There has been serious nosedive of the Liberian economy since the last four to five years and the impacts have formed their epic center during the early days of President George Manneh Weah’s regime. The regime has been struggling tooth and nail to salvage the situation compounded by many factors clearly beyond the control of the young government which is taking its case to international partners. This year’s Spring Meetings hosted by the Bretton Woods System—the IMF and World Banks and their partners—couldn’t have come a better time since the meetings are used as diagnostic labs used not only to spot economic ailments of the developing world but also to offer prescriptions. Liberia is well represented and all hopes are that the breakthroughs would be found, as The Analyst reports.
In April of every year, government officials from mostly developing nations attend the Spring Meetings in Washington DC. These meetings organized by the Bretton Wood institutions, the World Bank and the International Monetary Fund are intended to evaluate the economic programs and progress of developing countries and where necessary provide additional support for economic development.
This year, the country is represented by Finance and Development Planning Minister Hon. Samuel D. Tweah, the CBL Governor and a host of other ministers, directors and commissioners. Their mission will be to convince development partners for more support to the country’s Pro-poor Agenda for Prosperity and Development (PAPD). The agenda is especially focused on poverty reduction through sustained economic growth and jobs creation.
Prior to the Spring Meetings, the World Bank had already earmarked on USD$106m project for three key sectors including education (50m), water and sewer (30m), and Public Financial Management (26m). On the basis of conditionality, the country will have to develop a logical framework and a rationalized time bound matrix for the utilization of this money.
As chair of the Liberian delegation, Minister Tweah will have to push harder for more support, especially for infrastructure including roads as well as agriculture, social safety net projects, digital economy among other programs. Obtaining support for these developmental initiatives require that the government signs on to the IMF program. Economists have noted that the Fund guidelines are rigid, but are also useful for developing countries on their road to economic recovery.
The IMF Technical Assistant Report of 2016 notes that Liberia spends pretty close to 78% of its revenue on recurrent expenditure, leaving a smaller window for capital investment. The government has set up a committee to streamline the wage bill through a process of rationalization and harmonization.
The country has a distorted allowances framework that does not consider grade levels, performances and experience. For example, a director in one agency could be making more money than a director in another agency of government. The payroll rationalization process which is ongoing will remove all of these discrepancies, and provide for a horizontal payment mechanism that focuses on equity. Money saved from the exercise could be directed towards investment in infrastructure.
The government will also be pushing for private sector support, especially to the agriculture sector. Over the years, the country received more than US$350m in grants and loans for the sector, yet as it stands, food insecurity remains a key challenge. Under a new paradigm, the government wants funding to go directly to the private sector so as to stimulate economic growth through jobs creation and increase food production through value addition.
Targets from both the Fund and the Bank will focus on improving the environment for private sector growth and maximizing finance and development, as well as increasing public sector efficiency and transparency. Triggers such as improving trade facilitation, access to finance and land rights, especially for women are also crucial. Addressing the leakages and distortions and increasing transparency in tax policy and administration as well as improving the financial sustainability of the energy sector while addressing the affordability to electricity as well as reducing power theft are few of some of the benchmarks.
Bedeviled by several economic shocks including the departure of UNMIL, the Ebola crisis and the fall in global prices, emphasis must be placed on rebalancing and rebranding the economy to fit the current reality. The mask has been unveiled and the truth has set in. Projected GDP growth was due partly to the presence of UNMIL and not improvement in domestic revenue mobilization, value addition or private sector led investment.
Signing up to the IMF program represents a pathway toward reforms, and the austerities can provide a win-win opportunity for economic recovery through sequencing of macroeconomic policies. With the “political will” and the audacity of hope, the country could be on a journey towards self-reliance in the long run.