The $536M And $420M Loan Agreements May Be Odious Debts


The closure of Voice FM headed by Mr. Henry Costa clearly demonstrates the Ellen Johnson Sirleaf led government inability to tolerate opposing views on national issues drastically affecting the ordinary people.







The Editor,

Debts resulting from recently approved loan agreements between the Government of Liberia and two offshore firms (Eton Financial PTE Limited and EBOMAF SA) can be designated as illegal debts under the Odious Debt doctrine by the next administration. In general terms, odious debts are illegal debts not subject to repayment.

An odious debt must meet two conditions: 1) the state must prove that the debt was odious because its terms and conditions were against the interest of the state: 2) the state must proof that the creditor(s), at the time of the issuance of the loan was/were aware of its odious purpose. Once these two central points are established, the burden of proof rests with the creditor to show cause as to why the loan should be repaid. Giving what we know about the characters of the firms involved and the odor of conflict of interests surrounding these loan agreements, it is reasonable to assume that any debt resulting from them can be odious and therefore not subject to repayment by the next administration.

Despite the daily ruckus surrounding the $536.4M and the $420M loan agreement it seems the George Weah-led government, aided by coterie of corrupt lawmakers have hastily ratified these loan agreements despite concerns from many economists and international financial institutions. And the reasons for their concerns multiple, but the obvious are: the firms (Eton and EBOMAF) lack requisite credentials and credibility to engage in such huge financial transactions with a sovereign nation. A simple skiptrace of Eton Financial PTE Limited raises many red flags, and provides abundant reasons to be alarmed about its activities. Within the last few years Eton Financial PTE Limited had undergone multiple identity crises, including name changes, license revocations, forced shutdown etc. Just few weeks prior to entering into this loan agreement with the Govt. of Liberia Eton’s status was listed as dormant; meaning it was not operational. So from where is Eton getting the funds to give to Liberia? From all indications, Eton appears to be a brokerage firm that facilitates loans from third party financial institutions to a borrower country. But even if such scheme is legal the question still remains: are the institutions from whom Eton is securing these loans under any international sanction, reprimand or investigations? Answers to these questions may provide justifiable reasons to establish the odiousness of the $536M loan.

The same can be said about EBOMAF SA; whose President and CEO, Mr. Mahamadou Bonkoungou is currently embroiled in a legal tussle, owing to shady financial dealings with the Prime Minister of Benin. Mr. Bonkoungou is also said have been admonished by authorities in Ghana for other alleged contractual improprieties. More baffling is that these loan agreements, particularly the agreement between Eton and the George Weah’s administration does not meet international Project Financing Law’s standards, and the absence of these standards have prompted many Liberians, including international institutions to voice dissatisfactions and concerns about the terms and conditions of these loan agreements. In spite of all these red flags George Weah and his cavalry of thieves in both Houses remained cleaved to its desires to see these agreements ratified.

Notwithstanding, the odious doctrine provides some reliefs that vindicate victimized country and remove debt obligations from countries that are often preyed on by predatory lender like Eton Financial PTE Limited. The doctrine provides both legal and moral justifications for severing ties “in whole or in part” with debt obligations incurred by despotic regimes. Under this doctrine, odious debts are illegal debts; acquired under false pretenses and fraudulent schemes; hence, even if portion of such loan was used for developmental purposes by the borrower the loan can still be considered odious if the characters of the firms involved are shady and the processes that give birth to the loan agreement are fraudulent and antithetical to the interest of the people.

The concept of Odious is not a new phenomenon in international law; it goes as far back as the 1800s when Soviet states declined to shoulder debt burdens incurred by the czarists’ regimes. However, modern concept was first articulated after World War I, to relief developing countries from debt burdens incurred by colonial masters and despotic regimes. Since then many countries, including the Philippines and Nicaragua have evoked odious doctrine to successfully removed debt liabilities from their respective governments. A famous example came in 1979 when the Sandinistas’ leader Daniel Ortega, in his United Nations General Assembly address angrily vented that he will not shoulder the debt burden incurred by the administration of Anastasio Samoza, because the loan mostly benefitted Samoza and his henchmen and not the people of Nicaragua. Another example that is arguably on par with the shady deal between the GOL and EBOMAF SA is the infamous Bataan Nuclear Power Plant contract, involving the government of the Philippines and Westinghouse Electric. In this example, the government of the Philippines established a case of conflict of interest to proof that the debt was odious. It argued that the $1.2 billion dollar contract awarded to Westinghouse Electric to build a modern nuclear power plant in the Philippines was not in the interest of the people because the Marcos’s government colluded with Westinghouse Electric to defraud the people of the Philippines.

Similarly, the agreement between the government of Liberia and EBOMAF SA is littered with conflict of interest. It is now a known fact, base of admission that both Pres. George Weah and Mr. Mahamadou Bonkoungou, the President and CEO of BOMAF SA were in a secret deal that involved offering a jet plane to President Weah at a time a lucrative $420M road construction contract was being negotiated with EBOMAF SA. Interestingly, the contract was handed to EBOMAF SA without adhering to Liberia’s long standing practice of vetting multiple bidders before a contract is awarded. The only question now is whether the offer of a jet plane was an inducement for awarding the contract to EBOMAF SA? A reasonable argument can be made that it was.

Let me hastily underscore that arguing the legal merits of an odious debt is not a simple task; however, it is worth mentioning that in recent years many international institutions, including the International Criminal Court and scores of high-profiled figures have become more sympathetic to developing countries in cases involving odious debts. For example, a worldwide campaign known as Jubilee 2000 brought much needed attention to the issue of odious debt; augmented by voices of high-profiled spokespersons like Pop-Star Bono and John Paul II many international institutions are now evaluating financial transactions involving developing countries to ensure fairness. The World Bank has also launched the Heavily Indebted Poor Countries (HIPC) initiative as an alternative to aid developing countries that are often vulnerable to exploitations by ruthless creditors. This initiative awards loans to developing countries with certain conditions attached and when those conditions are met the remaining loan can be forgiven. For example, if a loan was provided for an identified project, upon successful completion of that project and certain number of interest paid, the remaining loan may be forgiven. In the loan deal involving Eton and EBOMAF SA no condition of forgiveness was provided, so one wonders why the George Weah-led government hastily entered into such deal?

It is abundantly cleared that these two agreements lack an appearance of fairness. Though the agreement grants 6years interest free reprieve to Liberia, Eton still gains $7.8M annually for the reminder of the 9years term, at 1.46%; that is about $72M in interest paid by the Government of Liberia at the conclusion of 15years repayment terms. The real concern here is what happens if the loan is not paid within the 15years? Does the interest compound? Moreover, did Eton consider Liberia’s precarious economic standings before subjecting Liberia to such extreme debt obligation to be paid in such a short period of time? These are some of the grimacing questions that prompted the IMF and World Bank to frown on these two loan agreements. It is also predicated on these concerns that an argument can be made to designate debts resulting from these agreements as odious debts, not subject to repayment by the next administration.

Nyaquoi Gehgan Bowman

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