Liberia’s economy showing signs of a strong recovery

The Sierra Leone Telegraph: 21 September 2013

President Ellen Johnson Sirleaf of LiberiaLast year, the people of Liberia gave their vote of confidence to President Ellen Johnson Sirleaf to serve another term of office, despite a tense and volatile rapprochement with the opposition, which saw Sirleaf extending an olive branch to former rebel fighter – Prince Johnson, in a coalition government, many saw as a recipe for political and economic disaster.

The International Monetary Fund (IMF) too, gave their vote of confidence in Sirleaf’s ability and capacity to continue the economic and social reforms, that are so vital to sustaining Liberia’s fragile peace.

After meeting officials of the government in March last year, the head of the IMF mission – Christopher Lane, said that; “Progress has been made in implementing the structural reform program; the Central Bank of Liberia roadmap for capital market development is under preparation; and the expansion of the integrated financial management system continued and is planned to extend into line ministries during 2012.”

Lane also said that “Economic prospects over the medium term remain favourable. The expansion of iron ore exports will support high GDP growth in 2013 and in the medium term.”

monrovia2But he warned that; “Downward risks are mostly linked to the increased volatility of international commodity prices, which could raise inflationary pressures and depress private consumption growth.”

Eighteen months on, what has the Sirleaf government achieved?

Ellen Sirleaf and her coalition government, which many thought could become dysfunction, had to go to work and the IMF was clear about the task ahead. The head of IMF mission said back then, that; “The Financial Year 2013 budget is being prepared for the first time with a medium-term expenditure framework.”

Sirleaf’s ‘commitment to enhance financial oversight of state owned enterprises and to re-define their mandates, while strengthening the governance framework in line with best practices’ is key to any progress that can be made by her government in 2013 in achieving fiscal targets.

Has the Sirleaf government lived up to expectations, or has the immense goodwill invested by the IMF and investors been squandered?

monrovia3Judging from the latest report of the IMF released last week, it is clear that president Sirleaf and her government have not only succeeded in sustaining the trajectory of economic reforms they started in 2012, but have laid down a strong foundation upon which the pace of economic growth can rapidly accelerate.

Abject poverty and serious crime remains high in Monrovia, with shanty dwellings now mushrooming along the city’s once thriving sandy beaches.

In a statement released in Monrovia on 14th September, 2013, the head of IMF mission – Corinne Deléchat, said that; ”The fiscal outturn for 2013 was broadly in line with the program. Total revenue including grants exceeded the projections, though core revenues fell short of the program targets.”

“Total spending was above the program, owing in part to higher current spending. Externally financed capital spending was below the government targets, reflecting implementation bottlenecks and delays in approving and distributing last year’s budget. As a result, the overall fiscal deficit for 2013 amounted to 1.6 percent of GDP, some of which was financed by the use of deposits.”

The IMF mission met with President Ellen Johnson Sirleaf, the minister of finance – Amara Konneh, Central Bank Governor – Joseph Mills-Jones, and other high-level government officials.

If there was some disappointment regarding government spending, going forward – there is hope.

“Liberia’s economic outlook remains favourable, with output expected to expand by 8.1 percent in 2013 and around 7 percent in 2014. This strong performance reflects higher-than-anticipated iron ore production and an acceleration in non-mining real GDP growth boosted by robust private and public investment in line with the government’s development strategy, the Agenda for Transformation” -says the IMF.

liberiaBut the government’s monetary policy performance gives cause for some concern.

“Inflation (in Liberian dollar terms) is projected to pick up to 8 percent in 2013 owing to higher domestic and international food prices and recent exchange rate depreciation pressures, and to gradually decline to 6 percent in 2014.”

Overall, president Sirleaf and her government have much to be proud of, though there is a lot more to be done to stabilise the fiscal programme.

This requires tougher discipline and a greater commitment to the implementation of the Agenda for Transformation it has set itself. And as the IMF confirms; “Program implementation has been challenging in some areas.”

“Solid progress was made in the implementation of the structural agenda, though a number of benchmarks were met with delay. In this context, the authorities and IMF staff reached agreement, ad referendum, on a package of policies that would allow the government to strengthen its buffers to address external shocks and to improve public financial management.”

“In particular, the authorities indicated that they were committed to the following:

• Rebuilding reserves and strengthening U.S. dollar and Liberian dollar liquidity management, including through improving the functioning of the foreign exchange auction and continuing to issue Central Bank bills

• Identifying budgetary space to compensate for the expenditure overruns while enhancing budget execution monitoring.”

Looking into the future and going forward, there could be brighter prospects ahead. The IMF said; “While uncertainty in the global economic environment poses downside risks to the growth outlook, this risk is offset by the coming on stream of new mining and agricultural concessions in the next few years, which could lead to higher growth over the medium term.”

Turning Liberia’s economic and social problems around is not going to be easy for the Sirleaf government, but the alternative is too costly to contemplate. Liberia remains fragile.

Hence so much capital – both political and monetary, are being invested on the government so it can succeed.

But with youth unemployment almost as high as in neighbouring Sierra Leone – over 70%, the development of the private sector to lead the economic reformation, has to be the main priority for the Liberian government.