World Bank Admonishes Liberia to Invest in Trading Sector to Curb Inflation
MONROVIA – The World Bank has cautioned the Government of Liberia to institute both long and short-term strategies in order to tackle its growing inflation rate.
Report by Gerald C. Koinyeneh [email protected]
In its October 2018 issue of Africa Pulse, the World Bank pointed out that Liberia and Sierra Leone continue to experience ten percent inflation as their currencies depreciated rapidly against the US dollar amid falling export.
Africa Pulse is the bi-annual analysis of the state of African economies by the World Bank.
According to Cesar Calderon, World Bank Lead Economist and Lead author of the report, the short-term measure should include “robust monitoring of the exchange rate by doing fiscal cushion and hefty amount of research.”
The long-term strategy, he said, should involve the acceleration of growth in the trading sector, especially the industrial sector.
The World Bank report comes in the wake of uncertainty over the US$25 million the Liberian Government said it has infused into the economy to mop up the excess Liberians dollars and the alleged missing L$16 billion shenanigans.
The Executive Mansion on July 16, 2018 disclosed that it infused US$25 million in the economy through the Central Bank of Liberia to mop up the excess liquidity of Liberian dollars.
According to the Center for Policy Action and Research (CePAR), since the government announced that some monies were mopped up, there has been no proper accounting of the L$3.7 billion that was mopped up over the period covering July 16, 2018 to September 22, 2018.
Meanwhile, on a lager notes, the report revealed that Sub-Saharan African economies are still recovering from slowdown in 2015-16, but growth is slower than expected.
The average growth rate in the region is estimated at 2.7 percent in 2018, which represents a slight increase from 2.3 percent in 2017.
According to Albert Zeufack, the World Bank Chief Economist for Africa, “the region’s economic recovery is in progress but at a slower pace than expected.”
To accelerate and sustain an inclusive growth momentum, Zeufack noted that policy makers must continue to focus on investments that foster human capital, reduce resource mis-allocation and boost productivity.
“Policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt,” Zeufack said.
The report notes that slow growth is partially a reflection of a less favorable external environment for the region; while global trade and industrial activity lost momentum, as metals and agricultural prices fell due to concerns about trade tariffs and weakening demand prospects.
It added that while oil prices are likely to be on an upward trend into 2019, metals prices might remain subdued amid muted demand, particularly in China. Financial market pressures intensified in some emerging markets and concern about their dollar-denominated debt has risen amid a stronger US dollar.
According to the report, the slow pace of the recovery in Sub-Saharan Africa (0.4 percentage points lower than the April forecast) is explained by the sluggish expansion in the region’s three largest economies, Nigeria, Angola and South Africa.
With regard to Nigeria and Angola, low oil production offset higher oil prices, which led to slow economic growth as these economies heavily depend on oil production.
In South Africa, the slow pace of growth can be attributed to weak household consumption, which was compounded by a contraction in agriculture.
The report, however, indicated that the region, with the exclusion of the three major economies mentioned above, had steady growth.
Several oil exporters in Central Africa were helped by higher oil prices and an increase in oil production. Economic activity remained solid in the fast-growing non-resource-rich countries, such as Côte d’Ivoire, Kenya, and Rwanda, supported by agricultural production and services on the production side, and household consumption and public investment on the demand side.
African economies-despite gaining some good grounds in economic activity in the midst of the slowdown will have to contend with their increasing public debt.
The report notes that vulnerability to weaker currencies and rising interest rates associated with the changing composition of debt may put the region’s public debt sustainability further at risk. Other risks such as conflicts and weather shocks also remain.
To ensure growth in the region is put on a sustainable and steady trajectory, the report notes that policies and reforms should be put in place to strengthen resilience to risks and raise medium-term potential growth.
The report’s lead author, Cesar Calderon called for reforms to “include policies which encourage investments in non-resource sectors, generate jobs and improve the efficiency of firms and workers.”