Analysis: Did CBL Violate the Law by Loaning Gov’t?

By Emmanuel Collins

Monrovia–In Liberia, public sentiments or politics often blur the reasoning and logic of the law, skewing both the textual meaning and intent-of-the-framers' doctrines of statutory interpretation. 

However, the age-old cliche that the ‘Law is the Law’ will always suffice. But one has to have an appreciable understanding of the facts and legal basis leading to the decision before deeming it legal or not. 

This is the case of the trending issue involving the Central Bank of Liberia's decision to loan the Government of Liberia US$80 million to pay civil servants’ salaries for November and December 2023. 

Representative Richard Koon and two others have written the plenary of the House of Representatives to invite the CBL to answer their claims that the Bank violated Section 36 of the Amendment and Restatement Public Financial Management Act (PFM Law) when it granted the loan.

In short, Rep. Koon claims that the CBL should have received authorization from the Legislature before crediting the Government. 

To accept or reject his argument, one has to understand the referenced provision of the PFM Act and juxtapose it with the related provisions of the CBL Act. 

First, let’s take a closer view of Section 36, paragraph–the reliance for Mr. Koon and Co.'s argument: “With the exception of any loans raised for the purpose of paragraph (b) of subsection 36(2), the terms and conditions of any loan shall be laid before the Legislature and shall not come into operation unless they have been approved by a resolution of the Legislature.”

Relying only on one paragraph of an entire section is not legally prudent to form the basis for a strong legal argument. Therefore, reading the preceding and subsequent paragraphs is important to get a balanced understanding. 

The first paragraph of this section vests the authority only in the Minister of Finance. It reads: “Subject to the provisions of the Constitution, the authority to raise money by loan, to issue guarantees and to accept grants for and on behalf of the Government shall vest solely in the Minister and no other person, entity or public organization shall, without the prior approval of the Minister, raise any loan or issue any guarantee, or take any other action which may in any way either directly or indirectly result in a liability being incurred by the Government.” 

The second paragraph of Section 36 further defines the authority of the finance minister, adding that “Loans may be raised upon such terms and conditions as to interest, repayment or otherwise as may be negotiated by the Minister or his/her representative but, only for the purpose of (a) financing budget deficits; (b) treasury and monetary policy management purposes, etc.” 

These provisions of the new PFM law do two things: one, they solely authorize the Minister of Finance to raise loans with the acquiescence of the Legislature. Two, they define the purpose for which loans may be negotiated by the finance minister. 

This means the PFM law prescribes the authority of the finance minister to negotiate loans with a specific condition of precedent–seeking legislative approval. This law puts no burden on the CBL to negotiate loans on behalf of the government. It is the minister’s prerogative to determine the terms and conditions as to interest and repayment as may be negotiated by the minister or his/her representative. 

What the law doesn’t include, it excludes. This legal concept means that mentioning the finance minister as the person with sole vested power means no other government institution, including the CBL, has the power to negotiate loans on behalf of the government. How can a body not responsible for negotiating loans on behalf of the government seek legislative approval? The legal reasoning here is that the Minister is the one with the sole authority and no one else. 

In essence, the CBL cannot be legally responsible for the negotiation of a loan on behalf of the government. In this instance, the Central Bank could not have submitted the terms and conditions of this loan to the legislature for approval, because doing so would be illegal and a usurpation of the function of the Minister. 

Simple reasoning suggests that Rep. Koon’s argument has a flawed legal basis and his reliance on Section 36 of the new PFM Law of 2019 is askew. 

The CBL is governed by the Restated and Amended CBL Act of 2020. But did the Bank violate its governing law by loaning the US$83 million to the Government? 

To know this, let’s first view the texts of the CBL Act regarding “Credit to the Government of Liberia”. Sub-section 1 of Section 46 lays out the procedure for loaning by the CBL. 

It reads: “Subject to the overall limits specified by this Act, the Central Bank, by decision of the Board of Governors, may extend credit to the Government of Liberia with maturities not exceeding six (6) months only under exceptional circumstances such as war, famine or other natural disasters…”

When former President George Weah wrote the CBL requesting the loan to pay civil servants' salaries for November and December, he stressed that the loan was intended to mitigate “national security risk”. It appears that Mr. Weah was keen on averting any disruption to the transitional process after losing the election in mid-November. 

At that time issues of grave security uncertainty and potential threat would have been posed to the transition of power if civil servants' salaries had remained unpaid. Probably, this would have disrupted any smooth transition. Hence, a “national security risk”, in the wisdom of the former president. 

National security risk falls in the category of “exceptional circumstances” as mentioned in Section 46 of the CBL Act.  Note that the law provides for loans to be granted to the government by CBL under certain circumstances. This section gives examples of conditions that may occasion the need to grant loans to the government. This Section also prescribes the power of the CBL Board of Governors – making the august body the sole authority to make such a decision via a resolution.   

When the text of the law lacks ambiguity it cannot be construed otherwise. This is the case of Section 46 of the CBL Act. The power is vested in the Board and the conditions to grant loans to the government are spelled out. There’s no confusion in the textual meaning of this section. 

However, one would argue, what constitutes a “national security risk” as mentioned by the former president in his request to the CBL? That determination lies squarely within the certain knowledge of the presidency – who is the chief executive and custodian of the country’s national security. 

The CBL board cannot question the nature of the “security risk” before approving the loan nor initiate a probe to determine the severity of the “national security threat” as a condition precedent to approving the loan. The CBL Act doesn’t set this standard and for the CBL Board to attempt so would be illegal and an assumption of power not prescribed in the law. Again, the law is the law: what it doesn’t give, it withholds.

The CBL Board followed all the requirements. They passed a resolution in keeping with Section 46 and then acted consistent with Section 4 of the Act which sets the limit for loans to the Government of Liberia.  

Section 4 reads: “At no time shall the aggregate principal amount disbursed and outstanding on Central Bank extensions of credit to the Government, exceed the equivalent of ten ( 10) percent of the annual average of the Government's total "ordinary revenue" for the two immediately preceding financial years; provided that for the purpose of this Act, "ordinary revenue" shall not include borrowing, grants and other forms of financial assistance, and income from sales of assets.”

Applying the aforementioned law to the US$83M credit extended to the Government shows that the amount is not more than ten (10) percent of the annual average of the Government's total "ordinary revenue" for the two immediately preceding financial years.

The Bank's decision to loan the Government does not breach any laws. It neither violates the PFM Act 2020 nor the CBL Restated Act of 2020. 

However, assuming that there is a conflict between the PFM and CBL Acts (even though there is none in all the applicable provisions regarding crediting the government), the CBL is obliged to follow only the CBL Act. 

Section 60 of the CBL Act sets the legal basis for such action, “in the event that the provisions of this Act conflict with those of other laws, then the provisions of this Act relating to the authority and functions of the Central Bank and/or matters of monetary policies shall prevail.”

In sum, the CBL decision to credit the government of Liberia US$80 million without Legislative approval based on a request to avert “national security risk” as presented by former president Weah did not violate the PFM Law. The PFM Law puts no burden on the CBL to seek Legislative approval but rather the Minister of Finance. It is the sole authority of the Minister to seek Legislative approval in certain instances when requesting loans.  

Additionally, the CBL Board exhausted all relevant steps as required by the CBL Act before crediting the government, including passing a resolution and ensuring the limit (US$83) of credit is within 10% of the annual average of the Government's total "ordinary revenue" for the two immediately preceding financial years.