Policy Makers Beware: Continued Indebtedness to IMF

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That the Liberian economy is in dire straits is an understatement. The coronavirus pandemic has made matters worse as nearly every economic activity has come to a halt. Corruption continues to flourish and there are telltale signs that the loss of investor confidence is strongly linked to mismanagement of public resources as well as policy uncertainty and even intra-party feuding.

These have not helped, neither have attempts by officials of the ruling party and government to paper over them and present a different picture to the public. Budgetary shortfalls, which was a character trait of the Sirleaf administration, continue and there are no indications that there will be an upturn in fortunes anytime soon. Amid the gloomy forecast, the International Monetary Fund has announced a US$50 million loan to the Liberian government to help offset the adverse effects of the coronavirus pandemic.

But this newspaper hastens to caution the Liberian government to tread softly and exercise prudential judgment in the contract of loan arrangements with the IMF. In the first place and as evidence from here and further afield shows, that IMF-administered bailout programs actually constitute a recipe for disaster. Under IMF Structural Adjustment programs, poor debtor countries are compelled to cut social spending particularly on education and health including public sector wage.

But, it is important to understand that the misdiagnosis of our problem, by the IMF, as one of a financial nature is dead wrong. Part of its official statement issued on its bailout to the Liberian government reads as follows:

“Most of the end-December fiscal targets and structural benchmarks were met but the monetary program went off track by a large margin mainly for two reasons: an acute shortage of Liberian dollar banknotes at a period of high cash demand resulting in higher foreign exchange intervention than programmed; and acute shortages of U.S. dollar liquidity in the banking sector”.

The statement continues: “The authorities are said to be addressing these weaknesses—aiming to bring the program back on track in time to complete the first review—but are faced with the challenging task of managing the COVID-19 crisis at the same time”.

But nowhere in the IMF statement is any mention of the alleged disappearance of 16bn Liberian dollar banknotes for which there has been no accountability, never-mind criminal indictments of a few individuals which have turned out to be nothing more that window-dressing charades. Neither has there been any accountability for the US$25m infusion exercise which, according to official investigative reports, was severely marred by corruption occurring right under the direct supervision of the Finance Minister.

As mentioned earlier, intra-party feuding, policy uncertainty, the mismanagement of public resources and runaway corruption are all factors which an IMF bailout cannot and will not address not even the refusal of the British Government to surrender to this government the US$8m deposited in a UK bank in 1971 during President Tubman’s fateful medical visit to London. Thus, it is not surprising that the IMF, other than the issuance of soundbites, has remained reticent on such issues. Instead they have provided budgetary support to a budget that was never vetted by the public although, it (IMF) may claim that the budget received legislative approval.

But for heaven’s sake, it is public knowledge that both the Senate and House of Representatives did not debate the budget, neither did they seek public input into the budget. As things appear, the criticism often levied against China that she (China) does not care about accountability and human rights concerns in the granting of loans or aid to undeveloped countries, is what we see the IMF exemplifying here.

It is now high time that Liberian policy makers consider the implications of continued indebtedness to the IMF/World Bank and begin to explore strategies for domestic resource mobilization. For example, there is no reason why Liberia with all its rich gold deposits should not benefit from it but is instead selling same for cheap to greedy and exploitative multinational corporations including surrogates of the International Finance Corporation (IFC) an affiliate of the World Bank.

According to “Foresight Africa” close to US$50 billion a year leaves the African continent with Liberia and Togo standing out as having lost 94 percent and 83 percent between 2005 and 2014, respectively. Policy makers should therefore be warned that continued adherence to IMF/World Bank Structural Adjustment arrangements will spell trouble for this government.
People will not continue to bear the heavy burden such policies impose.

Suggestions from high circles that the health budget is being slashed by US$10 million in adherence to Structural Adjustment prescriptions, as well as other proposed economic measures such as the imposition of surcharges on data and voice calls et cetera, are more likely than not to provoke riots and general instability. When such happens, the IMF/World Bank will not be around to help. Instead they will be more likely than not preparing to deal with the emergent government.

19 COMMENTS

  1. But why does the IMF keep loaning money to subside the Liberian government’s bloated public sector?? Much of this money will be stolen or spent on useless government employees who are paid to do nothing, but to sit on their fat asses and take long lunches!! What Liberia desperately need is a smaller public sector and BIGGER private sector!!!

  2. Brother Martin Scott, why are you asking questions on issues that you should have answers for? You asked this troubling question, for instance. “But why does the IMF keep loaning money to subside the Liberian government’s bloated public sector??”

    Certainly, you know that the IMF is a profit-making entity and cares less about whether a borrower is efficient and/or transparent. As many writers have stated in many publications, profit-making entities such as this money-lending entity (World Bank/IMF) usually prefer to lend money to entities that end up paying higher interest rate, penalty for delinquency, penalty for bankruptcy, etc. Alternatively, searching for higher profits is the reason the IMF and/or World Bank provides services and arranges economic policies that are similar to the economic arrangement of credit card companies.

    Credit card companies, seeking to earn higher profits, prefer delinquent or bankrupt borrower. They usually assume that a debtor is delinquent, not because the debtor mismanaged the available cash, rather, they assume that cash was inadequate to meet the cash flow, therefore, the borrower needs additional loans. On the other hand, they usually assume that if a business manager is not using cash of a business at a reasonable percentage, then there is little or no reason to lend additional cash to such a manager.

    Brother Scott, you admire profit-making entities. I appreciate your commitment to the idea of profit-making, however, there should be some limits. Your other statement, “What Liberia desperately need is a smaller public sector and BIGGER private sector!!!” indicates that you have yet to understand the greedy aspect of profit-making entities that private capitalists own and operate. In searching for higher profits, private capitalists usually prefer to do business with corrupt representatives, corrupt consultants, corrupt chief executives and/or corrupt government bureaucrats.

    That is part of the reason why I have joined many writers to suggest that Liberia should share ownership and management of our natural resources along with private capitalists. Surrounding 100% of the ownership and management of our natural resources to private capitalists with the hope that private capitalists will give our country a reasonable share of the profits, as Liberia continues to do, is wrong. Evidence is everywhere, which indicates that corruption is rampant because private capitalists are the owners and managers of our natural resources. More so, private capitalists will use portion of the profits generated from our natural resources to offer bribes to bureaucrats.

  3. Thank you Martin Scott and J. Yanqui Zara for politely and insightfully engaging the discussion, which is a civic responsibility of all. Like every institution, one cannot expect perfection from the media, that’s why holding practitioners accountable for fairness, accuracy, and non-partisanship stance also amounts to civic responsibility. Simply put, citizens must rely on the reports, stories, and opinions that may move them to momentary actions.

    However, in recent weeks, some of us have noticed that some commentators (for partisan reasons) are so intolerant that they would prefer the Press be neutral regarding governance, integrity of officials, and social justice. It won’t happen, and doesn’t happen in Democracies.I’m unapologetically pro-stability and a supporter of the execution of GMW’s PPAD, but any fussy person that frivolously attacks me because I didn’t follow an official line will regret it.

  4. If “evidence from here and further afield shows, that IMF-administered bailout programs actually constitute a recipe for disaster”!

    BUT THEN WHY many other Asian and African countries, have made so much progress and development via the very IMFŚ BAILOUTS or in fact, next door Rwanda, has made so much progress and development through the very mechanisms provided by the very IMF?????

    Thorough scientific research must Precede an editorial or news report. Otherwise, such dissemination is simply tabloid or propaganda for the highest bidder – whether the opposition or those thrown out of government.

  5. Sylvester Moses, while it is true, and it should be clear that public journalism parts company with the tradition of neutrality (whether it is about “governance, integrity of officials, or social justice”), you and others must agree that a return to politicized or advocacy journalism, or in fact, “paid to play” journalism (if we may quote you), has no place in professional journalism. FOR THE OBJECTIVITY CONCEPT REIGNS SUPREME AND PREVAILS.

    That is, the process of observing and reporting should thus not be contaminated by subjectivity, nor should it interfere with the reality being reported on – a contamination and interference made evident and made manifest in the “I Can´t Breathe, I Can´t Breathe” headline and story.

    For such non-contamination, non-interference value or ideal, in all respects, has an affinity, both in theory and practice, with the professional and intellectual mandate of the journalist sticking to the ideal of the rational, undistorted communication as far as truth and accuracy are A MUST!

    Accordingly, our condemnation of you and the editor concerned is not and can never be ligated to any partisanship or whatever of ours; besides the fact that neither are we a partisan within any party or coalition; nor are we within the officialdom of government! We are simply a nationalist exercising our rights as provided in the Liberian Constitution and those related international mechanisms!

  6. My position on the matter has unsurprisingly remained unchanged and unambiguous since the late 1960’s in a ‘multiparty system’ Sierra Leone. First, a free press is indispensable to democracy; second, journalists must abide by ethical standards. I even reiterated it – for crying out loud – in my earlier comment to this post!

  7. True Nationalist,

    Sir, did you read the different reports the Editorial mentioned in the article? Or have you read the findings of writers who discussed the IMF economic policies? Alternatively, are you implying that the Editorial should conduct its own research before commenting on any issues?

    For example, Transparency International stated in its findings that profit-making Corporations usually initiate bribes, hence, anti corruption advocates should not just focus on those government bureaucrats who receive the bribes. This is because profiteers usually demand from government bureaucrats what they (profiteers) want. In the case of the African Union, the investigation stated that multinational corporations are responsible for 95% of the $60B that is stolen in each year. Most importantly, the investigators stated that only 3% of the $60B that local bureaucrats are responsible for.
    So, this is the information, I guess, the Editorial reviewed before it printed its story.

  8. Mr. J. Yanqui Zayza, True Nationalist is frantically doing a Google search before answering your question. A guy who proudly talks of “condemnation” of a point of view rather than ‘refuting’ it, is, most likely, out of depth regarding critical thinking, reading, and writing.

  9. Look, Sylvester Moses, “don´t kill me” with laughter as we say back home.

    I came on this keyboard a few seconds ago only to firstly find your judgment that “Mr. J. Yanqui Zayza, True Nationalist is frantically doing a Google search before answering your question.”

    Look, my man “don´t kill me”. So, you want to tell me, you expect me to be sitting on this computer 24/7 to comment and counter comments?

    Mr. Moses, even if I were being paid for such task, I would still have to have some time away from the keyboard.

    Okay, I am back at the keyboard, you bet I have more than a hundred appropriate responses for ANY subject matter viz the burning issues of society. You can bet on that!

  10. Mr. J. Yanqui Zaza,

    You can rest assured that your three questions posed to me in your first paragraph are responded to by me in the affirmative.

    And I can candidly and objectively assert here and elsewhere that whoever wrote this editorial “did not mean business.”

    What I mean is this: How on earth the editor, while tacitly suggesting to the IMF not to give Liberia the grant, is at the same time, telling Liberian policy makers that the IMF is useless and diabolical?!!

    And Mr. Zaza, with all due respect, sir; I am surprised that you of all people would ask this question: “Alternatively, are you implying that the Editorial should conduct its own research before commenting on any issues?”

    Mr. Zaza, if a news story which in some cases must simply be reported as seen, experienced or relayed, what do you think about A JUDGMENT handed down by an editor on a given issue?

    From all implications, you are saying that a judge does not necessarily have to study properly the arguments of the litigants before making his or her decision and hand down his or her verdict. An editorial cannot pass the scrutiny of objectivity if it has not researched that which it is to render its opinion upon!

  11. Mr. J. Yanqui Zaza,

    You can rest assured that your three questions posed to me in your first paragraph are responded to by me in the affirmative.

    And I can candidly and objectively assert here and elsewhere that whoever wrote this editorial “did not mean business.”

    What I mean is this: How on earth the editor, while tacitly suggesting to the IMF not to give Liberia the grant, is at the same time, telling Liberian policy makers that the IMF is useless and diabolical?!!

    And Mr. Zaza, with all due respect, sir; I am surprised that you of all people would ask this question: “Alternatively, are you implying that the Editorial should conduct its own research before commenting on any issues?”

    Mr. Zaza, if a news story which in some cases must simply be reported as seen, experienced or relayed, MUST BE KNOWLEDGEABLE OF ALL SIDES OF THE GIVEN STORY, since there are always two sudes to every story, what do you think about A JUDGMENT handed down by an editor on a given issue?

    From all implications, you are saying that a judge does not necessarily have to study properly the arguments of the litigants before making his or her decision and hand down his or her verdict. An editorial cannot pass the scrutiny of objectivity if it has not researched that which it is to render its opinion upon!

  12. An anonymous “True Nationalist”, with a fake cover story, considers himself James Bond. Well, my bad, I use a phone (while watching TV) for all comments. Ironically, however, I fail to see the fruits of your keyboard-focus; maybe, Mr. J. Yanqui will fair better.

  13. Sylvester Moses, it is said: “Breve judiciale sequi suum originalle, et accessorium suum principale” …. “A judicial writ follows its original, and an accessory, its principal.”

    So, we understand your feigned failure, Sir.

  14. True Nationalist,

    Please review the Editorial’s statements below in support of its conclusion. Let me also refer you to the May 2019 IMF report on Liberia. IMF stated that the Liberian government’s debts to the Central Bank of Liberia (CBL) has increased to $355M in 2018 from $260M in 2016. However, the IMF did not disclose this GOL’s debt to the Central Bank in its previous report.

    In any case, has the IMF followed International Financial Reporting Standard and/or Generally Accepted Accounting Principles? If yes, why did CBL fail to record and document the L16B missing money saga? Sir, the IMF reviews our financial statements almost every three months since it does not approve any IMF loan without reviewing GOL’s financial statements prepared by CBL.

    The Editorial wrote, “but it is important to understand that the misdiagnosis of our problem, by the IMF, as one of a financial nature is dead wrong. Part of its official statement issued on its bailout to the Liberian government reads as follows:

    “Most of the end-December fiscal targets and structural benchmarks were met but the monetary program went off track by a large margin mainly for two reasons: an acute shortage of Liberian dollar banknotes at a period of high cash demand resulting in higher foreign exchange intervention than programmed; and acute shortages of U.S. dollar liquidity in the banking sector”.

    The statement continues: “The authorities are said to be addressing these weaknesses—aiming to bring the program back on track in time to complete the first review—but are faced with the challenging task of managing the COVID-19 crisis at the same time”.

    But nowhere in the IMF statement is any mention of the alleged disappearance of 16bn Liberian dollar banknotes for which there has been no accountability, never-mind criminal indictments of a few individuals which have turned out to be nothing more that window-dressing charades. Neither has there been any accountability for the US$25m infusion exercise which, according to official investigative reports, was severely marred by corruption occurring right under the direct supervision of the Finance Minister.

    As mentioned earlier, intra-party feuding, policy uncertainty, the mismanagement of public resources and runaway corruption are all factors which an IMF bailout cannot and will not address not even the refusal of the British Government to surrender to this government the US$8m deposited in a UK bank in 1971 during President Tubman’s fateful medical visit to London. Thus, it is not surprising that the IMF, other than the issuance of soundbites, has remained reticent on such issues. Instead they have provided budgetary support to a budget that was never vetted by the public although, it (IMF) may claim that the budget received legislative approval.

    But for heaven’s sake, it is public knowledge that both the Senate and House of Representatives did not debate the budget, neither did they seek public input into the budget. As things appear, the criticism often levied against China that she (China) does not care about accountability and human rights concerns in the granting of loans or aid to undeveloped countries, is what we see the IMF exemplifying here.”

    I think the Editorial did an excellent job by including IMF’s written statements to support its conclusion. Sir, the IMF is searching for profits, therefore, it does not worry about borrower’s financial transparency and accountability.

  15. Mr. J. Yanqui Zaza, please, don’t waste your time with those data that put True Nationalist to sleep.

  16. Mr. Sylvester Gbayahforh Moses,

    Thanks for your comments.

    In any case, I am following your idea to help inform the public.

    Thanks.

  17. Mr. J.Yanqui Zaza,

    Sorry that an excellent and professional writer as you on economic issues is one of those who would entertain the belief that a major UN supranational financial organization as the IMF, would reach conclusions, not to talk about decisions, based on tabloid/yellow journalism in a given country!!! My God! THEY WILL NEVER EVER!!!!!!!!!!!!!!!!!!!!!!!!!!

    In other words, most professionals and learned men would be surprise to know that after internationally acclaimed and highly respected and credible investigating institutions or organization as the Kroll and the FBI together with the U.S. Embassy, have trashed such tabloid and yellow journalism about “16.b, or 25 m, you and this editor are still basing your argument on such non-issue and rubbish. The same with that so called laughable 8 m crap of antiquity.

    Look, J. Yanqui, just how the international community and Washington detected the criminal nature, foolishness, and hidden agenda, of the so called opposition led by defeated Joseph Boakai, Benoni Urey, Alex Cummings, etc., hence snubbed so called CoP; equally so, have the IMF and the World Bank trashed those “paid to write” opposition propagandists disguised as editors and reporters. Its as simple as that!

  18. True Nationalist aka true coward aka Dortu-Sebo and many others

    Here you go again. Because you don’t agree with a piece of writing, the writer was paid or influenced to pen that writing. Just like you condemned the same Daily Observer that you are an avid of, when she said that Stupid Donald Trump sought refuge in the bunker. yellow journalism, paid agents, those were your words.

    Now you at it again. I challenged you to be half the man, the towering intellect you claim to be, to apologize to Mr. Moses, knowing fully well you are incapable of such simple decent act.

    You are a complete fraud. When you look are yourself in the mirror, do you like what you see?

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