kind of government President-elect Weah would be inheriting on January 22 in the midst of very high expectations for sudden change.
Gaydou Sumu, a small business owner in Red-Light told FrontPageAfrica in a recent interview as part of measures to grow the economy once again, that he expects President-elect Weah to be firm on price control.
“The market is so hard these days. The exchange rate between the US Dollar and that of the Liberian Dollar is too high. When we buy our goods from the store (wholesales), we do not get profit. Because the exchange rate is so high, at the end of the day, we just suffer and can’t get any profit. So we want the incoming government to work on price control. This is because the outgoing government said it has no control over the prices of goods on the market.
For this reason, the Fulanis, Lebanese and Indians (all wholesalers), use it to exploit us. They price their goods any way they feel and we are forced to buy. At the end of the day, we petite traders become the losers. It’s so frustrating. We are suffering,” Sumu said.
Nevertheless, Weah has promised to improve the lives of Liberians through the instruments of “pro-poor government” and improving the economy through the cultivation and export of cash crops rather than being solely dependent on the export of mineral extractives and rubber.
“I want for us to be self-sustained so we can export,” Weah told Reuters news agency recently.
“The government has a responsibility to have agricultural programs so people are able to grow their own food.”
The President-elect compared Liberia to Ghana where the export of cash crops like cocoa contributes immensely to the their economy.
In a recent report, a Ghanaian-based research group IMANI recommended, that, keeping in mind the potential of the extractivs and power sectors of Liberia, President-elect Weah should demonstrate capability in leveraging these two sectors for growth and development to achieve the following:
- A commitment to prudent revenue management in the extractives sector: This will involve the formulation of requisite policy that will determine the direction of allocations or earmarking of resource revenue preferably towards development in pro-poor sectors such as education, health, agriculture and infrastructure development. This will also foster transparency and accountability as it will allow the tracking of the use of resource revenues. Ghana has been able to define the allocation of its petroleum revenues through its Petroleum Revenue Management Act, an example that Liberia could follow.
- A commitment to formulate targeted policy towards long-term industrial growth that would facilitate value addition to natural resources
- A commitment towards securing fuel supply for thermal power generation in the short to medium term from neighboring countries such as Ivory Coast and leveraging the country’s potential petroleum resources towards power generation in the long term. There should also be a critical look at diversifying sources of fuel for thermal generation.
- A structured investment plan that would ensure growth and expansion of the electricity network (generation, transmission and distribution) in the long term and in the short term, intensifying the proliferation of mini/microgrids and stand-alone renewable energy systems in urban as well as rural areas.
- Provision of and following clear timelines for the implementation of the policy recommendations in the National Energy Policy and a commitment to implementation.
IMANI also recommended that given the importance of a vibrant private sector to the growth of the Liberian economy, President-elect Weah should also carefully consider the following in their quest to promote a conducive business environment.
- Regulations that protect investors must be strengthened. Liberia ranked 179 out of 189 countries in terms of protecting minority investors in the 2017 Ease of Doing Business Index. A World Bank survey on investors identified insufficient legal protection of investors as the primary concern to Public-Private Partnerships (PPPs).
- The number of days required to access electricity for business needs to be reduced. Currently, it takes an average of 465 days and cost 4066.6 percent of income per capita to get electricity due to factors such long bureaucratic processes. This can greatly hinder investor interest.
- A robust credit information system is needed to facilitate wider dissemination of credit information aimed at reducing credit risk and to encourage lending. Liberia has zero percent credit bureau coverage and very limited distribution of credit information on both firms and individuals.