Monrovia – Members of the House of Representatives Tuesday unanimously passed the controversial US$536 million loan from Eton Finance Private Limited, but restricting the sovereign guarantee to the government’s consolidated fund.
Report by Henry Karmo, [email protected]
The loan agreement received a unanimous vote from the floor with one lawmaker, Representative Nyumalin Francis Sakila of Lofa County District 1, abstaining from the process.
The loan financing agreement was ratified a day after a public hearing conducted by the Legislature Ways, Means and Finance and Judiciary committees. The agreement has been sent to the Senate for concurrence.
The restriction of the sovereign guarantee to the consolidated account means should the government default on payment, Eton would not be able to seize any of Liberia’s assets home or abroad or natural resources, but would be able to take money from the country’s consolidated account.
According to the House, the Ministry of Finance & Development Planning, Ministry of Justice and Civil Society Movement and the general public invited to the public hearing confidence that Eton Financing loan agreement proposed by President Weah to borrow the US$536,400,000.00 with an interest rate of 1.46% per annum.
At the public hearing on Monday, Justice Minister Dean said, all internal procedures, including approvals, consents and authorizations required by the Constitution and laws of Liberia for the negotiation and signing of the loan financing agreement have been taken, fulfilled and observed.
“We have reviewed the above agreement and have determined that it is consistent with the laws of the Republic of Liberia. We, therefore, respectfully request the Honorable Legislature to proceed to ratify the loan agreement, consistent with Article 34(f) of the 1986 Constitution,” Dean said.
Public Works Minister Mabutu Nyenpan told lawmakers at the public hearing that statistics reveal that Liberia has a total road network of about 12,000 kilometers, and under 1,000 kilometers of roads paved, whereas 94 percent are unpaved, and most often than not, good for safe travel and accident-prone, especially during the raining season.
The US$536 million loan is 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.’
In a communication to the Senate recently, President Weah indicated that 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 payment at an interest rate of 1.46 percent per annum, with a seven-year interest and principal free grace period.
The loan agreement came under several criticisms, particular because the unorthodox nature under which it is being acquired. The loaner, Eton Finance Private Ltd. has no proven record of undertaking such deals before and until recently declared itself as dormant.
The Weah Government’s insistence on such a huge amount of loan runs contrary to advise from the International Monetary Fund (IMF), which had agreed with the Liberian government, after Liberia qualified for debt cancellation about a decade ago, the modalities and requirements for taking on new loans. The IMF insists that the terms and conditions of any loan to be contracted by the Liberian government must be of such that the loan can qualify as concessional – the interest rate should be very low and the repayment period should be very long.
The IMF also believes that Liberia should assess its ability to repay the loan when the loan falls due; otherwise, the Liberian government runs the risk of serious debt distress and bringing untold economic hardship to Liberians in the future. Other partners like the World Bank, the European Union, the African Development Bank, the American government and other bilateral and multilateral partners of Liberia are said to be very uncomfortable with the entire loan scheme but are quietly watching from the sidelines.