Over ten years of leadership and receiving over US$16 billion in Foreign Direct Investment (FDI) and millions of dollars from development partners, President Ellen Johnson Sirleaf is grappling with building a vibrant economy.
Though the President and her lieutenants usually boast of tremendous increase in the country’s national reserve since taking office in 2006; however, things have not been favorable as a result of some shocks that the economy continues to experience.
In her annual message to the Legislature on the state of the Republic yesterday, President Sirleaf, a Harvard trained economist, said that as a result of the crisis, the government will be unable to meet the targeted level of public sector investment that is required to meet its obligation to ongoing infrastructure projects and new priorities that are essential for the country’s economic diversification goals.
President Sileaf said as a result of weak revenue performance, total expenditure in the FY15/16 budget of US$622.7 million is expected to be reduced by 11.2 percent to US$552.8 million, representing potential cutbacks from all entities while avoiding cuts in compensation and other economic and social services’ expenditures.
The implication, she said, “is that we will be unable to meet the targeted level of public sector investment that is required to meet our obligation to ongoing infrastructure projects and new priorities that are essential for our economic diversification goals.”
She did not name some of the projects that would be affected by the situation.
“About two months ago, we were compelled to draw the attention of the nation to the ailing state of the economy influenced largely by exogenous factors, including the outbreak of a deadly disease and the precipitous decline in our traditional exports of iron ore and rubber,” she said.
She said the economy is under severe stress, adding: “We are in difficult times. As we all recognize, this situation is causing hardship for many ordinary Liberians.”
Meanwhile, numerous calls for the Government of Liberia to empower farmers and increase its support to the agriculture sector over the years appear to have gone unheeded. Budgetary support to the sector has been consistently dominated by donor support, with GOL contribution only 1% of its own money.
Vice President Joseph N. Boakai recently said in Nimba that Cote d’Ivoire is the only member state of the Mano River Union (MRU) whose economy is currently doing well under the global economic crisis. According to him, this is because of that country’s serious investment and involvement in agricultural activities.
Near the end of her speech, President Sirleaf proffered to the Legislature “a number of measures… to see us through yet another cyclical flow of the changing conditions of the global economy.” Among these measures, the President outlined the need to:
– Provide a guarantee of US$15 Million to commercial banks for loans to finance operations in the rubber sector under Sector Restructuring Plan that ensures debt settlement and value addition for farms of not less than 100 acres;
– Provide Guarantee of US$2 million to commercial banks for loans small Liberian Businesses that require no more the US$50 thousand for commercial activities;
– Revise Revenue and Investment Codes to protect local manufacturers;
– Expand duty free on all agricultural machinery and farm inputs;
– Restrict duty free privileges;
– Enforce the law restricting certain businesses reserved for Liberians
Liberia obtained the cancellation of an external debt burden of US$4.9 billion under the Heavily Indebted Poor Countries (HIPC) Initiative, President Sirleaf said.
However, the foundation of economic diversification already set in place by the administration could not fully absorb unexpected shocks that affect the economy.
In addition to the global economy shocks, she said Foreign Direct Investment into the economy has been adversely affected by land and labor related disputes. To date, an estimated US$4.2 billion has been operationalized to create jobs, improve infrastructure and generate revenue.
In addition to the perpetual budget shortfalls, the Liberian economy has experienced three shocks since 2006. The first shock grew out of the 2008 global financial crisis which slowed the pace of investment resulting in a GDP decline to 5.1 percent in 2009.
President Sirleaf said that despite this shock, the economy grew by 8.7 percent in 2013.
The second shock, which threatened lives and livelihoods of Liberians, collapsing the health sector and paralyzing the economy, came from the Ebola Virus Disease (EVD) in 2014. “This was concomitant with the third shock – a sharp decline in global prices of our two main exports: iron ore and rubber.
“As a result, real GDP growth plummeted from an original forecast of 5.9 percent to 0.7 percent in 2014,” she added.
The President admitted that the economy continued to experience suppressed growth in 2015 owing not only to falling prices of “our prime export commodities and the effects of the Ebola Virus outbreak but also to the ongoing drawdown of the United Nations Mission in Liberia (UNMIL), which mainly affected the services sector.”
Consequently, she said the GDP declined further to 0.3 percent in 2015, compared to the original forecast of 6.8 percent.