Hiring Freeze at Liberia’s Central Bank, Several New Hires from Departing Governor Affected
Rodney D. Sieh, [email protected]
Monrovia – Just days after a delegation from the International Monetary Fund (IMF) admonished the Government of Liberia to reduce its wage bill as it embarks on a process of adopting a credible and executable budget for Fiscal Year 2019/2020 and beyond, the Board of Governors and the Management of the Central Bank of Liberia(CBL) has decided, with immediate effect, to rescind several letters of employment with start dates of July 1, 2019.
Several of those hires said to be brought on by departing Governor Nathaniel Patray, were due to start work on Monday, July 1st. But when they began showing up for work Monday morning they were turned back.
Governor Patray, who replaced former Governor J. Milton Weeks, reportedly brought in more than two hundred new employees, reportedly based on recommendation from the ruling Coalition for Democratic Change, since his appointment in July 2018.
In a letter obtained by FrontPageAfrica, the board said the decision to cancel the letter of employment is due to financial constraints the bank is currently faced with. “These constraints have compelled the Management of the CBL to place austerity measures on its operations as recommended by the International Monetary Fund(IMF) and the harmonization exercise currently being implemented by the Government of Liberia(GOL). Therefore, the management has placed a freeze on employment beginning May 28, 2019. We thank you for your interest in the Central Bank of Liberia and will keep you and the public informed when the bank resumes its hiring process in the future.”
The decision, FrontPageAfrica has learned got the approval of President George Manneh Weah whose administration has been under pressure from international stakeholders including the IMF and the World Bank to slice the wage bill.
“These constraints have compelled the Management of the CBL to place austerity measures on its operations as recommended by the International Monetary Fund(IMF) and the harmonization exercise currently being implemented by the Government of Liberia(GOL).Board of Governors, Central Bank of Liberia
Therefore, the management has placed a freeze on employment beginning May 28, 2019. We thank you for your interest in the Central Bank of Liberia and will keep you and the public informed when the bank resumes its hiring process in the future.”
In its most recent Article IV Consultation, IMF directors who visiting Monrovia recently emphasized that significant fiscal adjustment is needed going forward. “They underscored that efforts should focus on mobilizing domestic revenue and rationalizing spending, especially the wage bill, while securing needed space for social and capital spending. Directors encouraged the authorities to formulate realistic budgets and to implement a sound borrowing plan that ensures debt sustainability, while advocating caution in engaging in non-concessional borrowing. They also called for further progress in public financial management reforms to improve the quality of spending in a resource-constrained environment.”
The Directors agreed that the Central Bank of Liberia (CBL) should tighten monetary policy with the objective of reducing inflation to single digits by 2021 while emphasizing that further issuance of CBL bills should be suspended until the cost of the operation is included in the government budget, and the fiscal financing gap is closed without CBL financing.
The Directors noted that while the financial soundness indicators show that the banking sector appears adequately capitalized, the CBL should enhance its supervisory efforts. They highlighted the need to prioritize strengthening the CBL’s supervisory, regulatory, and resolution frameworks in light of the elevated level of nonperforming loans, focusing on measures that improve loan underwriting standards.
The Weah-led government appears to be taking note.
The revised 2019/20 budget amounts to a total of USD 532,906, 966, which is a 7 percent or USD 37.2 million reduction over the FY2018/19 budget, marking the first time the Ministry of Finance and Development Planning has submitted a proposed budget with a total less than the total of the previous year’s budget. Analysts say this signals the beginning of real transformation, since Liberians are used to the budget being passed with a higher total than the previous years. However, the real test is in the national legislature keeping this number at USD 532.9 million. Last year, the MFDP submitted a budget of USD 563 million which was increased to USD 570 by the legislature.
Compensation of employees is put at USD 297 million, which is 6 percent reduction over the 317.1 million amounts budgeted for compensation of employees in the 2018/19 budget. However, in terms actual amount spent on compensation of employees for the last budget year, this reduction in the wage bill is about 1 percent of GDP, which analysts say is significant.
This reduction has been achieved through what the government is calling a wage bill harmonization exercise. For several years, the Liberian wage bill has been extremely large, crowding out critical spending needed in health, education, infrastructure, agriculture and other vital areas. In 2013, the wage bill was about 12 percent of GDP, one of the highest West Africa. With the current 1 percent GDP reduction, the wage bill is now set at 9 percent of GDP and the goal according to government authorities is to move it to 7 percent of GDP in the medium term.
What remains unclear is how far the Weah-led government will be extending the wage bill slash. At the start of the administration last January, critics cautioned the government over the massive hiring of its partisans to several government ministries and agencies to no avail. Now, with the economy in a freefall, those criticisms are coming back to haunt the administration.
For the immediate future, international stakeholders like the IMF and the World Bank see the slashing of the wage bill as key to the government restoring sanity to the economy and putting its books in order. For the foreseeable future however, an overall economic upturn could be at least four to five years away.