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.

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