The intense public debate ensuing in the wake of the July 2, 2019 Daily Observer story has claimed the attention of this newspaper. According to the story written by business reporter David Yates, headlined: “Tweah Speaks of New Measures to Stabilize Liberia’s Economy”. Finance Minister Samuel Tweah said that the “cabinet has approved a battery of measures to stabilize the microeconomic side, and was working with the International Monetary Fund (IMF) on a program to transform and restore confidence in the fiscal and monetary spaces”.
Amongst such measures proposed to be adopted to ease the economic crunch is the payment of domestic debts to local vendors for goods and services rendered government. The Daily Observer welcomes such news but is wary that media institutions will be left out as though their services were never rendered at all. In the final analysis, most of such payments will go to foreign owned businesses particularly, Lebanese owned businesses and Liberians will be left groping in the dark for answers. This practice is immoral and should be stopped.
But what is of vexing concern and perhaps the most troubling concern is the statement by Finance Minister Samuel Tweah that, henceforth, remittances from abroad will all be paid in Liberian dollars. According to the Federal Reserve Bank of St. Louis, remittances to Liberia from the US in 2017 amounted to 26.88750 percent of GDP, which stood at 2.158 billion USD in 2017. Said remittances amounted to about 580.2 million in 2017. In 2016 it was 548.8 million USD.
In neighboring Sierra Leone, remittances amounted to 1.30 percent of GDP while in the Ivory remittances Coast amounted to 0.94 percent of GDP; in Guinea remittances amounted to 0.53 percent of GDP while in Ghana, remittances amounted to 7.47 percent of GDP.
These figures show a very high comparative advantage that the Liberian economy enjoys in this respect. Moreover, the potential of such remittances to drive economic activities in Liberia cannot be underestimated. Perhaps it was in realization of the fact that the informal sector, which is a key driver of economic activities in Liberia and which has remittances as its lifeline, the Sirleaf administration introduced a policy that required the surrender of 25 percent of the remittance to be paid in Liberian dollars.
This policy, according to officials, was intended to help address shortfalls in Liberia’s revenue projections. But such made no sense at all, for it amounted to nothing more than a rip off of poor Liberians for as all government taxes are denominated in US dollars, even commodity prices. Correspondingly, official policy towards foreign owned businesses allows for 100 percent repatriation of profits without restrictions or surrender of portion of such proceeds earned here in Liberia.
The policy was however relaxed when President Weah assumed office which was a welcome relief to all. Surprisingly, this policy is being reintroduced with even more far reaching effects for it requires 100 percent surrender of remittances to be paid in Liberian dollars.
This newspaper questions the economic rationale of such a strategy for generating foreign exchange which depends entirely on subjective factors such as the willingness of people to send money to their relatives knowing such will be virtually commandeered and replaced by a rapidly depreciating Liberian dollar against the US dollar.
It is the considered view of the Daily Observer that the introduction of such a policy will have far reaching social consequences, some of which could prove injurious to the health and longevity of this government. Already civil servants have begun showing signs of great unease at the prospects of impending salary cuts which is worsened by what seems to be an uncontrollable plummet in value of the Liberian dollar against the US dollar.
Nowadays, on nearly every local radio station Liberians can be heard expressing concern and alarm over extremely difficult economic conditions which appear to be going from bad to worse on a daily basis. Many families are finding it very difficult to get even a daily meal, let alone provide for the health care of their children.
At the John F. Kennedy Memorial Hospital, the nation’s largest referral medical center, patients have to pay for nearly everything including syringes, which are sold in its pharmacy at a retail price of 30 Liberian dollars, while outside, the same syringe can be procured for 10 Liberian dollars.
The economic situation does appear bleak and hopes for a turnaround in economic fortunes may be undermined by the introduction of this policy demanding a 100 percent surrender of remittances sent through Western Union, Money Gram, etc. Aside from the economic hardships it is more likely than not to induce, it has the potential to provoke public anger which could be expressed in the form of strikes, riots or general civil unrest.
But more to that, the policy is likely to drive such an activity underground where beneficiaries would continue to receive remittances through established networks outside the banking system although the provision of such services may come at a higher price. But judging from experience during the civil war, ordinary people finding themselves hard-pressed will be willing to pay the extra cost in preference to a 100 percent surrender.
The Daily Observer recalls a similar instance warning of the implications of imposing the Cargo Tracking Note requirement, warning that such would cause economic hardships including increased prices amid shortages and occasion further decline in the value of the Liberian dollar which have all happened as correctly predicted.
Later, the nation was to bear witness to a mass public demonstration which paralyzed business activities throughout the country, especially in Monrovia, where most public employees did not show to work. Once again, this newspaper is warning of the dire implications of such a policy and urges policy makers to consider well before attempting to address complex economic problems with policies which appear to have been conceived on the fly.
As this newspaper has urged time and again, government, civil society and all stakeholders need to come together to forge a common consensus on rebuilding the economy on a sustainable basis.