No Cause for Celebration, Yet: Deciphering the Fine Prints of Liberia-IMF Extended Credit Facility Agreement
THE INTERNATIONAL MONETARY FUND, a key stakeholder in Liberia’s post-war development entered into an agreement with Africa’s oldest republic this week, agreeing on a staff-level agreement on a new program subject to fulfillment of significant prior actions in the fiscal and monetary areas.
THE OBJECTIVE of the program is to restore macroeconomic stability, provide a foundation for fiscally sustainable, inclusive growth, and address weaknesses in governance.
Liberia is not quite there yet. But the staff-level agreement, agreed to this week, is a step toward that direction. Thus, this is not a time to celebrate; the IMF is not giving Liberia millions of dollars, so it would be unfair for anyone to raise the expectations of a nation, vulnerable to unrealistic expectations.
SINCE ASSUMING OFFICE nearly two years now, the George Manneh Weah-led government has been wrestling over how to fix the struggling economy. The exchange rate is at an all-time high, prices of basic commodities are rocketing by the day, countless number of children are not in school because their parents simply cannot afford to send them, marketers are seeing their goods rot on the shelves because consumers are not buying in droves and many businesses are struggling to stay afloat because times are just damn hard.
THIS IS WHY, OVER the past few months, the IMF and other international stakeholders have been working the clock with Liberia to ensure that the government and the country are at a good place to qualify and benefit from the IMF’s assistance.
THE ANNOUNCEMENT by the IMF does not warrant a cause for celebration but a time to rethink, recalibrate and understand the fine prints of what the agreement says.
IT IS CLEAR THAT the existing cuts have not done enough to ensure that Liberia meets the IMF’s benchmark for signing on to the program.
NEVERTHELESS, the IMF commended the government for its determination to restructure its controversial wage bill.
THE IMF HAS BEEN CLEAR THAT slashing the wage bill “is a key policy reform needed to free up fiscal space and make a credible and viable budget possible, while also increasing transparency, accountability, and equity.”
THE IMF SAYS it has been impressed with the fact that all three branches of government participated, and that the process yielded a progressive outcome, in that the burden was borne by the higher paid employees with the poorest benefiting from salary increases, including among teachers, health workers and line security forces.
HOWEVER, A MAJOR FINE PRINT of the agreement is that it is subject to fulfillment of significant prior actions in the fiscal and monetary areas that will need to be undertaken by the Liberian authorities. Assuming these are satisfied in a timely manner, it is anticipated that the IMF Executive Board could consider approval of Liberia’s formal request for financial support under the Extended Credit Facility as early as the first half of December 2019.
THIS MEANS THAT Liberia is not yet in the clear and needs to do more work on what it is already doing for it to be guaranteed a place in the program.
A major fine print of the agreement is that it is subject to fulfillment of significant prior actions in the fiscal and monetary areas that will need to be undertaken by the Liberian authorities. Assuming these are satisfied in a timely manner, it is anticipated that the IMF Executive Board could consider approval of Liberia’s formal request for financial support under the Extended Credit Facility as early as the first half of December 2019.
TO PUT IT ALL into perspective, Senate Pro-Temp Albert Chie has gone on record to say that the government cannot take water out of rock, illustrating the case that an additional $US$42 million, in addition to the Internal Revenue collection is needed to solve the current salary issue.
THE PRO TEMP’S comments came in the wake of threats from legislative staffers notifying the government of its intent to stage a strike in demand of their four-months’ salary due them by the government. In a memo circulated the staffer’s leadership called on their colleagues to assemble on the grounds of the capitol on October 25, 2019.
ON TUESDAY, aggrieved workers at the National Housing Authority(NHA) held placards bearing inscriptions like “Our Children need to go to school. We need to take care of our families. We have waited for too long.”
DIXON N. NEBO, SPOKESPERSON of the disenchanted NHA staff, told FrontPageAfrica that their concerns have been ignored on several occasions by the authority, who have failed to shed any light on why they have not taken pay for eleven months.
A FEW WEEKS ago, it was students from the Monrovia Consolidated School System, taking to the streets in demand of their teachers’ salaries.
CIVIL SERVANTS are also threatening to stage a go-slow if government fails to pay their salaries and end its harmonization program that is radically altering the lives of thousands of families who can no longer afford to live a normal live due to the increase hardships and an even more increasing number of folks wandering below the poverty line and at the bottom of the economic ladder.
THE IMF HAS EXPRESSED concerns about the implementation of a 2020 budget that constrains expenditure to available resources and avoids inflationary and reserve-depleting borrowing from the Central Bank of Liberia.
INSTEAD OF CELEBRATING the IMF agreement, as some folks in the administration are already doing, we hope that those enjoying the confidence of the president, breaks it down clearly, that the work has only just begun.
THE IMF IS CLEAR that the country still faces enormous economic challenges while emphasizing the need for steadfast and well-sequenced policies and structural reforms, that are essential to regaining macroeconomic stability and promoting high, sustainable, and inclusive growth.
A STRIKING FINE PRINT that all must pay attention to is the emphasis the IMF places on significant fiscal adjustment needed going forward, including the mobilization of additional domestic revenue and rationalizing spending, especially in the wage bill, while securing needed fiscal space for social and capital spending.
THIS IS IMPORTANT for a government that continues to send names of partisans to offices for jobs to its own detriment.
WE HOPE THAT THE recent departure of Nathaniel Patray as Governor of the Central Bank of Liberia would pave the way for the CBL to tighten its monetary policy to reduce the inflation that was eroding the living standards of the poorest Liberians, while taking strong measures to safeguard financial sector stability.
IF THE WEAH-LED government can do these things, and do them well, perhaps there is light at the end of the tunnel of the ongoing impasse and economic uncertainty.
IN THE END, all any well-meaning Liberian wants, is a haven for economic prosperity which this strait jacket IMF program could go a long way in preparing Liberia for, if adhered to – and done rightly.
If the Weah-led government can do these things, and do them well, perhaps there is light at the end of the tunnel of the ongoing impasse and economic uncertainty. In the end, all any well-meaning Liberian wants, is a haven for economic prosperity which this strait jacket IMF program could go a long way in preparing Liberia for, if adhered to – and done rightly.
ONE MUST PLAY close attention to a striking point from the IMF which states: “A key element of the program is the FY2020 budget recently approved by the Legislature that constrains expenditure to available resources, and avoids inflationary and reserve-depleting borrowing from the CBL. This budget is underpinned by important reporting and institutional safeguards aimed at preventing slippage and avoiding the re-occurrence of domestic payment arrears. The budget faces tight financing constraints at a time of significantly reduced fiscal buffers and will therefore need to be strictly implemented. Importantly, this budget retains its intended pro-poor orientation. It protects essential social spending, while providing enough resources to allow the CBL to use monetary policy aggressively in the fight against the inflation that has been so damaging to the living standards of the most vulnerable members of society.”
THIS IS NOT an easy task and requires discipline which some officials and government agencies have not been unable to do.
ALREADY, we have heard wailing from the Speaker of the House of Representatives and his deputy regarding cuts to their budgets, the head of the judiciary branch, Francis Korkpor has also been making noise about cuts to his budget and quietly, some government ministers are already feeling the pinch and quietly complaining.
THE EXECUTIVE BRANCH of government must also take note and begin putting the brakes on wasteful spending, travels and expenses.
THIS STRAIT JACKET IMF program requires discipline. What the program provides is, financial assistance to countries with protracted balance of payments problems.
CREATED UNDER the Poverty Reduction and Growth Trust (PRGT), the program is part of a broader reform to make the Fund’s financial support more flexible and better tailored to the diverse needs of low-income countries (LICs), including in times of crisis. The ECF is the Fund’s main tool for providing medium-term support to LICs.
LIBERIA IS NOT quite there yet. But the staff-level agreement, agreed to this week, is a step toward that direction. Thus, this is not a time to celebrate, the IMF is not giving Liberia millions of dollars, so it would be unfair for anyone to raise the expectations of a nation, vulnerable to unrealistic expectations.
THOSE AROUND THE PRESIDENCY, must be careful how they raise people’s hopes in times like these. This is why it is important to highlight the fine prints of the deal so that all can understand what it is, what’s at stake and what is required from the Liberian government for the Extended Credit Facility to become a reality.