Min. Tweah, Boima Kamara Clash on Liberia’s Debt Increase

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“Kamara (right) failed to understand or investigate the reasons for the abnormal growth in the stock, an outcome that leaves his article seriously wanting,” Min. Tweah (left) said.

— Min. Tweah defends the government, saying that they only borrowed “US$30.6 million of the increase in external debt stock since 2018.”

Finance Minister, Samuel Tweah has denied accusations made by his predecessor, Boima Kamara, that the Government of Liberia had borrowed an average  US$170.2 million in the last two years.

Min. Tweah, in response to Kamara, said his predecessor’s assertion is correct in only one aspect: that the stock of debt has grown over time and over the two periods under consideration in Kamara’s article, being 2018 to 2020.

“But Kamara failed to understand or investigate the reasons for the abnormal growth in the stock, an outcome that leaves his article seriously wanting,” Min. Tweah said.

Arguing further, Tweah said with gross international reserves around $160 million at the end of 2017, the Central Bank of Liberia could have never lent $170.2 million to the government yearly.

“Neither could the Government consume $170.2 million in goods and services in one fiscal year for which it would owe domestic vendors that amount. These facts and issues should have come out clearly to anyone investigating the debt numbers, compelling due caution and care in reaching conclusions,” the minister said.

According to the Finance Minister, Liberia’s rising debt stock from 2018 to 2020 is due to issues that have to do with accounting reconciliation of government debt to the Central Bank of Liberia and that disbursements on external loans signed by the previous administration are happening now.

“The first reason is that disbursements on external loans from the World Bank, the African Development Bank, and other multilateral and bilateral creditors, signed by the previous administration, are happening now. When a loan is taken, the loan amount is recorded as borrowing, but is not included in the official debt stock until the amount is disbursed or spent on the projects for which the loan was taken,” Min. Tweah argued.

For example, Tweah said that if the Legislature ratifies a US$50 million loan and US$10 million of this is spent six months after ratification, “the debt stock, recorded and managed by the Debt Management Unit at MFDP, goes up by $10 million.

“The remaining $40 million is recorded as undisbursed and, if canceled, will be considered as borrowing,” he added. The second reason why the total debt stock went up has to do with accounting reconciliation of Government debt to the Central Bank of Liberia. This increase was paper or accounting money added to the domestic debt stock. “

Min. Tweah further said the monies were that which the previous administration did not recognize in the total debt owed to CBL and, as such, they had a problem in taking it without a full audit, but “after a lengthy negotiation between the ministry, CBL and IMF an understanding was reached.”

“Prior to entry into the IMF program, the IMF insisted that the Government cannot continue carrying these unreconciled amounts in perpetuity but needed to validate and accept the debt as official Government borrowing from the CBL over the last decade or so,” he added. “The MFDP had issues with bringing all these amounts as debt to CBL without a full audit. Some audits had been done by KPMG, but MFDP folks still had issues with accepting the numbers. As such, a lengthy negotiation between MFDP, CBL and IMF ensued and an understanding was reached.”

However, for Kamara, this is not the case about Liberia’s public debt performance because the ministry’s recent data shows a remarkably high rate of growth in public debt within 2 years and 3 months of the current administration, compared with post-HIPC 7 years of the Sirleaf administration that ended in 2017.

“The public debt stock data for 2 years and 3 months spanning 2018 and end-March 2020 paints this picture of the current government’s debt performance. Total public debt rose by 71.15 percent (or US$624.88 million) to US$1,503.08 million at end-March 2020, from US$878.2 million at end-2017. Of the total stock of public debt at end-March 2020, external debt accounted for US$898.68 million and domestic debt, US$604.40 million,” Kamara argued.

Adding, Kamara said in terms of movements, external and domestic debts grew by 46.8 percent (or US$286.48 million) and by 127.13 percent (or US$338.3 million), respectively.

“GoL’s borrowing from the CBL increased by 88.92 percent (or US$228.62 million) to US$485.70 million, from US$257.08 million at end-2017, followed by commercial banks with a growth of 552.2 percent (or US$55.22 million) to US$65.22 million, from US$10 million for the same period. Of the US$65.22 million, LBDI, Ecobank, and IB account for over US$50 million,” Kamara wrote in an article, titled: “Liberia, Life After Debt”

Kamara, who also served as one of the Deputy Governors of the CBL, noted that the country’s debt-to-GDP ratio has risen from around 30 percent during the Sirleaf Administration to 51.33 percent as of March 2020.

“It is important to point out that for the fiscal year ending FY18/19, US$88.82 million was GoL’s borrowing from the CBL largely in the form of a bridge loan of US$28 million; FY18/19 Escrow Account in US dollars, US$16.25 million; FY18/19 Escrow Account in Liberian dollars converted to US dollars, US$14.70 million; and Other Claims (there is a need to know what constitutes “Other Claims”) in Liberian dollars converted to US dollars was US$29.87 million.

“The Liberian-dollar equivalents of US$14.70 million and US$29.87 million (totaling US$43.87 million), using as a proxy for fiscal dominance (a situation where the national debt rises too quickly with a risk of debt distress and inability to repay), means a high level of deficit financing by the CBL through an expansion of Liberian dollars in circulation by over L$8.0 billion. This seems to be one of the key factors that led to the rise in inflation to 30 percent during 2019 on the heels of rapid exchange rate depreciation averaging about 30 percent to L$186.64/US$1 at end-December 2019,” he said.

Kamara added it is becoming worrisome that fiscal dominance is slowly creeping given the borrowing pressure on the CBL, which runs contrary to the spirit of fiscal-monetary complementarily.

“At end-June 2020, the IMF and World Bank jointly classified Liberia’s risk of debt distress as MODERATE, something to claim the attention of policymakers. In this regard, we advocate for greater support for the independence of the CBL as the monetary authority,” he said.

But for Tweah, Kamara failed to understand or investigate the reasons for the abnormal growth in the stock, an outcome that leaves his article seriously wanting as the current government is only responsible for “US$30.6 million of the increase in external debt stock since 2018.”

“As of December 31, 2017, the total external debt stock was US$612.03 million. As of March 2020, total external debt stock stands at US$898.6 million,” Min. Tweah explained. “This means, US$286.65 million has added to the external debt stock since President George Weah took office. Of this US$286.65 million, US$256.05 million was added to the stock from borrowing/loans taken by the previous administration.

Min. Tweah added that the total amount borrowed from the CBL over the last two and a half years by the current administration is US$30.9 million, which represents about 6.3 percent of the $487 million the government owes the CBL.

“And this is most likely the only amount that would be borrowed by this administration under the no borrowing policy.  The other reason why the domestic debt went up is that the present administration recognized domestic debts to vendors and commercial banks in the tune of US$105.78 million that the previous administration did not recognize. This recognition deserves praise from former officials of the previous administration, rather than blame for ‘increasing the debt’,” he said.

Finance Minister Tweah added that his predecessor concern about debt to GDP ratio is also misguided and if they were merely looking at debt GDP, the ratio cannot be put on the current administration; and that Liberia’s debt to GDP is among the lowest in the region.

15 COMMENTS

  1. Thanks to the able minister of Finance in Min Samuel D Tweah Jr for the clarity. Some of us know that people like Boimah Kamara who just served as finance minister in three years and bought luxurious vehicles should not be given the attention when it comes mismanagement of state resources. In just three years under his leadership as minister of Finance, we experienced a printing of New Bank notes in excess that cause inflation in our exchange rate thereby causing serious slow economic growth. under his leadership, the CBL of Liberia experienced many economic challenges, except for min Samuel D Tweah Jr who has made the CBL to be independent and allow it meets deciplaine fiscal policies.

  2. HPIV Part II: Tweah sinks Liberia into more debt. Bad economics.

    Tweah thinks he is at the University of Liberia. He lies about numbers and uses jargons to confuse Weah. He needs to know that the debt stock does not change the narrative of our debt burden.

  3. Thanks to the most powerful Finance Minister ever in the history of Liberia for such clarity.
    As a matter of fact, conscious people like us have no space and will give no credence to a trending fallacy from a mere bluff boy in a former Finance Minister Boimah Kamara

  4. Hummmmmmmm!

    It’s good to always think you are “don” more than everyone. Minister Tweah’s rebuttal is shrewdly constructive, with the devil in the details.

    Even a child of 5 in Liberia knows for everything the CDC does, it must contract a debt (from feeding it’s lazy and unproductive partisans to building uneconomical roads). So honorable Minister, you want us to believe since you guys came, you have contracted only $30 million? Is this not the amount you recently borrowed to feed your lazy and unproductive partisans?

    Technicities:
    According to Min Tweah in simple English, the rising debt burdens can be attributed to 2 factors:
    1. Accounting reconciliation, which means all lending and borrowing transactions or entries into the GOL’s journals (accounting records or bookkeeping) must be in agreement at the end of a given year (which must NOT be cumulative or over many years but monthly or quarterly or annually in accordance with the Time Period accounting principle).
    Which means the money borrowed by past administration (as Ellen will always take blame for all their mediocrity whereas they promised us FIXES) is now being recorded as liabilities in the GOL balance sheet. NO, honorable Minister, it doesn’t work like that!
    If it were the case, why should such debts appear on the yearly balance sheets of the CBL, IMF, AfDB, etc. Mr. Minister, in finance, every second, minute, hour, day, week, month and year counts in generating income on a dollar invested. That’s why in every financial transaction, the repayment deadline is determinant in setting the remuneration rates (interest rates); the principle of Revenue Recognition.
    2. Disbursement on loans, which means the agreed time set to begin to reimburse the principle (the amount borrowed) of the loan to financial institutions. It should be noted that whenever a loan is contracted, there is a “grace” period or deferral time for the borrower to begin to repay the debt. It means the borrower could be given 2 or 3 or even 10 years to begin to repay the debt, but NOT the accrued interests payable at the end of every accounting period (monthly or quarterly or yearly).
    The minister is telling us that since they have started repaying some of such debts under their regime, it means it has augmented their debt burdens, NO honorable Minister. You are misleading the illiterate Liberian populace.

    To those of you who want to know how much debt Liberia owes or reimburses annually, visit the Liberia country report on IMF website.
    Weah and team have no revenue generation creativity. They contract unproductive loans and are creating dire hurdles for upcoming administrations.
    We understand you guys bought your way to the presidency, you are now there and turning in on yourselves, STOP misleading our people. Mr. Kamara’s assessment suffers no criticisms. All the figures advanced by him are verifiable, STOP your political rhetoric!

    You see, during the last presidential debate, we saw people (presidential aspirants) come in the intellectual debate hall with bunch of hooligans to make foolish noise for them, it should STOP!
    A presidential debate should be held henceforth at our highest institution of learning (UL) or at CUC attended by students and the Liberian intelligentsia to ask candidates pertinent questions regarding their platforms and policies.
    CDC goatish followers have started heaping praises on Minister Tweah and mudslinging an astute and meticulous observer. Liberia can NEVER develop without constructive intellectual debates.

    STOP THE DIN AND PUT ON YOUR THINKING CAP FOR LIBERIA, OUR COMMON HERITAGE!

  5. Government of Liberia to Experience Huge Deficit of US$41 Million – Culled from FPA during the era of the Joseph Boakai and Ellen Johnson Sirlöeaf Unity Party Government. 2006 – 2017

    “The implication this has for the next Government is that they will be starting from negative cash balance in bank with huge debts to repay.

    This could cause several donors to pull additional funding from the Government because they can no longer trust the Government to be fiscally responsible.” – Financial Expert

    The Ministry of Finance and Development Planning (MFDP) has not commented on the issue despite inquiries made by FrontPageAfrica.

    As seen from a reconciliation report in our possession, there is a possibility of President Sirleaf leaving the next Government with a significant domestic debt.

    Financial experts have linked the huge deficit to poor fiscal stewardship of the economy.

    “Former Minister Amara Konneh was noted for the constant budgetary shortfall, but at no time did we experience such a huge deficit under his regime.

    This could probably be the result of poor economic management,” an expert told FPA.

    FPA further gathered from the experts that the government has been running a balanced budget.

    This means the Government will only spend money when it collects and by the end of each fiscal period, the books should be balanced or at least small surplus or very small deficit.

    “Running a US$42 million deficit can only be termed as reckless and irresponsible fiscal management,” the expert further told FPA.

    Review of preliminary numbers available to us indicates that the government is poised to collect the same US$525 million or thereabout as it was in other fiscal years and but it remains a mystery why the government would experience such huge loss.

    “The implication this has for the next Government is that they will be starting from negative cash balance in bank with huge debts to repay.”

    “This could cause several donors to pull additional funding from the Government because they can no longer trust the Government to be fiscally responsible,” the financial expert told this paper.”

    Some employees within the MFDP who spoke with this paper on the basis of anonymity said the deficit is a result of “dangerous spending”.

    Such spending under the current IMF program, according to expert, is not permitted as the government is only to spend what it collects.
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    “On this one, there is no room to blame those who ran the ministry before because this is a matter of spending only what you collect and so it has nothing to do with what happened in the past.”

    “It is just plain irresponsible to be spending money that you don’t have.”

    “Even in our personal lives, there is a limit to running a deficit so how can our Government, especially in these last days, be running such huge deficit?” the expert rhetorically asked.

    FrontPageAfrica has not able to go into the details and complexities of the problems, but the staff of the ministry indicated that the minister has no interest in fiscal management, unlike his predecessor who held weekly Financial Management Team (FMT) meetings to look at the entire picture of the economy and make decisions on spending.

    That FMT meeting, FPA was informed, brought the technicians together in one room to look at the revenue picture, the allotment, and then the disbursement.

    By this meeting, the necessary decisions were made on what to fund and what not to fund so that Government did not run a deficit. The staff informed us that the current minister has absolutely no interest in doing such thing.

    Staffs at MFDP also accused the Minister of not consulting many of his staffs on decision making based on his conviction that many of the staffs there are corrupt.

    FPA was further informed that the Deputy Minister for Budget is no longer responsible to allotments as Minister Kamara has taken that responsibility unto himself.

    FrontPageAfrica has, however, not been able to verify this information.

    “In the past, when a request came from the President or another cabinet minister, the Finance Minister will send the request to the Budget Minister who will then seek the advice and analysis of the technical staff responsible before a decision can be made, but now things are different.

    The Minister is not law and gospel. In some cases, the boasts that he has divine power and understanding so when God speaks then he makes decision,” another staff told this paper.

    The minister also stands accused of taking money from various donor projects under the Project Financial Management (PFM) Unit to fund the expenses of Government.

    “Now, because those funds are intended for specific projects, if the Government is not able to return those funds to those accounts, those projects will be at risk and donors could pull back their funding to those projects and future projects,” an insider said.

    “This situation needs to be brought under control immediately because this singular event has the propensity to rewrite the history of her administration,” the financial expert who is an insider at the MFDP told this paper.

    The reconciliation report further shows that the Government has raised approximately US$525 million in revenue but have paid US$3 million to ECOWAS as trade levy (ETL) so therefore the net revenue collected for FY16/17 is about US$522 million.

    Additionally, the report shows that Government has borrowed nearly US$39 million from the CBL and also took another US$27 million from various project accounts, some of them being World Bank project intended for special use. It means that those projects will be stalled because their monies have been used by the central Government on something else.

    At the moment, our sources inform us that in spite of the huge deficit, the Minister is still making efforts to ensure that additional US$4 million is paid to the contractor working on the Executive Mansion, while another US$6 million should be paid to George Haddad’s Prestige Motor.

    If these amounts are added, it will carry the potential deficit to US$50 million

  6. This SDT thinks all of us are fools like his partisans to think that they are not obligating the country more and more; they said the country was broke, where did the money in the oversea reserve come from, they are even borrowing from the National Social Security Pension funds, by the time we retire, there will be no money in our pension funds to carry home, frustration will kill lots of us.
    Another lie was that there was a budget surplus, where is the surplus that you are borrowing our pension money? If no money was missing, why are you prosecuting Mr. Weeks? Criminal minded people.

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