16 July 2018

Liberia: All Eyes Speech - After Meeting With Businesses, Liberian President Looking to Fix Messy Economy

Photo: FrontPage Africa
President George Weah delivering his first State of the Nation address.

Monrovia — When Liberian President George Manneh Weah addresses the nation Monday, he will be looking to reassure a fickle nation still a bit jittery about the uncertainty surrounding the local economy amid rising inflation and an ever-rocketing exchange rate competing with the 171st Independence anniversary of Africa's oldest Republic.

Sources with close proximity to President Weah informed Frontpage Africa that major portions of today's economic speech will deal with financial sector reforms including capital controls. The sources also say there will be restrictions on some outward transfers.

Liberians have in recent weeks bombarded social media and talk radio with calls from Liberians both at home and abroad, calling on the President to address the nation as problems and a gloomy economic outook linger.

In the last 48 to 72 hours the President's office has been putting out feelers in hopes of assuring Liberians that relief is on the way.

Assurances for Business Community

Last week, the President met with several members of the business community in a a roundtable discussion looking to showcase policies aimed at fixing problems in the economy and efforts the administration is making toward a favorable business environment.

The President assured the business community that his administration remains committed toward the creation of conducive commercial environment for all businesses in the country.

The President went on to explain that factors responsible for the current inflation in the country are now been addressed by his administration stressing that he has put into place several measures to mitigate the problems.

The President's comments come amid recent suggestions from two former finance ministers who suggested a sit down with the business community in a bid to hear some of the problems they are encountering.

Mr. David Farhat, a former Minister of Finance and currently the director of the Graduate Program of Business and Public Administration, blamed the ecnonomic downturn on the lack of a strong export policy. "The major thing that is generating interest right now is the rate. But there is nothing we can do right now because we are not exporting. Since we are not exporting we are not earning high currency."

Mr. Farhat said the government needs to call the business community and dialogue with them about some of their problems - and see how best it can help solve them. "Some of them the government owes them a lot of money and the way the government came to them in the beginning it scared the living daylight out of them. Even you or myself you got some money you don't' know what is going to happen - because if you go to the bank tomorrow the bank might say they don't have any foreign exchange - so you will hold on."

For his part, former Finance Minister Nathaniel Barnes recommended that the government immediately implements strict austerity measures which should include an immediate hiring freeze, a significant reduction in foreign travel, freeze on procurement of major assets (vehicles etc.); close examination and possible curtail of benefits like gas, telephone credits, per diems, etc. and the implementation of a process to closely monitor and redeploy associated costs savings.

Mr. Barnes also called on the Weah-led government to consider purchasing cheaper vehicles and allowing custodians (those to whom the vehicles are assigned) to own them after a certain period of monthly salary reductions. "This would result in the exercise of more responsible care of the vehicles; but more importantly, this arrangement will shift the associated repair costs from the GOL to the new owner. Usually an automobile transitions from maintenance to repair costs by year three."

In the wake of ongoing concerns about the economy, President Weah is confident that in the coming weeks, there will be a flurry of measures to address the problem in the short term while stressing that long- term solutions to the country's economic situation would require value addition in Liberia's primary export commodities, expansion in agriculture and local manufacturing among other measures.

'Things Will Get Better'

Besides his meeting with the business community, the President's office has also been busy putting out thematic pointers in a bid to reassure unhappy Liberians that things will get better. "Things will definitely get better in subsequent days, weeks, months, and years and President Weah will be the example of success story of our beloved country Liberia," a statement from the Executive mansion said at the weekend.

Speaking during the official launch of the Coastal Defense Project last Friday the President assured the people of Liberia that he will not let them down, and referenced the ongoing Coastal Defense project as just one of the many projects serving as precursor to the good news that will soon be revealed in the country.

No matter the amount of criticisms by critics, President Weah made it clear that his government would remain focused on delivering on commitments made to Liberians, and stressed: "Our life is not to boast, but as a government our responsibility is to perform, give to you what you need and not to give you those things that you do not need."

"We must do our best to succeed because our vision is for us to help our people out of poverty and that is our major concern in running of our government. When you are poor, you will live everywhere because you are looking for that aunty, uncle or family member that you think will help you achieve your dream; and by that, you will experience things. For me, it is good to live everywhere, living everywhere gives me the sense of experiencing development."

But amid assurance and reassurances from the presidency, many including business owners like Amin Modad, CEO of Atlantic Foods Co and the Bella Cassa Hotel, says the fundamental basis for Liberia's economic problems is what seems to be recurring trade deficits compounded by the volatility of the demand and prices of our traditional exports (rubber, iron ore, coffee, cocoa, etc). "In recognition of the fact that this economic model that rests on importation and large concessionaires that export only raw products, with insignificant focus on value addition, has never worked, it's high time that we became more creative in our strategy and more firm in our resolve to substitute imports with local made products."

Liberian Businesss SOS: Yearning for Protection

Modad whose Atlantic Foods company produces water and juices is one of several local business owners struggling to break even. The other, Sharks Ice Cream has been battling strong competition from two Lebanese-owned Ice Cream shops eventhough, the business is one of those set aside for solely Liberians to own.

Protection of Liberian owned businesses was one of President Weah's strongest assertions when he delivered his inaugural address in January.

In that address, the President clearly stated the key priorities for his government: (i) improve public sector transparency and efficiency, (ii) creating environment for transparent and honest businesses, (iii) filling in infrastructure gaps in particular connecting the Southeast through the coastal road, and (iv) creating jobs for youth.

Critics however charge that the allocation of more than half of the budget to payroll and the rocketing number of ruling partisans filling job slots is one of the reasons the economy is struggling.

In recent weeks however, key stalwarts of the ruling party have been laying the economic woes blame at the doorsteps of the former President Ellen Johnson-Sirleaf.

The departure of the United Nations Mission in Liberia (UNMIL) has also been cited as a attributing factor to the dismal performance of the economy.

The UN which supported the transition from war to peace capped its stay in Liberia on March 22, 2018.

Both the World Bank and the International Monetary Fund(IMF) while hopeful of a modest recovery amid significant fiscal and external imbalances, have cautioned against new debts pileup amid efforts by the administration to take on questionable Eton Financial and EBAMOF loans which have been dogged by controversies.

The World Bank in a recent report noted that the non-mining sector grew by 0.2%, reflecting the sluggish performance of agriculture and services sectors. However, headline inflation increased to double-digit, averaging 12.5%in 2017 compared to 8.5 percent in 2016 due to depreciation of the Liberia dollar, following the sharp decline in exports, the UNMIL drawdown and capital flight.

Improvements in the economy according to the World Bank would be slow amid some substantial downside risk. "GDP's growth is projected to recover to an annual average growth rate of 3.8%over the period 2018-2020. The recovery is expected to be driven largely by the agriculture, manufacturing, and services sectors, as the economy begins to reap the benefits of improved access to road transport network and cheaper sources of electricity. The mining sector is projected to recover rather slowly, in tandem with the recovery in global commodity prices. Inflation is projected to decline from 11.5% in 2018 to 9.5%by 2020. Additionally, in line with projected improvements in the economy over the period 2018-2020, poverty is expected to fall from 50.5% in 2018 to 48.6 in 2020."

Key Factor, Agriculture Ignored

To date however, the new government has not stated a clear cut case to tackling the agriculture sector.

It is a problem, the new Dr. Mogana Flomo, the new Agriculture Minister highlighted recently during the opening of a two-day technical review of the Liberia Agriculture Sector Investment Plan organized by the ministry in collaboration with the Food and Agriculture Organization and the European Union, where he made calls for increment in the allotment for the sector many say is the key to reviving the frickle economy. The draft national budget for the 2018/2019 fiscal year is US$488.8 million, with US$8.3 million being appropriated for agriculture, which amounts to 1.69% of the total national budget of Liberia, while 62.1%. goes to recurrent expenditures the bulk of which pays for huge salaries and allowances and logistics for top officials.

Besides agriculture, the issue of debts remain critical.

The IMF recently expressed concerns that acquisition of new debts is not being done transparently. The Fund demands transparency. "Directors emphasized that future debt obligations should be undertaken transparently, limiting new debt to concessional terms, with effective implementation of infrastructure projects".

The national legislature recently passed two loans submitted by the President. The loans which have brought the government to public rebuke include a US$536 million arrangement geared toward the construction of a coastal corridor connection of counties' capitals road project, via the construction of the Buchanan-Cestos City to Greenville to Barclaryville Road, the Barclayville to Sasstown Road and the Barclayville to Pleebo Road. Other roads to benefit from the loan include; the Medina to Robertsport Road and the Tubmanburg to Bopolu Road. Also to be constructed are 'rest stops' and 'roadside service areas.'

The US$536 million loan will also include the construction of a vocational training center in Greenville, Sinoe County; construction of a mini soccer stadium in Harper, Maryland County; Barclaville, Grand Kru County; Greenville, Sinoe County, Cestos City, Rivercesss County; Zwedru, Grand Gedeh County, Robertsport, Grand Cape Mount Count and Bopolu County.

The principal amount of the loan is said to be payable in 15 years by level payments at an interest rate of 1.46 percent per annum, with a seven-year interest and principal free grace period.

The second loan triggered concerns over conflict of interest and a clear breach of the code of conduct after granting a US$420 million loan to his Burkinabe businessman friend, Mahmadou Boukoungou whose planes the President has been using for presidential trips.

Risks of Blame Game

The President has also come under immense criticisms over his refusal to declare his assets.

As he faces the nation Monday, critics, detractors and even his supporters will be keen to see how the President addresses the mounting concerns over the economy, bearing in mind the expectations hanging over his head.

The lack of a clear cut agriculture policy coupled with a wave of criticisms over the government's blame of its predecessor for the ongoing economic decline appear at least for now to be generating a discourse amongst stakeholders and business leaders hoping for a light at the end of the tunnel.

As businessman Modad pointed out in an op-ed this week, the government cannot afford to allow things to deteriorate any further. "Looking back on the state of the economy when Pres. Ellen Johnson-Sirleaf took over and the collective work that was done to get the country back on track, this administration must not underestimate its responsibilities and allow the economy to collapse under its watch.

Let's be candid, while it's true that the economy began experiencing stress and semblances of deterioration since 2011, it is now that Liberia is experiencing the most profound sense of economic decline and directional crisis. The economy is at the worst state since the Ebola epidemic. The government must demonstrate a genuine interest and preparedness to openly discuss the underlying causes of decline as much as the institutional challenges and political prerequisites for turning the situation around and fostering sustainable development."

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