Pro-Poor Agenda – Long on Aspirations but Short on Reality
By Samuel P. Jackson, Contributor
The PAPD includes four pillars: 1. Power to the People 2 Economy and Jobs. 3. Sustaining the Peace. 4. Governance and Transparency. The pillars hope to empower Liberians to take control of their lives, provide economic stability and jobs creation, promote sustainable development and improve governance and transparency.
Liberia’s economic growth rate was estimated at 2.5 percent in 2018 but even with that, the World Bank estimates a budget shortfall equivalent to 5 percent of GDP or 112 million dollars out of projected expenditure of 536 million dollars. Clearly then, although the economic growth rate has been revised upwards to 3.9 percent according to the Ministry of Finance and Development Planning (MOFDP), yet the budget shortfall persists, decreasing fiscal space for investments in the public sector on health and education undermining the optimism characterizing the PAPD. The projected growth in economic output was mostly based on increasing gold exports, which have limited linkages to the rest of the economy. With such narrowness of economic output, no wonder then the non-mining sector continues to feel the sluggish effects of the post Ebola downturn and completion of the UNMIL drawdown. Without broad based economic growth, Liberia’s ability to reduce poverty and fund public sector investment projects (PSIPs) will be challenged in the short to medium terms meaning for the rest of President Weah’s tenure in office.
Even with some outdated data such as on maternal mortality, using the 2007 Liberia Demographic and Health Survey (LDHS) of 774 per 100,000 births (the figure has actually risen to 1072 out of 100,000 births according to the LDHS of 2013) yet the country’s PAPD makes a valiant effort to catalogue the myriad challenges on the multiple dimensions of poverty but the mismatching of figures manifests chronic data challenges.
Extreme poverty is still very high in Liberia using figures from the 2016 Household Income and Expenditure Survey (HIES) which states that 50.6 percent of the population live below the poverty line. The PAPD proposes to take 1 million people out of extreme poverty in 5 years for the remainder of this administration. Bear in mind, Liberia’s national poverty rate uses one dollar a day while the universally accepted poverty line is 1.25 as expressed in the United Nations Human Development Report of 2018. Using the UN’s poverty line, almost 84 percent of Liberians live in extreme poverty.
Poverty is declining in Liberia, but at a very slow pace and not at an appreciable rate to substantially decrease the absolute number of people living in extreme deprivation. In 2007, during the first postwar analysis of poverty statistics, the country’s national poverty rate, the proportion of the population living under one dollar a day was 63.8 percent, according to the Core Welfare Indicator Questionnaire (CWIQ). The population growth rate was 2.1 percent annually, according to the National Population and Housing Census of 2008, indicating the population of Liberia in 2007 was 3,407,075. In 2008, Liberia’s population was 3,476,608 in the first national census during the postwar dispensation, five years after the end of hostilities. .
Using the 2008 census figures, it meant in absolute terms, 2,218,075 people lived in extreme poverty. In 2010, the needle moved to where 56.3 percent of the population lived below the poverty line. But with a population growth rate of 2.1 percent, the rate of decrease, at only 1.3 percent was not sufficient to substantially reduce the absolute number of people living in extreme poverty. Only 133,312 persons had been lifted out of extreme poverty in three years, from 2007-2010. Therefore in 2010, Liberia still had 2,040,041 people living in extreme poverty. At the rate of reduction, it showed only 44,375 people on average were being moved out of poverty annually, which indicates it would have taken more than 22 years to lift 1,000,000 people out of poverty even in the most promising economic boom of the first term of Ellen Johnson Sirleaf.
How then is it possible that 1 million people will be moved out of poverty under current difficult economic circumstances as envisioned by the PAPD? The population figure used by the PAPD is 4,243,475 with the average size of a household at 4.3. Under conventional methods of expanding the private sector and increasing employment, the economy would need to generate at least one reasonably well paid job per household which means that at least 232,558 jobs would be required over the next 62 months to reach the government’s target of removing 1 million out of poverty. What the PAPD is saying unabashedly is that the economy under the guidance of this administration can create 3,750 jobs monthly uninterrupted to the end of President Weah’s term in 2023. The government has another option as mentioned in the PAPD, social protection for the most vulnerable. It projects increasing social protection from 1 to 4 percent of GDP. But social protection would require investments beyond the limited fiscal ability of this administration and fully installed human capacity of social workers and other professionals. Cash payments without active interventions in the lives of recipients have amounted to failures in many countries, but in Brazil where Bolsa Familia (the name of the country’s social protection program) includes both cash payments and social interventions, there have been spectacular improvements in the lives of the poor and vulnerable.
For economists reading this piece, they would have already noticed that we have not yet tackled Liberia’s binding constraints to economic growth, which obstruct jobs creation and poverty reduction. In writing the country’s Constraints Analysis of 2013, a requirement for receiving funding from the Millennium Challenge Corporation, the binding constraints discovered were electricity and roads. Less than 6 percent of Liberians are connected to the country’s electricity grid and less than 7 percent of roads are paved. To overcome the challenges of binding constraints would require billions in infrastructure finance through a combination of domestic resource mobilization and borrowing. Domestic resource mobilization would require improvements in governance and the country’s business environment. Currently, Liberia lags in the near bottom of the World Bank Doing Business Survey and major governance indices. Moreover, Liberia has reduced borrowing abilities now due to the conditionality of being limited to concessional loans as dictated by the World Bank and the IMF. The country’s debt to GDP ratio is reasonably sustainable at 26 percent but that is undermined by limitations in fiscal space with recurrent expenditure devouring 87 percent of the budget. The combination of public wages, interests and other finance charges on the country’s debt amount to 75 percent of projected expenditure in the 2018-2019 fiscal year. Clearly, any serious downturn in the economic cycle would be disastrous for Liberia’s ability to pay its debts, which now stand at right around close to one billion dollars.
Financing from the PAPD would come from “funding combining domestic resources mobilization (revenue and domestic debt), foreign support (loans and grants), domestic private sector investment and foreign direct and portfolio investments, and public/private partnerships.” The PAPD requires 5.2 billion dollars in funding with 2.8 billion dollars or 53 percent from domestic revenues while 2.4 billion dollars or 47 percent from grants. These figures are overly optimistic even while the PAPD is projecting domestic revenues increasing from 13.2 percent of GDP to 15.2 percent. ODA from the OECD countries was 1 billion dollar a year during most of the Ellen Johnson Sirleaf Administration with 700 million dollars in support to UNMIL and only 300 million dollars to the government of Liberia, with funding through development institutions and NGOS. Donor fatigue has reached its height as even acknowledged by the PAPD. How then will 480 million dollars be raised from ODA, 180 million dollars more than to the previous government, which had many more allies and alliances within the international system? The PAPD anticipates the government will borrow an additional 1 billion dollars bringing the total financing to 6.2 billion dollars. Borrowing for infrastructure would require technical feasibility studies, including geotechnical reports that could take years to fulfil making implementation of projects planned to at least 36 to 48 months nearing the completion of President Weah’s six year term.
In addition to the usual orthodoxy of effective tax administration and reducing wastes, fraud and abuse, the PAPD twin document, which is the Domestic Resource Mobilization (DRM) policy note prepared by the Liberia Revenue Authority (LRA) proposes to utilize other nontraditional methods such as Diaspora bonds and George Weah Savings Certificates. Like the PAPD, the DRM policy note is mostly aspirational, short on details and not steeped in reality. The Government of Liberia will have insurmountable problems in accessing international capital markets under current in-country circumstances.
In order to sell any investment instrument to the public such as a bond, Liberia must write a full disclosure document known as a prospectus detailing market and country risks and choose an investment banker to help with the subscription. This is a requirement in most countries including the United States of America. Additionally, Liberia does not have a sovereign credit rating and thus the bonds will be classified as below junk requiring deep discounts or an exceptionally high interest rate. I personally don’t see any appetite for Liberian bonds in the US and can predict little or no subscription. As for the Weah Savings certificate, Liberia has outstanding issues concerning the erstwhile savings bonds of the 1980s which were and still are not redeemable and by extension there might be no public appetite for this new investment instrument even under a compulsory savings scheme as was done during the dictatorial regime of Samuel Doe. Liberia is at least 4 years away from creating governance structures that will allow it to participate in the market place to sell investment instruments.
Liberia’s best option in the short run is to create conditions for expansion of its private sector, which includes building capacity within the public and the private sectors. In order to achieve this objective, the PAPD plans to create a number of key performance indicators (KPIs) and link them to the global Sustainable Development Goals (SDGs) and African Union (AU) Agenda 2063. Achieving an effective monitoring and evaluation system for achievements of the PAPD would be the country’s seemingly most intractable challenge. Monitoring and evaluation of the PAPD would require teams of multidisciplinary experts in all sectors. That capacity is woefully lacking in this and previous governments.
The PAPD envisions a heavily layered coordinating committee named and styled the National Steering Committee (NSC) to replace the failed Liberia Development Authority in the last administration. The NSC is to be chaired by the president of Liberia with the Ministers of State, MOFDP, representatives of five development partners and champions of the four pillars as members. Cabinet ministers will provide guidance and help monitor the goals of the PAPD. The composition of the NSC will necessarily impose political considerations and obstruct efficiencies. What is needed outside of the bureaucracy is an independent unit of professionals unencumbered by politics.
To accelerate economic growth, achieve the SDGs and AU 2063 objectives, the size of this undertaking requires that all resources of the state including human capacity and financing be made readily available. Securing 6.2 billion dollars of financing under current difficult economic circumstances, dwindling ODA and limited human capacity over a period of five years seem more than herculean. The PAPD is mostly an aspirational document and a wish list with no credible financing plan and takes no consideration of the country’s limited human capacity.