Monrovia – A FrontPage Africa investigation has revealed that the Liberian government, through the Ministry of Finance, was warned by the World Bank of a potential suspension if it failed to repay loans totaling US$2,452,198.03. The loans, provided by the International Development Association (IDA) for various projects, were due for repayment on June 15, 2024.
By Gerald C. Koinyeneh, [email protected]
Some of the funded projects include the Liberia Electricity System Enhancement, West Africa Agriculture, and Road Asset Management AF2. Projects that would be affected by the suspension include the Southeast Corridor Road Asset, Liberia Reconstruction, Cheesemanburg Landfill & Urban Sanitation, Energy Sector Management Assistance Program, Policy and Human Resources Development, and TF Standalone Trust Funds.
Prior to the suspension, the World Bank had repeatedly notified the Liberian government that failure to meet the repayment deadlines would result in the country being blocked from accessing further loans. The deadlines for repayment were June 15, 2024, July 15, 2024, and August 1, 2024.
In one of the communications to the acting Minister of Finance and Development Planning, a copy of which is in the possession of FPA, Ousmane Diagana, the World Bank’s Vice President for Western and Central Africa, outlined the importance of timely debt service payments to the Bank’s ability to mobilize resources for its member countries. He insisted that the World Bank required the settlement of all payments when they were due.
Diagana stated, “We must advise you that unless all payments due under all IDA financings and PPF advances made to or guaranteed by the Member Country have been received by the Bank by close of business on or before August 14, 2024, further withdrawals under all effective and not fully withdrawn IDA financings, PPF advances, and IDF grants made to or guaranteed by the Member Country will be suspended.”
He continued, “We regret to notify you that, until all payments due under IDA financings and PPF advances to or guaranteed by the Member Country are current, the Bank must take certain actions. Being current on all payments includes not only the receipt by the Bank of payment of all amounts 30 days or more overdue but also all other amounts that have fallen due, regardless of the number of days since they fell due.”
He further noted that for countries in default, no new IDA financings would be presented to the Bank’s Executive Directors for approval, and no agreements related to approved IDA financings or PPF advances would be signed. Additionally, the Bank would not make disbursements to designated accounts established under any IDA financings, PPF advances, or Institutional Development Fund (IDF) grants. The Bank would also decline to make disbursements to designated accounts established under grants or loans financed by trust funds administered by the Bank.
We must advise you that unless all payments due under all IDA financings and PPF advances made to or guaranteed by the Member Country have been received by the Bank by close of business on or before August 14, 2024, further withdrawals under all effective and not fully withdrawn IDA financings, PPF advances, and IDF grants made to or guaranteed by the Member Country will be suspended.
Ousmane Diagana, Regional Vice President Western and Central Africa
Following the suspension, the World Bank’s Liberia Country Office confirmed to FrontPage Africa that Liberia’s payment obligations to the World Bank had been overdue for 60 days. As a result, the World Bank has suspended Liberia’s right to make withdrawals under various financing agreements, including credits, grants, and trust funds.
State of Denial
Despite the World Bank’s notification and subsequent action, the Liberian government denied defaulting on its payments. In a statement, the Ministry of Finance and Development Planning (MFDP) asserted that the government had not defaulted on its obligations to the International Development Association (IDA), the World Bank Group’s primary financing institution for low-income countries.
According to the MFDP, the administration under President Joseph Nyuma Boakai has paid US$44.26 million since January 2024. This amount includes US$23 million outstanding from 2023, which was not paid by the previous administration, and US$21 million of the scheduled external debt repayments due in 2024.
The MFDP cited challenges related to external transfer dates at the Central Bank of Liberia (CBL), which have been reduced by the Federal Reserve Bank of New York from five days to two days per week. This reduction, it said, was due to irregular transactions through the CBL before the January 2024 transition of power. The Ministry explained that some IDA loan repayments did not align with the new CBL transfer dates, leading to what has been misinterpreted as defaults.
Additionally, the Ministry highlighted the challenge of managing a debt portfolio of US$2.6 billion, including US$1.5 billion accumulated under the CDC government over six years, compared to US$881.8 million during the entire twelve years of the first Unity Party administration.
Sight of Relief
Despite the setback, there may be hope on the horizon. Amid this crisis, the International Monetary Fund (IMF) announced that its staff and the Liberian authorities have reached a staff-level agreement on a comprehensive set of policies to support a 40-month Extended Credit Facility (ECF) arrangement for a total amount of SDR 155 million (equivalent to about US$209 million or 60 percent of the country’s quota).
This arrangement, pending approval by the IMF’s Management and Executive Board, aims to back the new administration’s robust reform agenda. The Board discussion for Liberia’s ECF arrangement is scheduled for September 25.
Mr. Daehaeng Kim, the IMF’s mission chief for Liberia, said at the end of the discussions with the authorities, “I am pleased to announce that the IMF staff and the Liberian authorities have reached an agreement that will facilitate the IMF’s support for the new administration’s policy reform agenda.”
“The IMF staff welcomes the authorities’ efforts to address immediate policy challenges and restore policy credibility. We remain committed to supporting the authorities’ implementation of key policy priorities, which include restoring fiscal sustainability, rebuilding external reserves, ensuring financial sector stability, and revitalizing a reform agenda to tackle governance and corruption issues. The authorities have developed a sound plan and have initiated essential policy actions to manage the difficult fiscal situation and address concerns related to central bank governance.”
