--Economist Says Economy Experiencing Growing Pains
The Liberian dollar has tumbled in what some consumers believe is uncharacteristic. The fall of the dollar has triggered prices of basic commodities and transportation fare to rise sharply.
Consumers said prices of some commodities increased sharply, just before noon on Monday, after they learned that the Liberian dollar had plunged LD90 to one United States dollar. The Liberian dollar had been wobbling since it plummeted about three months ago LD80 to one United States dollar.
There has been no comment from government institutions responsible for monitoring and regulating the Liberian currency. The Central Bank of Liberia says it is not responsible for the fall of the dollar, because part of its responsibilities is to regulate the currency while the Ministry of Finance is responsible for fiscal policy.
The tumbling of the Liberian dollar has exacerbated an already high cost of living as Liberians struggle to improve their living conditions.
Boimah Kamara, a petit trader believes there has to be a way out of this economic mess. He wants the government to address the seriousness of the budget shortfall and the fall of the Liberian dollar because the current situation is having a pinch on ordinary people.
"We know times are hard but the government must find a way out of this situation. Our people are catching hard time," Kamara said as he drove his wheel filled with assorted goods.
Despite the slow performance of the economy, some Liberians are upbeat that the economy will get better.
Liberian Economist and Activist Samuel Jackson believes that Liberia is not in a hopeless situation; neither is it facing imminent crisis. However, he thinks the economy is undergoing painful growth.
Speaking last Wednesday at the University of Liberia scholarship program for the Economic Students Association, Mr. Jackson analyzed the current circumstances in the four sectors of the economy including the real, external, monetary and fiscal and demonstrated how they impacted socioeconomic development.
Speaking on the topic "Budget Shortfall and Implications for the Economy," the Liberian economist told the students that current budget shortfall is the result of both exogenous and endogenous factors.
Exogenous factors are the results of circumstances within the global economy that impact the country in terms of trade, affect its foreign exchange reserves and produce ripple effects that are causing the current reduction in growth, which is now projected at 6.8 percent instead of the actualized growth rate of 8.1 percent in the last calendar year.
Endogenous (domestic) factors are in play, such as the impact of the UNMIL drawdown, reduced consumer spending, increasing gaps between promise and delivery of aid in the form of direct budget support and the impact of the transitioning from the single year budget to a multiyear budget in the Medium Term Expenditure Framework (MTEF).
Jackson indicated that despite the slower growth rate of the economy, yet projections for core revenue, in the form of taxation of corporate and personal income taxes have been mostly realized, but other components of revenues such as contingency and direct budget support have come under projection, contributing to the current shortfall.
He said it is true that due to the slowdown of economic activities, the resultant depreciation of the Liberian dollar, which has lost 18 percent of its value over the last 12 months, many people are experiencing difficulties and the strain is beginning to show in an outpouring of negative in the media.
Mr. Jackson expressed empathy for the many Liberians feeling the pinch of the current economic circumstances, but said that the potential for growth and development remain strong, but only with creativity and innovation.
He noted that the automatic growth seen in the economy as the implementation of the four pillars of the country's poverty reduction strategy (PRS) in 2006 under the Ellen Johnson Administration would now require more innovation and creativity and the use of domestic resources to expand economic opportunities in order to achieve the goals in the country's long term visioning plan, the Agenda for Transformation (AfT).
The Liberian economist reminded the students that despite the current slower growth rate, yet Liberia is above the African continent's projected economic growth rate of 6.1 percent according to the World Economic Outlook of the IMF, with inflation in single digits in the country while currencies, including the Ghanaian Cedi, in the ECOWAS region have lost more than 50 percent of their values and the rates of inflation are in double digits.
He said even tax administration within Liberia is within limits of comparator countries in West Africa, with the amount of taxes collected at 21 percent of the country's GDP.
Mr. Jackson cautioned the students that the current growth model based upon trickledown economics would continue to produce income equality and said that a more aggressive model of state corporatization of productive assets would yield improved "Pareto Optimality", or a more equal wealth and income distribution.
He said Liberia is under an IMF program that is geared towards providing short run stabilization and long term economic growth and development, but "we need to aggressively pursue a more indigenized approach to development, especially in natural resource development."
He asked the students to always use the courts and established institutions to seek redress of grievances.