18 May 2018

Liberia: The Weah Government's Us$536 Million Loan - a Deadly Poison Packaged in a Medical Syrup Bottle


If there is one thing all Liberians are unanimous about, it is that the conditions of our roads are terrible and that something needs to be done about them as quickly as possible.

During the height of the rainy season, the entire southeast and sometimes parts of Lofa, Nimba, Gbarpolu counties, etc., are cut off, bringing untold suffering to our people who spend days and weeks on roadsides as they struggle to pull out their vehicle or truck from thick mud.

Therefore, the professed intent of the Weah government to do something to change this sad scenario deserves commendation. That is why Liberians, especially us from the Southeast that are to benefit the most from the planned road construction projects, are joyous.

Against this background, one of the first major actions of the Weah government was to conclude a US$536 million loan deal with a relatively unknown private company based in Singapore, ETON Finance Limited. The company has no proven history of undertaking such deals before and until recently declared itself as dormant. The Weah Government's insistence on such a huge amount of loan runs contrary to advice from the International Monetary Fund (IMF), which had agreed with the Liberian government, after Liberia qualified for debt cancellation about a decade ago, the modalities and requirements for taking on new loans. The IMF insists that the terms and conditions of any loan to be contracted by the Liberian government must be of such that the loan can qualify as concessional - the interest rate should be very low and the repayment period should be very long.

The IMF also believes that Liberia should assess its ability to repay the loan when the loan falls due; otherwise, the Liberian government runs the risk of serious debt distress and bringing untold economic hardship to Liberians in the future. Other partners like the World Bank, the European Union, the African Development Bank, the American government and other bilateral and multilateral partners of Liberia are said to be very uncomfortable with the entire loan scheme but are quietly watching from the sidelines.

One thing that is giving many international and local observers running stomach is that the chief architect behind this loan deal is none other than Emmanuel Shaw, an individual who is notorious for locking previous governments in dubious deals that harmed Liberia and benefited Shaw and a few persons in the leadership clique. It was the same Emmanuel Shaw who masterminded the seizure of an aircraft belonging to the Liberian government in 1990 and during the height of the Liberian Civil War under the guise of the Doe Government's failure to meet up with conditions of a previous petroleum deal that had been struck with Shaw's instrumentality. Shaw was very close to former President Doe and Taylor and has now succeeded in imposing himself as the favorite advisor of President Weah. Shaw serves as the de facto Minister of Foreign Affairs and Minister of Finance of Liberia. He is on every foreign trip Weah makes and sits right behind the President at ECOWAS and other meetings. He along with former Taylor General Charles Bright coordinate with each other and have succeeded in transforming President Weah into their puppet.

But here are some troubling questions about the ETON Capital US$536 million dollar loan deal that should raise red flags with all Liberians, especially the legislators who are now being asked to put their stamp of approval to a deal that definitely has all the features of a deadly poison packaged in a beautiful medical syrup bottle:

Even if we agree we want to borrow, why borrow from a private company with such limited history? What due diligence has been done on the company? How are they going to generate the US$536 million - raise the money from some shady sources? Is ETON Finance Limited just a front intended to facilitate money laundering operations of Emmanuel Shaw and some of his criminal local and international hustlers?

Aren't there any other reputable lending institution or country that we could get similar amount of loan from under better terms and conditions? We are told that lending institutions like the Saudi Fund, the Kuwaiti Fund, BADEA, etc., or bilateral lenders like the government of China could give Liberia a similar or higher amount of loan at a relatively more attractive interest rate and repayment period. The Ghanaian government recently borrowed more than US3 billion from the Chinese government under far more comfortable terms and conditions than is being offered by ETON. The interest rate on the Chinese loans are usually below 1% and the Chinese can allow a grace period of nearly 20 years for the start of repayment and a total repayment period of nearly forty years. ETON Finance gives Liberia only 7 years to start to repay the loan at an interest rate of 1.46% and the entire loan would have to be repaid within a period of 15 years?

One advantage of borrowing from one of the reputable traditional lending institution or country is that if there are difficulty in repayment, a country can easily re-negotiate the terms of the loan and can even secure debt cancellation (especially with a country like China). On the contrary, it is extremely difficult for private companies to soften the terms of repayment of a loan later and debt cancellation is virtually impossible with them. Private companies, like ETON, would resort to court action if Liberia cannot repay its loan and Liberia runs the risk of having its funds (maritime funds) attached or seized and assets abroad (including embassies) sold in order to enable the private lender to get its money back.

Given the extremely short grace period for the start of the repayment of the loan (7 years), Liberia would be expected to begin repaying the loan in 2025, the second year in the tenure of whosoever is elected President of Liberia in 2023. Let's do some rough calculations in order to know how much on an annual basis would be expected to be repaid. Over the 15-year repayment period of the loan, the annual repayment of just the principal of the loan will be as follows: U$536 million/15 years = US35.73 million per year. At an annual interest rate of 1.46%, the interest to be paid in the first year of repayment (2025) amounts to: US$536 million x 1.46% =US7.83 million. This means that the total amount the Liberian government would have to repay to ETON Capital or risk court action would be: US$35.73 million +US$7.83 million = US$43.46 million! The Liberian budget has practically being stuck within the US$500 million to US$550 million zone for nearly six years now.

Given the international isolation that the contracting of the US$536 million loan could engender and the disjointed economic policies the current government has embarked upon, we doubt whether the Weah Government could grow the government revenue base beyond US$625 million in six years. Given the huge expenditure demands from health, education, agriculture, civil servants' pay, and debt service obligations from other loans, can the Liberian government afford to take out from its meager budget US$43.46 million in 2025 and an average of US40 million for the next fourteen years thereafter to service its loan obligations? Imagine that the current government is finding it difficult to find just US$2.5 million dollar for by-elections. Imagine how much more difficult it will be for the future government to be paying an average of US$40 million annually to ETON Finance Ltd. It could do so, but at the expense of health, education, infrastructure, agriculture and other critical areas.

One of the subtle but most troubling feature of the US$536 million loan agreement that is now at the legislature for ratification is that a contractor to do the actual road construction has already been identified in the agreement in total violation of the Public Procurement and Concessions law. The MOU now at the legislature identifies the contractor as "MAE II Liberia Construction Co. Ltd., a major Chinese Engineering procurement and construction company and subcontractor(s) comprising Liberian-owned and operated construction and engineering company(ies) all to be vetted and confirmed by the Ministry of Public Works in respect of their technical capacities." Why would a government be borrowing from a private company under questionable circumstances and then hand-pick another private company again under questionable circumstances to do the construction work and to be allowed to subcontract the work to "Liberian companies" to be vetted by the Ministry of Public Works? Liberian law calls for competitive bidding. Why not subject the award of the contracts to a competitive bidding process wherein Liberian-owned business could themselves emerge as the winners for some of the lots, not just chosen under dubious circumstances as subcontractors by a shadily established Chinese Joint Venture Company.

Why butcher the normal procurement exercise? Under such an underhanded, non-transparent, non-competitive process, the so-called MAE II Liberia Construction Co. Ltd is expected to rip-off the Liberian government by overly inflating the costs of construction of some of the lots or road with millions of dollars entering the pockets of officials of government and some private individuals as huge kickbacks. There is cogent information in privileged circles that almost US$100 million of the US$536 million will end up in the pockets of Emmanuel Shaw and a host of officials - nearly US$65 million to Shaw and his cartel and the remaining US$35 million to top level officials of the government. The Shaw cartel believes that Liberian legislators are narrow-minded, non-critical and mostly belly-driven, so the cartel has allocated a little less than US$600,000 in bribes to induce the legislators to ratify the overly problematic loan agreement on a "4G" basis.

In summary, this US$536 million loan from the Emmanuel Shaw linked ETON Finance Limited will in the long-run do more harm to the country than good. Firstly, insisting on taking the loan against the advice of the IMF makes the government to run the risk of a major international isolation. It makes the already internationally weak government to look like a rogue regime. Liberia's potential bilateral (including the US government) and multilateral donors are not stupid. They know that something fishy is going on and they all are going to reduce the level of aid and other forms of support to the Liberian government in the coming years. What the government is going to get in loan will be far less than what it would lose in the form of international support and goodwill.

Additionally, by contracting a loan from a shady private company with such unfavorable terms, the Weah Government is going to box the future government of Liberia in an ill-conceived and corrupt deal in such a way that the future government's room for maneuver to deal with its own challenges of employment, health, education, investment in infrastructure as well as catering to the huge government wage bill, will be gravely limited. The current government should not only be happy with taking loans (most of which will be squandered as was done in the past), it should be concerned about unfairly tying the hands of the future government, who may not be able to repay the loan as it falls due so soon and who may not have any scope to renegotiate better terms because commercial creditors, unlike reputable lending institutions and governments, demonstrate little sympathy for debt waiver or debt renegotiation.

The Liberian people want roads, but they also don't want to be enslaved by a beautifully conceived scheme engineered by Emmanuel Shaw. The burden is on the legislators to save the state or become co-conspirators in the selling of the country. We want loan, but aren't there better options available? Why avoid entities or governments that could give Liberia a better deal but rush to tie the government in with a dubious private company? The only answer is that with reputable lending institutions or governments, Emmanuel Shaw and a band of government officials that are set to milk the country of millions will not do so under those arrangements.

The haste and the unguarded nature with which the Weah Government is proceeding with the contracting of the loan reminds us of what happened in the 1870's when President Edward J. Roye took a US$500,000 from British lenders under similarly unfavorable terms and questionable circumstances. The political fallout from the contracting of the loan and the difficulty it imposed on the Liberian government is believed to be one of the reasons behind the overthrow of the Roye administration (Liberia's first coup d'etat) and the unfortunate assassination of President Roye.

We certainly don't wish for the overthrow of the Weah Government and pray that the "pro-poor" president will run his full course of six years or even more unharmed. However, we are equally concerned about the enrichment of few individuals under the guise of bringing development to our people. This has been the scheme employed by previous Liberian governments, and the ETON Finance Limited US$536 million loan scheme has all the features of another carefully prepared deadly poison about to be administered to innocent, gullible Liberians under the guise that it is the medical syrup that will make them well. Can something dramatic happen at the legislature to save the State from ingesting this poison? Judging by how the legislature has proceeded over the years, the honest answer is "NO". However, we are told that miracles still happen in this day and age.


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