Will IMF Debt Relief Help Liberia Rebound From COVID-19 Economic Shock?

Economic activities have been ghastly affected since Liberia announced its first confirmed COVID-19 case on March 16, and the recent declaration of a State of Emergency by President George Weah has further slowed commercial activities in Monrovia – the country’s main commercial hub

Paynesville – The International Monetary Fund has given Liberia a debt breather as the country struggles to deal with the Coronavirus pandemic, by agreeing to push back its debts payment.

Interview by: Alpha Daffae Senkpeni | [email protected]

Liberia, which is among 25 other poor countries, are beneficiaries of the IMF decision gears toward strengthening global efforts against the spread of COVID-19.

According to a dispatch from the IMF, Ms. Kristalina Georgieva, Managing Director of IMF, the Executive Board approved the immediate debt service relief to the 25 countries as part of its revamped Catastrophe Containment and Relief Trust (CCRT).

In Liberia, there are increasing concerns about the expected shock of the outbreak on the already struggling economy. Entrepreneurs and economists have called on the government to adapt a plan that will address some of the aftershocks.

Now that the IMF has made a massive intervention, how will it impact the country’s economy? How will local businesses resuscitate after an outbreak that seems to have protracted implications?

FrontPageAfrica called called Mr. Hon. Augustus J. Flomo, Deputy Minister for Economic Management of the Ministry of Finance, to respond to these questions including the impact the IMF decision will have on ordinary Liberians?

FrontPageAfrica: Thank you for taking our call Minister Flomo, can you tell us how will this debt relief by the IMF benefit the Liberians directly?

Minister Flomo: Under the COVID-19, there is a challenge with resources in terms of how countries respond to the COVID-19 situation in dealing with getting taxes including custom taxes or domestic taxes. At this point there is a great challenge because the pandemic is a global issue and every country focus is now on responding in a positive sense that gives them the opportunity to overcome. So, the government of Liberia has been in conversation with the IMF trying to raise the concern during the midst of this pandemic. We have the issue around resource mobilization so businesses, as you may know and see, are closing, entities are closed down so domestic revenue collection and taxes that would normally put us in the position to pay our debts on time are challenged. We are not raising taxes as they were before the coronavirus outbreak, so if we didn’t work with them in this case to be able to give us a relief – meaning giving us a window of opportunity by suspending debt payments for the period of this COVID-19, we would have a huge challenge in trying to meet up with our obligation. And the challenge in most instances is for the international loans that we take as a government. If you default one day or two days or you default completely on the repayment, you are usually put on a default list – so if we had not negotiateD with the IMF to offer us this window it will be a challenge, while fighting COVID-19 then you will be fighting the issue of meeting regular payment.

We don’t already have the economic strength as a country and you are faced with the pandemic that you have to finance and then you have to be paying debts. So, you can see there are a number of issues around capacity.

So, the debt relief will put us in a position that will allow us to pay the IMF will be available to allow us address some of the domestic issues that we are face with now during the COVID-19 outbreak.

FPA: Now that the IMF has given us some breathing space, how long can we enjoy this period?

Minister Flomo: According to the framework that we’ve been working on, this is expected to take us up to the period of a year or at latest up to 2022 April. Yes, that’s a lengthy time because you know the whole issue of this COVID-19 is huge so while we are tackling the issue of health emergency which involves the current situation to control the health situation, we also have issues around recovery because the economy has practically gone to sleep as you see it. So, by the time COVID-19 is over, the restart of the economy takes a lot of time – recovery from the shock comes over time.

For example, for those who are doing production to come back into production and for those who are doing value addition to go back, it is going to take a lot of time, efforts and resources. The private sector, for example, will need stimulus, will need support to be able to even bounce back – so while government is having the recovery processes to be able to depend on the private sector [it] will take phases, so all these businesses that are closed will take us some time for them to recover, hopefully, for them to be able to pay their taxes to put us in the position to begin to pay regular against our debt.

So, the reason why that will appear to be a good timing, when we are able to contain this in the next couple of months, then we can be sure that recovery will be addressed within that same period which is very critical to the economic rebound.

FPA: Now that the IMF has given you some relief, will the government give relief to businesses in the country so that they can experience the tracker down effect?

Minister Flomo: What I can say now is that there have been a number of proposals coming from the private sector including the Chamber of Commerce. They have made some proposals to the government about waivers and negotiations or suspensions on different payments – so there are conversations taking place [but] has the decision been reached? No! I cannot confirm that decision has been reached because there is still a work in process. There have been a lot of conversations taking place and I’m sure along these paths of conversations there will be some reasonable steps that the government will take to support the private sector. In fact, we (the Government) in our package are talking about stimulus for the private sector – how do we support the businesses for them to get back on their feet? That is being covered in our recovery plan that we are putting together. There are conversations about helping businesses after COVID-19 and during COVID-19 as well. Hopefully, when government decides and concludes on the processes, I’m sure there’s going to be something announcement by the state.

Minister Flomo: “There are conversations about helping businesses after COVID-19 and during COVID-19 as well. Hopefully, when government decides and concludes on the processes, I’m sure there’s going to be something announced by the state.”

FPA: What’s the Possibility of Liberia’s economy becoming a little more balanced than what we experienced after the Ebola epidemic?

Minister Flomo: In the context of what we look forward to? We look forward to an early rebound as a state. The challenge with the rebound is a combination of all the efforts. I usually say this is a rectangle engagement for any economic rebound for a country; so the government is on one side providing the policy platform, providing the support areas where necessary – and then you have the private sector on the other side responding in that economic space and providing the services and goods that need to be provided to the population, then you have the development partners at the other end, working and then the citizens themselves.

There are conversations about helping businesses after COVID-19 and during COVID-19 as well. Hopefully, when government decides and concludes on the processes, I’m sure there’s going to be something announcement by the state.

So, it is a combination of these four team members that I call the rectangle edge of the economic rebound that must take place immediately during the COVID-19 crisis to keep the economic rebound in sight. So, what we all need to do for us to be very confident to ensure that the economic rebound is going to be aggressive immediately after the COVID-19, [is to] require that the citizens themselves have to muster that courage. Firstly, for us to quench this outbreak in terms of the spread because if we have a limited time to contain it and then we get back to normal activities, then our rebound will be better than countries that have gone to the worst cases before coming back to recovery. If we don’t, then it could drag our economic rebound even further after the COVID-19.

In terms of recovery, to say how fast it’s going to be? In my view, it’s going to be how fast we are able to contain it now so that we don’t get to the worst situation because if we get to the very worst, the recovery might take us a long time because the impact will be heavier.

FPA: Does Liberia anticipate debt relief from other international borrowers like the Arab Bank and the Chinese Export-Import Bank?

Minister Folomo: We are in conversation with them as well. As I told you, the government has been working with the IMF – now we have this relief. And you know that the IMF is the lead on all of these debt instruments. They drive all these debt policies and fiscal issues globally, so once they have taken the first step for Liberia, it makes it easier for those [other borrowers] that we are already engaging. In my view, it will be easier for them to follow suit.

So, we are hopeful that those other entities and institutions – private borrowers, bilateral borrowers – will be able to help us through.

FPA: Just in couple of words, if you are to breakdown how the IMF debt relief will benefit ordinary Liberians, what will you say?

Minister Flomo: It will benefit the ordinary Liberians in the sense that it gives the government the opportunity to use the available resources to now focus on spending locally to address the issue of the COVID-19 and also to help the country come back economically – for us to get back on our feet as a country.