Ebola was not reflected in our IMF deal, but the impact is already being felt.
The outbreak of Ebola that began in West Africa and has claimed victims as far east as Nigeria will darken the lives of millions of people, but most of them will never contract the disease.
The virus exacts a horrific toll on those it infects and the people who care for them. But it is difficult to catch and slow to spread, and the fatality rate has so far been much lower than the oft-cited figure of 90 per cent. This is a terrible epidemic, but it is not one that is spiraling out of control. Yet when this outbreak ends, Liberia and its neighbors will face huge financial consequences, in a region recovering from decades of interconnected wars and civil strife.
For most Liberians, the real fear is that Ebola will claim, not their lives, but their livelihoods. Internal travel has been restricted and affected areas quarantined. Schools are closed and public meetings restricted. Virtually all borders have been sealed. These measures are starting to contain the spread of Ebola; but because they are so restrictive, they have the side effect of halting much day-to-day economic life. If the biological threat the virus poses has often been exaggerated, the economic risk has if anything been underplayed.
The closure of centers of business, such as the markets along our borders where farm produce, clothing and household goods are sold, is unavoidable. But it is hitting rural communities hard. Current indications are that growth may fall far below the 5.9 per cent forecast by the International Monetary Fund for this year.
In the four months since the crisis began, the government has lost revenue equivalent to 2 per cent of our annual receipts. This figure could grow many times greater before the outbreak is fully contained. To make matters worse, our reduced budget will have to stretch further, threatening spending on schools, security and other priorities.
It is a harsh blow for a country that had been recovering from the economic damage done by more than a decade of conflict. During Liberia’s civil wars between 1989 and 2003, gross domestic product fell 90 per cent and most infrastructure was destroyed, including power generators crucial for healthcare. Hundreds of thousands fled. Liberia, a country that before the war had an estimated 2,000 medical practitioners, was left with 30 doctors by the conflict’s end.
Now, after 10 years of peace, we have encouraged thousands of Liberians home, including many healthcare workers.
Economic growth has averaged more than 8 per cent a year, we have been forgiven most of our foreign debt and $16bn of foreign investment has flooded in.
Yet it was a fragile recovery, even before Ebola hit. Youth and urban unemployment remains high; and, having seen how the powerful led our nation to war, people are suspicious of authority. In the face of such distrust, with many initially choosing to ignore public health warnings, the government has moved to protect the population.
It is crucial that, as we work to limit the virus’s spread, the international community puts in place plans to support our return to the path of economic recovery we were successfully following before the crisis began.
The economic impact is already being felt. Monrovia’s hotels are emptying of international business executives, tourists and staff from non-governmental organizations. British Airways has suspended flights to Liberia. Concession operations from mining to agriculture may be hit next. Palm oil production, a crucial industry, is particularly at risk.
None of this is permanent and the underlying fundamentals of the economy remain strong. But it places considerable strain on an already stretched government trying to lead the country back to strength. With help from international partners we are tackling the immediate health emergency – but our economic room for maneuver is tight. It is crucial to remember that the disaster does not end when Ebola is defeated.
What might our partners do to support our economy? Our 2010 debt stabilization deal with the IMF prevents us borrowing to pay for current spending programs. Ebola was not, of course, reflected in the agreement; it may need to be. Liberia will need greater fiscal flexibility to respond to the long-term impact of the outbreak.
With tax revenues down, the government runs the risk of being unable to pay basic salaries or support its public services in the aftermath of this crisis. Falling consumer spending could hit growth rates and further dent investor confidence.
The country’s recovery, in the wake of a brutal civil war, is a tribute to our people’s determination and spirit. These same qualities will ensure we contain and defeat Ebola but we will need all the help available to ensure the virus does not reverse the economic advances we have made.
The writer is finance minister of the Republic of Liberia