Dubai and Monrovia – March 13, 2019: A would-be investor from Dubai, the United Arab Emirates who is reported by the Government controlled Liberia News Agency (LINA)on Tuesday, March 12, 2019 to have entered into a Memorandum of Understanding investment agreement with Liberia in the areas of “energy, mining, infrastructures and other crucial sectors” is linked to a report of controversial dealings involving then former Ghanaian President John Mahama.
Sheik Ahmed Dalmook Al Maktoum of Ameri Group LLC
In an investigation conducted by the WestAfrican Journal Magazine into the business dealings, it was uncovered that a Norwegian newspaper Verdens Gang( VG) reported in November, 2017 that former Ghanaian President John Mahama, in July, 2017, traveled to the southwestern African nation of Namibia to meet representatives of Sheik Maktoum.
Former Ghana President John Mahama
The paper reported that, “John Mahama brought the two men representing the sheikh to Namibia – seeking to clinch possible energy deals with yet another African nation: Namibia.
This July, Mahama travelled to the Namibian capital, Windhoek, with employees of the “private office” of Sheikh Ahmed Bin Dalmouk al Maktoum of Dubai, United Arab Emirates.
This company now owns the Ameri Group, also known as the Africa Middle East Resources Investment Group LLC.
According to Namibian officials, Mahama claimed he was in Windhoek as an advocate for the African Development Bank.
At a news conference after Mahama’s meeting with Namibian President Hage Geingob, the former Ghanaian leader appeared with two men professionally based in Dubai.
Until now, it has not been officially known who these men were.
But VG can now reveal their identities:
One was Ameri Group CEO Maher Al Alili, who is also CEO of the sheikh’s private office.
Prior Reporting By Verdens Gangs Newspaper
The other was Mustafa Ahmed, who left behind a business card in Namibia embossed with the logo of the sheikh’s office.
…Not until Mahama’s delegation arrived in Namibia were his mysterious companions presented to the Namibian government, according to Aocham:
– The two gentlemen were introduced by Mr John Mahama (as working for) The Private Office of Sheikh Ahmed Bin Dalmook al Maktoum. They were introduced as Mr Mustafa Ahmed and Mr Maher Al Alili. The names of the two gentlemen or the name of the company were not mentioned in the letter from former President Mahama.
– Among his delegation were these two gentlemen, as well as the former ambassador of Ghana to Namibia, Alhaji A. R. Haruna, Aocham adds, then continues:
– Mahama informed President Geingob that he was in Namibia in his capacity as an AfDB (African Development Bank) advocate for African energy self-sufficiency, and brought UAE representatives to Namibia after they identified the country as one of the most attractive destinations for electricity infrastructure investments.
Since July there has been no further contact between the parties.
One of the men, Mustafa Ahmed, denies to VG that he had a role in the Namibia visit.
– I do not work for his highnesses private office,” he says.
– So what happened in Namibia?
– I advise several groups, not just them, he replies.
– Nothing happened in Namibia, so if you want to make a big story, that’s up to you.
– But the sheikh’s logo and your number appear on the same business card. How do you explain that?
– I don’t know what you are talking about. I have nothing to hide. I know him. I have advised him and advise him, but I do not work for him. I do not have an official position with him, insists Ahmed.
A few days later, the company’s CEO, Maher Al Alili, contacted VG and threatened a lawsuit. In 2015 the company had threatened to sue VG for USD 150 million for its reporting on the controversial electrical power deal between Ghana and Ameri Group.
The company said VG had published false claims about Umar Farooq Zahoor, the man who signed the Ameri agreement and is still wanted internationally.
– Who gave you the right to write about Umar? asks Al Alili, the CEO of Ameri Group, by telephone from Dubai.
– If there is anything wrong with the story we have the option of suing you, he says.
– The company does not want to be open with information or grant interviews with the media.
Al Alili nevertheless confirms that he was in Namibia working for the sheikh’s office.
He refuses to comment on Mahama’s ties to the Dubai company.
– You’ll have to ask Mahama about that, says Al Alili.
For seven weeks VG has tried to make direct contact with Ghana’s former president in order to obtain comment.
His special advisor, the lawyer Joyce Bawah-Motare, confirms that Mahama has received VG’s inquiry.
– Of course. Mr Mahama sees any request that arrives. I am telling you he is not available, and that I will get back to you if he becomes available, the special advisor told VG in mid-October.
VG’s many queries have not been well received by the ex-president’s inner circle.
– He has no obligation to give you an interview. You can’t force Mr Mahama to talk to you. Can you force the King of Norway to give you an interview?
The Ameri Group has repeatedly denied that Umar Farooq Zahoor, the man who signed the controversial energy agreement with Ghana in 2015, is a wanted internationally by law enforcement authorities.
That is not the case.
He is still wanted by the police internationally, Norwegian district attorney Carl Graff Hartmann, confirms to VG.
– We have received a response from the United Arab Emirates stating they will not grant our request for the extradition of Umar Farooq Zahoor, he continues.
That means the UAE refuses to turn over the internationally wanted man, who has a Pakistani passport, to Norway.
Zahoor himself has claimed he no longer works for Ameri Group, though VG has disclosed that he still plays a key role in the sheikh’s private office, which owns Ameri Group.
This was also confirmed by a PR officer at the sheikh’s office.
– Yes, he is working there, said Ahmed al Baloushi to VG.
In September, Zahoor travelled to Pakistan with Sheikh Ahmed Bin Dalmouk al Maktoum and CEO Maher Al Alili to further discuss yet another Ameri-related deal with Pakistani company FWO.
Zahoor has declined to comment on his professional affairs in Dubai.
– He sees no reason to comment on his working relationships or assignments to a Norwegian newspaper, and it is beyond my mandate as a Norwegian defence lawyer to express an opinion about this,” his Norwegian lawyer, John Christian Elden, writes in email to VG on Zahoor’s behalf.
Zahoor also points out that the Ameri-deal is still ongoing in Ghana.”
The African Development (ADB) at the time denied that former President Mahama was representing them in Namibia, according to the Norwegian newspaper.
As part of the former Ghanaian President’s engagement with associates of Sheik Maktoum, the Norwegian newspaper Verdens Gang (VG) also reported in August, 2016 that former Ghanaian Power Minister Kwabena Donkor signed a $510 million dollar deal with one Umar Farooq Zahoor, a Pakistani Norwegian individual from Oslo who the paper alleged “was wanted by Norwegian and Swiss police for spectacular acts of fraud committed the last ten years…”
Former Ghana Power Minister Kwabena Donkor
The paper reported that when it showed a photo of Mr. Zahoor to the Ghanian Power Ministry official, he responded, “I know him; he is the Chief executive of Ameri Group”.
In a press statement issued later the Ghanaian news website Citifmonline reported that, “UAE-based Ameri Group LLC, has rejected claims that its former CEO, Umar Farooq Zahoor, is a criminal who is on the wanted list of Interpol for financial crimes in Norway and Switzerland.”
A statement signed by His Royal Highness, quoted Sheikh Ahmed Bin Dalmook Juma Al Maktoum, Chairman of the Emirati Company and a member of the ruling family of UAE, as saying Umar Farooq Zahoor, “is not the same person who signed as witness in the Ghana and Ameri power deal.“
The Norwegian newspaper Verdens Gang alleged further that Umar Farooq Zahoor is a well-known name among investigators at the Financial Crime Section of the Oslo Police District.
Citifmonline website reported that, “The deal brought ten turbines to Ghana to generate electricity in order to mitigate the power challenges in the country.
However, the Newspaper suggested a possible inflation of the cost of the turbines by more than 200 million dollars, adding that Ghana is paying $510 million for ten power turbines when the market value of the turbines is $220 million”
But the statement from the Ameri Group said Mr. Umar Farooq served as CEO of the company until lst August 2015, but was never a shareholder or a partner of the company, adding that “Mr. Farooq resigned as CEO in order to pursue other bigger business opportunities. Mr. Ziad Barakat was appointed as CEO of the company and is working in this position to date.”
“The tabloid article targets Mr. Umar Farooq, only wrongly portraying him as the owner of the company, but also tries to malign his character. Moreover, it states that Mr. Farooq attempted to swindle the Government of Ghana through this transaction by inflating the price of the contract. A ridiculous claim since the contract was agreed upon by the Ministry of Power and thereafter, ratified by the Ghana Parliament with full pricing transparency.”
“Another falsehood is that Mr. Farooq, on his own caused the transaction to occur. It is a matter of record that the sole owner of the above mentioned company is His Royal Highness Sheikh Ahmed Bin Dalmook Juma Al Maktoum, member of the ruling family of Dubai UAE” the statement added.
Research Documents Compiled
The Ameri Group company of Sheik Maktoum was apparently angered by the reporting of the Norwegian newspaper and had threatened legal action.
LINA reports that, “…The agreement covers foreign direct investment in Liberia and further enhances the bilateral relationship between both countries.
During the International Defense Exhibition Conference last month, the Crown Prince of Abu Dhabi, Sheik Mohammed Bin Zayed al Nahyan, said President George M. Weah holds a “special place in the hearts of my compatriots,” while also expressing his country’s interest to explore investment opportunities here…”
President George M. Weah
The Weah Administration is under serious pressure to halt the deteriorating economy and attract foreign investors who can generate much needed hard currency and jobs for Liberians.
However, attempts to attract investors have been dismal and two major loans from non-traditional lenders ETON and EBOMAF have failed to materialize.
West African Journal Magazine has not linked Sheik Maktoum to any illegal activity and can report that the allegations contained in the Norwegian Newspaper Verdens Gangagainst Sheik Maktoum have been denied.
The UAE Billionaire has termed reporting of The Norwegian newspaper as “unfortunate”.
With the heightened focus on dealings of the Liberian government by ordinary citizens, and the controversial business history of Sheik Maktoum, from the reporting of the Norwegian newspaper, any formal business deal with the Liberian Government will be heavily scrutinized for probity.
Liberia’s rapid decline is becoming alarming and unsustainable without the right policy actions to reverse course.
The current state of the global economy is expected to make things muddy for a country whose standing in the world has diminished from the fourth poorest country in the world in 2016 by Business Insider to #1 today, according to a USA Today report, and which GDP per capita per purchasing power parity (PPP) (not always an indicator of economic growth and wealth) has decreased from $934 U.S. dollar to $710 U.S. dollars within the same period.
While the current government bears the brunt of the decline, the country was already on a downward spiral during the last few years of the Ellen Johnson Sirleaf Administration.
I think it is time that we take a capricious but nuanced perspective on the economic outlook of Liberia in 2019 and provide an honest and balanced perspective as to the global economic conundrum and headwinds ahead and propose recommendations for policy makers seeking measurable indicators to drive decision-making and prepare for the future.
These trends are particularly important for Liberia to achieve its Pro-Poor Agenda for Prosperity and Development (PAPD) of the Sustainable Development Goals (SDG), if we expect to improve the living standards of our suffering people.
The outlook for the global economy in 2019 is becoming alarming even in established economies. The recent stock market volatility in the U.S. (at one point, 138% of stock market gains from the Obama Administration was wiped out and barely restored), unprecedented global interest rates hikes by the U.S. Federal Reserve to address monetary concerns, escalating trade tensions between U.S. and China (a tit-for-tat action), Brexit debacle in Europe and the murky state of UK politics, economic softening in China, slide in oil prices, inflationary pressures coupled with other global concerns (labor market tightening) are creating uneasiness worldwide.
Most economic indicators suggest that the global economy looks poised to slow from 3.8% in 2018 to 3.5% or less in 2019 and the risk of a global recession is becoming more likely.
All these geopolitical tensions mentioned earlier, suggest a daunting and challenging time ahead for the country since it lacks the structure, mechanism and fundamentals to react to shocks and would require policymakers to craft out effective monetary and fiscal policies to tackle these economic trends. But instead, most leaders are involved in political and/or social activities to the detriment and future of the country.
In October 2018, President George Weah unveiled the “Pro-poor Policy” agenda as a road map for building a “harmonious society”, developing the country, uniting and reconciling the Liberian people, educating and developing its youths and promoting peace and human rights; all bold and aggressive policy actions that are expected to take place in just under five years (by 2023).
The question is how is this going to happen if the resources aren’t available based on future economic outlook? And as the concept notes from the National Budget suggest, a macroeconomic environment that continues to pose challenges. Is it expected that with the economic challenges, this government will continue to rely on aid and remittances as the main source of foreign exchange regimens?
Look, we are richly endowed with water, mineral resources, forest, and climate favorable to agriculture and principal exports such as iron ore, diamond, gold and rubber and yet we are the poorest country on the face of the earth. Think about it!
Liberia is 43,000 square miles with a little over four million people. What the hell are we doing, people!
As one author suggested, Liberia is not a poor country. The problem it has is that it has been blessed with mostly bad rather than good leadership in its entire 170 years history. It is unimaginable that at the dawn of the 21st Century with all the resources in the world, yet our people lack access to clean drinking water, unable to feed ourselves, continue to be trapped in poverty.
I believe that some countries, because of geography or bad luck are trapped in poverty, but don’t see that in the case of Liberia. It isn’t bad luck; it is bad and terrible leaders who care more for themselves than people.
Alternatively, Liberia Gross Domestic Product (GDP) per PPP, increased from $6 billion U.S. dollars to about $6.12 billion dollars by 2017 according to the CIA World Fact Book; an increase from 0% in 2015 to 2.5% in 2017. Under the Ellen Johnson administration total USAID obligations to Liberia between 2006 to 2017 was $3.242 billion dollars (USAID Foreign Aid Explorer Dashboard). This is excluding obligations from the IMF, World Bank, United Nations, and other NGOs. Similarly, the European Development Fund (EDF) contributed $285 million U.S. dollars for the period 2008 to 2013 and $310 million U.S. dollars for the periods 2014 to 2020 and yet, 84% of our people live on less than a $1.25 per day, 59% of our people are illiterate, 55% have limited access to food and 1.3 to1.4 million of the population live in life-threatening poverty.
So, it doesn’t appear that we haven’t had the resources; it is also because of greed and mixed priorities.
Today, most of the world have progressed through stages of development in the ‘post-industrial society’ when the service sectors generate more wealth than the manufacturing sector of an economy and the codification of knowledge is essential for growing an economy. For close to two centuries we haven’t even evolved to where we engage a robust manufacturing sector, and we call ourselves a country?
I suggest that this government hit the STOP button and reset its vision of ‘Hope for Change’, if it wants to provide for its people and begin to address the many pressing issues such as lack of coherent monetary and fiscal policies, shortages in tax revenues and the problem of liquidity.
The Crystal Ball
According to the EIU, political stability is presumed to continue in the short-run, and this is the one sweet spot. But systematic, widespread and endemic poverty, corruption, high inflation, pain and suffering will continue and remittances which dominate aid will decrease as labor market tighten in the West causing a spillover effect.
The risk of a global recession will also make things worse and impact any poverty reduction effort.
In a previous paper, I argued that any poverty reduction strategy must be buttressed and strengthened with sustained economic growth. The Sustainable Development Goals (SDGs) known as “Transforming Our World: the 2030 Agenda for Sustainable Development” adopted in 2017 by the United Nations is an ambitious inter-governmental set of 17 goals and 169 targets that are people-centered, transformative, universal and integrated and build on the Millennium Development Goals (MDGs).
Its intended purpose is to end poverty and hunger, improve health and education, make cities more sustainable, combat climate change, protect the world and oceans from environmental degradation and foster prosperous, peaceful, just and inclusive societies in which people can live and strive peacefully.
I sincerely think that PAPD should have been built on SDG and MDG since the objectives are relative the same, instead of crafting a new framework. So how can the PAPD become successful?
First, by increasing Foreign Direct Investment (FDI). The caveat is that size and growth potential of markets are a major driver of FDI – a challenge for Liberia. Moreover, favorable business climate depends on strong and robust institutions and investor-friendly regulations. Liberia fails on that too. Case in point, there’s no shortage of stories about business people who have been duped and scammed through unscrupulous and unprincipled people masquerading in the Liberian Government hierarchy.
Second, by leveraging the Better Utilization of Investments Leading to Development (BUILD) Act passed by the US Senate on October 5, 2018 to counter China’s investment on the Continent. The initiative is characterized as bringing US relationship with Africa from underground (resource focused on oil, gas and minerals, etc.) to above ground (infrastructure, agriculture, etc.) per se.
I see this as an opening for Liberia to achieve sustainable, broad-based economic growth if requirements are met. As a forewarning, success in the program requires public accountability, high standards of transparency, environmental and social safeguards which I think this government will have a challenge based on how they do business today.
Third, the African Growth and Opportunity Act (AGOA) enacted by the U.S. Congress to assist economies of sub-Saharan African countries develop a market-based economy and improve economic relations between the U.S. and the region. The act was extended on June 29, 2015 up to 2025. We haven’t moved the needle on that; an opportunity missed.
So, as we enter 2019, I think that thirst-quenching, vitalizing or invigorating the Liberian economy for the 21st Century will take clear policy actions, steps and skills to reduce poverty and increase the standard of living of our people. The world is changing. We cannot rely on what was done by previous administration. We must continue to reinvent ourselves as a people and government.
The history of Liberia is riddled with the same old failed and outdated promises that do nothing to move the needle one iota. Changing Liberia will require honesty, commitment, leadership, toughness and bold steps that include putting in the right mechanisms and structure that will combat corruption and limit waste in government.
At this moment, the government must develop and implement strategy that will result into economic diversification, increase business investment and trade, build robust institutions, maintain (if not build) its current infrastructure and continue to maintain the peace.
For one thing, there is a need to bolster human capacity development by increasing investment in Technical Vocational Education Training (TVET) and Science Engineering and Mathematics (STEM) and the list goes on.
And so, I like to propose the following recommendations for the current administration:
Build positive relationships with Diaspora Liberians, so that those retiring can begin to transfer wealth and knowledge.
Create efficiency and effectiveness in how taxes and fees are collected to help finance development. Simplify taxes for business entities and minimize corruption and ill-gotten gains.
Strengthen the judiciary system as a catalyst to declare war on corruption and persecute individuals or persons engaged in ill-gotten gains and corrupt practices and the net-net is that a well-functioning judicial system underpins economic development.
Prioritize two strategic objectives at a time or simultaneously. Maybe self-sufficiency in food production first and growing the service sector as a means of creating employment next or undertake both at the same time.
Improve tax policies and improve ability to collect revenues in especially hard-to-tax sectors.
Create a positive and welcoming environment where businesses (especially foreign entities) can strive and grow.
Improve ease of doing business so it is easy to create and grow a business.
Mobilize domestic resources to increase market size for goods and services.
Develop dynamic capabilities in either agriculture or the service industry and achieve sustained competitive advantage.
Leverage aid resources to achieve maximum impact and outcome by enforcing transparency and accountability across the board.
Leverage data, quantitative research and machine learning algorithm to drive effective decision-making and help solve practical, real-world problems.
Improve revenue intake by automating custom systems and streamlining logistics processes.
To conclude, I think efforts to address items mentioned earlier must be done effectively and efficiently in order to improve livelihood and impact lives and leveraging limited resources to realize those objectives.
I like to caution that public service is never about amassing wealth and ill-gotten gains. It is about contributing to the greater good and effecting social and/or societal change. Nothing more. Nothing less.
Otherwise, our nation of birth will continue to lag at the bottom of the economic and development pyramid and eventually the laughing stock of the world.
Lastly, we must start to rethink and find novel ways of fighting corruption and poverty.
The status quo has not worked and never will.
HAPPY NEW YEAR!!!
Economics Intelligence Unit (EIU) Global Microscope
3. Public Policy Magazine
4. The African Economic Outlook from the African Development Bank (AFDB)
5. USAID Foreign Aid Explorer Dashboard
About the author
Dr. A. Joel King has a doctorate in Management and a diploma in Public Policy Economics from University of Oxford and Executive Coaching from University of Cambridge, UK.
He is a Wharton Online Scholar and an academic tutor at Coursera and volunteers at the American Academy of Management (AOM) and Strategic Management Society (SMS).
Liberia is one of the poorest countries in the world with 64 percent of its citizens living on less than a $1 per day. Latest available Human Development Index (HDI) rates Liberia at 0.427. Comparatively, Norway which has the world’s highest HDI ranking is rated at 0.949. According to the Atlas method in (current US$), Liberia’s GNI per capita is recorded at $370 annually. (World Development Report, Liberia At A Glance – Economic Growth Data, 2015 -2017).
As the country forges ahead in a post-Ellen Johnson Sirleaf era, the challenges of economic recovery will require adopting both short and long-term reform measures. This dissertation outlines some of these crucial challenges and offers structural reform alternatives that are worth considering.
According to the United Nation Development Program (UNDP), the Sustainable Development Goals (SDGs), referred to, in short, as the “2030 Agenda”, is a universal call to action to end poverty, protect the planet, and ensure that the citizens of the world enjoy peace and prosperity.
Building on the successes of the Millennium Development Goals (MDGs), the 17 goals of the SDGs seek to address the issues of poverty; hunger; health and well-being; quality education; gender equality; clean water and sanitation; affordable and clean energy; decent work and economic growth; industry, innovation, and infrastructure; reduced inequalities; sustainable cities and communities; responsible consumption and production; climate change; life below water; life on land; peace, justice, and strong institutions; and partnerships for the goals. (UNDP – Sustainable Development Goals; 2015). The possibilities of success in tackling these goals are based on the adherence to good governance and building strong economic systems.
Liberia, being a fragile post-conflict nation is facing a plethora of these challenges and would do well in achieving successes in each of these categories.
The Liberian economy like those of many developing countries in Sub-Saharan Africa is dualistic. It is characterized by a formal and an informal economy. Beyond this dichotomy, the Liberian economy is largely controlled by foreigners. Multinational companies and foreign wholesale and retail businesses are the major importers and exporters.
As a consequence, they contribute the largest share of taxes to the government. The informal economy comprises of a mix of rudimentary economic activities and transactions. They include menial labor and other forms of subsistence livelihood including village farming, hunting, and petty trading. These economic activities are neither taxed nor regulated by the government. For the most part, activities in the informal economy are not included in the Gross National Product (GNP) or the Gross Domestic Product (GDP).
According to World Bank data, Liberia recorded a GDP of 2.101 billion (US$ dollars) as of 2016. The real GDP of Liberia contracted by -1.64 percent in 2016 and grew at approximately 2.1 percent in 2017. Reports by the Central Bank of Liberia (CBL 2017 Annual Report), reveal that the projected expansion in real GDP is attributed to significant increase in output in the mining and panning sectors as a result of anticipated rise in industrial gold production and manufacturing. (CBL 2017 Annual Report)
Based on data from the Liberia Labor Force Survey and Trading Economics, Liberia’s national workforce is recorded at 1.6 million and comprises of workers between the ages of 16-65. Of this amount, 195,000 or 12.18 percent represents the wage-earning employment workforce and 87.82 constitutes the vulnerable unemployed.
The formal economy is characterized by a heavy reliance on the extraction of non-renewable natural resources such as iron ore and gold; as well as renewable natural resources such as rubber and oil palm. Such a resource dependent economy or otherwise referred to as an “enclave economy” that depends on the extractive sector produces fewer jobs. The mining sector in particular doesn’t induce much employment growth.
The recessionary trends in the economy came about as a backdrop to the 2014-2015 Ebola epidemic and came closely on the heels of the precipitous decline in global prices for iron ore and rubber; Liberia’s two primary exports.
By the end of June 2016, the Ebola outbreak had further decimated an already fragile economy. The Sirleaf administration had admittedly failed to diversify the country’s productive output through the introduction of labor-intensive industries that would have expanded the domestic production of goods and services.
As a result, we have witnessed an increase in inflationary pressures. The annual average headline inflation in 2017 was 12.4 percent from 8.8 percent at period ended 2016, mainly underpinned by a 24.5 percent depreciation of the Liberian dollar. Reflectively, there was an exchange rate decline of
L$125.50/US$1.00 in December, 2017 compared with L$100.80/US$1.00 in December, 2016. These economic trends have led to an increase in the cost of living. (CBL 2017 Annual Report)
According to Trading Economics, Liberia recorded a current account deficit of 25.10 percent of the country’s GDP in 2016. Then latest reports by the Central Bank of Liberia,reveal that the current account balance deteriorated by 6.5 percent to a deficit of US$346.5 million during 2017, from US$325.4 million deficit reported in 2016. It is stated that the deterioration in Liberia’s current account deficit in 2017 was due to a sharp deterioration in net secondary income owing to a 43.6 percent projected reduction in receipts.
However, the latest current account deficit when compared to the US$852.3 million deficit recorded in 2015, did register an improvement of 59.
The need for a robust economic stimulus program
While the recent election of 2017 brought with it opportunities for a newly elected government to infuse dynamism into the affairs of government, it has also brought to the forefront some of the intractable challenges that the Liberian economy has been faced with in recent years.
As such, I’m of the opinion that the economy will require major reforms in the real and financial services sectors along with an ambitious infrastructural development program. The broad goals of economic diversification, inclusiveness, and sustainability should form the primary goals of structural reforms.
Although the government’s much heralded Pro Poor Agenda has garnered a high degree of anticipation, it has yet to be comprehensively adopted. Such an agenda will need to be well-crafted. In addition, it must provide specific core policy objectives, targeted capacity building programs, and a set of well-defined outcomes.
By all indications, the Liberian economy is not producing adequately to meet current budget demands or to support a 4.02 percent growth in real GDP that has been forecasted for 2018. Many of the earlier forecasts however did not account for a deteriorating terms of trade condition and the accompanied liquidity crisis that we have recently witnessed. According to recent reports, amidst the need for rigid austerity measures, the government released its recast national budget for FY 2017/2018.
According to the release, the recast budget is registered at US$536.2 million, a decline of US$27 million from the original budget that had been signed by the former president Ellen Johnson-Sirleaf of US$563.5 million. (Henry Karmo, FrontPage Africa, “Executive Presents Revised Budget to Legislature with Major Austerity”, March 9, 2017)
Austerity measures and the current recast budget
The government recently announced a set of austerity measures. While an important initial step, US$27 million doesn’t seem to go far enough. Much of this amount is already captured based on the sluggish budget performance witnessed in the last two quarters of 2017. Hence, it appears that at minimum, there is a need for 30 percent of additional cuts in wasteful spending particularly of recurrent expenditures. With a downturn in business activities, it is further expected that the government will experience a major challenge to raise the tax revenues of US$401.4 million which represents 71.2 percent of the recast budget.
If appropriate measures aren’t taken in the short-term to go beyond the existing cuts earmarked in the recast budget to further strengthen fiscal management and curtail waste and abuse, the government may find itself running an intractable budget deficit by the close of FY 2017/2018.
Import Substitution and Export Diversification
Along with drastic austerity measures, the government will need to institute a robust short-term stimulus program. These measures should revolve around monetary and fiscal policy adjustments that are aimed at jump-starting growth within the economy.
In my dialogue with colleagues, I have laid emphasis on the broad goals of instituting import substitution measures alongside a gradual diversification of exports. We’ve already noticed that the options available in an already tight liquidity situation will require adherence to a well targeted set of initiatives that would include the streamlining of trade barriers and expansion in capital formation. In addition, authorities would need to seek external support to recapitalize a select number of banks with the aim of financing growth in agriculture and agro-based industries.
Additional capital will also be required to enhance growth in labor-intensive low-cost manufacturing.
Expanding agriculture and agro-based industries with an emphasis on mechanized rice production
Discussions and actions taken so far around an attempt to reduce the price of imported rice have been gravely inadequate. Observably, with the economy spending on average of approximately $US240 million per year on rice imports, this is one area where import substitution policies could work. The Central Bank of Liberia (CBL) reports that the international price of rice has witnessed a rising trend from the beginning of 2017. At end-2017, the international price of rice was projected to rise by 3.5 percent to US$401.9 per metric ton, from US$388.3 per metric ton recorded at end-2016 and by 5.7 percent when compared with the value per metric ton recorded in 2015.
The estimated rise in the price of the commodity during 2017 was significantly occasioned by scarcity amid increased demand mainly from the Asian region. (CBL 2017 Annual Report)
Agriculture as a major sector of the Liberian economy is worth 38 percent of GDP and employs 70 percent of the population. Unfortunately, much of this production is at subsistence level and provides very little contribution in the way of tax revenues to the government. Liberia has a climate that is favorable to farming with vast forested land and abundance of water. Notwithstanding, the low yield from food production including rice has precipitated the importation of 60 percent of the food that the population consumes. This has led to a significant loss of foreign exchange.
As such, any actions taken to introduce mechanize farming to increase food production and expand agricultural exports will not only markedly reduce the country’s high import bill but also lead to growth in tax revenues through a boost in trade and employment activities.
Liberia’s reliance on foreign imports has placed a burden on our foreign exchange position. Thus, the government should work along with the Central Bank of Liberia (CBL) which is the fiscal agent of government to institute an expenditure-switching macroeconomic policy. The aim of the policy would be to balance the country’s current account by altering the composition of expenditures on foreign and domestic goods.
Consequently, the Ministry of Finance and Development Planning needs to develop some revenue-and-expenditure-switching policies in order to expand the revenue base and reduce expenditures on activities that provide limited socio-economic returns. This will also include controlling corruption and waste of financial resources.
The main challenge to this undertaking is that Liberia’s current financial system is still very underdeveloped despite the expansion of the banking system within the last 12 years. There is still a lot of room for the legitimate application of capital and portfolio investment that could be harnessed to spur home-grown economic development.
To start, the CBL will have to get more involved in open market operations which is supposed to be one of its cardinal roles; the buying and selling of government issued bonds. We are learning that there is movement toward that endeavor but more transparency is required to promote participation and bring about positive results. Such a move would cause adjustments to short term interest rates and impact money supply levels.
Without such capacity, the CBL will have limited influence over adverse pricing conditions or to expand and contract money in circulation. It is also evident that the Liberian financial sector needs to undergo a major policy shift by instituting structural reforms that would enable the central bank to operate as a full-fledged monetary authority. Without such reforms of the financial system, the goal of achieving long-term price stability in Liberia will continue to be elusive.
Liberia’s ongoing development paradigm has led to a huge import bill to meet the needs of heavy-duty capital equipment that was required to jump-start the operations of many large multinationals that started to operate in the country during the Sirleaf administration. Also, the drive to construct new roads, rebuild the energy grid, and meet the demands for housing expansion etc. has placed pressures on demand for hard currency. This is going to be a trend for some time to come if expenditure-switching along with import substitution policies are not embarked upon.
Therefore, the Ministry of Finance and Development Planning along with other government stakeholders need to analyze imports to evaluate where out-flows of US dollars to pay for non-essentials can be curtailed or taxed upward and where through the switching of tax rates, government can generate more revenue of hard currency from certain types of for-profit foreign-emanated services i.e. bank transfers, insurance etc.).
In short, we need to be smarter in managing the demand for foreign consumption and expand access to domestic production.
Monetary policy and banking reform
The primary role of a central bank is to manage a nation’s financial system and promote long-term conducive pricing conditions. There are several instruments that should be at the disposal of a central bank in order to achieve these goals. In Liberia’s case, due to the uniqueness of its monetary system, the central bank has never operated as a “bank of issue “. This happens to be an important role of a full-fledged monetary authority. Owing to the fact that Liberia decided many years ago to adopt the use of the US dollar as a legal tender, the country’s monetary system has depended to a large extent on its political and economic relationship with the United States.
This also meant that the domestic economy has been traditionally subjected to the negative impact of exogenous currency shocks.
During the period before the global oil crises of the mid-1970s when Liberia experienced relative stability and good relations with the United States, the country did benefit from what I would call a pseudo sense of economic and financial stability by its use of the US dollar as a national currency. The very sustenance of the economy was driven by foreigners mainly the United States for which Liberia promoted by adopting an Open-Door Policy during the Tubman Administration. Unfortunately, this policy arrangement kept the economic base unrealistically small and placed a heavy fiscal reliance on foreign multinationals (i.e. Firestone, LAMCO, LMC, Bong Mines, etc.).
The ruling class did not capitalize on our special political and economic relationship with the United States in order to expand and diversify the domestic economy, strengthen the productive base, or harness the adoption of a national currency backed by strong external reserves.
I call this period a very lazy approach toward national economic management. In essence, the structural and managerial deficiencies of the Liberian economy was being covered up by us using the world’s most convertible currency. As such, the US dollar stood as a type of guarantor of Liberia’s monetary and financial system. (William Ponder, “The Macroeconomic Challenges of Adopting a Realistic Exchange Rate Regime for Liberia”; Liberia Studies Journal, XXII, 2 (1997).
Reports however suggest that after the spiraling events of the 1970 oil-crises, the Tolbert Administration had begun to hold talks with authorities at the United States Federal Reserve and with the IMF to gradually institute a national currency regime for Liberia that would’ve been backed by a strong US dollar external reserve position. Unfortunately, that was short-lived as the 1980 coup derailed those possibilities. Everyone knows that the political and economic conditions in Liberia which prevailed between 1943 and 1980 did not last.
Since 1982 when Liberia first found it necessary to introduce the Liberian five-dollar coin as a solution to addressing the devastating deflationary effects of capital flight; the drawbacks from a de-facto application of the US dollar as national currency has become evident. I once stated in a paper that proponents of what I then referred as the “dollar myth concept” view the US dollar as a panacea to all of Liberia’s monetary and trade problems.
I also recommended at the time that Liberia needed to adopt an official national currency within a framework and a timetable that would allow for the strengthening of the domestic currency by building strong external reserves. Unfortunately, that was in 1997, and everyone knows what was politically pertaining in Liberia during that time.
Whereas I wouldn’t blame the current financial sector administrators for the structural limitations of the relatively weak monetary system which they’ve inherited, I would believe that immediate attention should be made toward adopting a comprehensive set of new policies. These policies should be geared toward curtailing the impact of a currency system that is vulnerable to external shocks. We must come to the realization that we can’t and will never again return to the days when Liberia depended solely on the United States and its currency as a guarantor of domestic economic stability.
And even today, to place a heavy reliance on foreign direct investment driven by the new wave of multinationals like China Union and Accelor Mittal as an approach toward alleviating the employment crisis; is just sheer policy laziness in my opinion. This indicates that even today there are some Liberian economic managers who are relying on approaches and policies of the past which had kept the economy small and under-productive and largely driven by external factors.
Lastly, I would like to state that several central banks particularly those going through financial crisis have adopted “inflation-targeting policies” as a pragmatic response to the failure of other types of monetary policy regimes. To be brief, “inflation targeting” is an economic policy in which a central bank estimates and publishes a projected, or “target” inflation rate and then attempts to steer the actual inflation level toward the targeted inflation rate. The Liberian central bank should consider inflation-targeting as a significant policy objective in controlling inflation.
Again, it would go back to my earlier statement of operating as a full-fledged central bank. But I remain convinced that inflation-targeting measures are necessary for the Liberian economy which continues to exhibit a heavy demand for imported goods and services.
Mobilizing domestic savings through the introduction of mobile banking has taken-off on the continent of Africa. In the last decade, mobile money services have expanded in several African countries with particular diversification of activities in Kenya and Tanzania. The mobile money has proven to be an accessible tool for payments. Moreover, other financial services, such as credit, insurance and savings have been rolled out in a number of markets, allowing people to better manage financial risks and household shocks. Credit services enabled by mobile money, in particular, have proliferated in the region: from six services in Kenya in 2011 to 39 services in 11 other countries in 2016.
The inclusion of mobile money has led to expansion and growth of formal economies and has introduced new ways of tracking transactions and markets to promote the growth of banking and insurance. Utility companies have also been able to introduce mobile money in their attempts to institute digital billing and payment arrangements with clients in remotest regions of these countries.
I would thus recommend that Liberia expands its drive to institutionalize mobile money platforms in the country. The critical tasks of safeguarding the telecommunications infrastructure and setting up the regulatory and legal framework to protect consumers and users, would be the major challenge. Moreover, the government should seek external training for those involved in this emerging industry.
External Debt Sustainability and Re-basing of GDP
The World Bank and IMF establishes that a country can be said to achieve external debt sustainability if it can meet its current and future external debt service obligations in full, without recourse to debt rescheduling or the accumulation of arrears and without compromising growth.
A Debt Sustainability Analysis (DSA) conducted by the IMF in November 2017 revealed that Liberia’s external debt stocks have been increasing rapidly due to a scale-up of infrastructure spending and to deal with multiple adverse shocks. The report however concluded that the country’s risk of debt distress is moderate. Concomitantly, since September 2016 to June 2017, the total debt stock has increased from US$597 million to US$736 million comprising mostly of multilateral loans.
Meanwhile, the 2017 GDP projections deteriorated as a result of a lower-than-expected impact from the draw down of UNMIL and the continuing effects of a sluggish performance of exports. (Liberia: Debt Sustainability Analysis: IMF Country Report 17/348, November 1, 2017).
Given these underlying economic trends, there can be only limited reasons for which the government would try to justify exponentially acquiring new loans at higher than concessional terms at this time.
During the 2018 Spring Meetings of the IMF and the World Bank Group, I heard the Minister of Finance and Development Planning, Mr. Samuel D. Tweah Jr through a podcast, reveal that the government is anticipating the re-basing of GDP. Re-basing of GDP occurs when a country that has long neglected to undertake the statistical work required to maintain accurate GDP figures finally awakens to the task and comes out with numbers that are completely out of line with its previous estimates.
It can lead to marked distortion of historical data and trend analysis. This has remained largely an African problem. In 2014 alone, Kenya, Nigeria, Tanzania, Uganda, and Zambia all completed rebasing exercises. (Amadou Sy, “Are African Countries Rebasing GDP in 2014 Finding Evidence of Structural Transformation?”: Brookings Institute; March 3, 2015)
Minister Tweah alluded to the goal that Liberia will seek to rebase GDP so it will provide additional fiscal space to accommodate new debt and other financial obligations in order to grow the economy. GDP rebasing also provides a clearer look at the economy, and in particular it should capture from which sectors most of the growth in the economy is coming from. While rebasing might be necessary, it doesn’t tell the full story.
Liberia will require more than GDP rebasing to stimulate the economy. While it is important to have up to date statistics, rebasing GDP will not of its own lead to economic prosperity or change the reality concerning the high levels of poverty. The revised GDP statistics may have changed but the reality of poverty and income inequality remains the same. Therefore, if the economy doesn’t grow in real terms, the upward adjustment in GDP will not lead to better economic outcomes.
The need for targeted reforms to achieve growth cannot be overemphasized. Once the implementation of policies is geared toward expanding and redistributing income such that the lowest percentile of income earners is lifted out of poverty, the aim of a pro poor agenda would become achievable. Furthermore, if growth can be accompanied by the bridging of the gap between the formal and informal economies and adding of more wage-earning jobs, Liberia’s path to promoting sustainable economic recovery would be guaranteed.
However, these goals cannot be achieved by mere happenstance. It will require the political will and fiscal discipline to substantially reduce waste and corruption. Concomitantly, the government will need to target a robust set of short-to-medium-term policies several of which I’ve enumerated on in this paper.
Amadou Sy, “Are African Countries Rebasing GDP in 2014 Finding Evidence of Structural Transformation?”: Brookings Institute; March 3, 2015
Central Bank of Liberia, (CBL) Annual Report, 2017, CBL (Highlights and Statistical References), January 23, 2018
Karmo, H. FrontPage Africa, “Executive Presents Revised Budget to Legislature with Major Austerity”, March 9, 2017
Liberia: Debt Sustainability Analysis: IMF Country Report 17/348, November 1, 2017
Ponder W. “Macroeconomic Stabilization and the Budgetary Implication for Liberia in Post 2017”. Published in the Global News Network (GNN) online magazine – August 27, 2017
Ponder W. “The Macroeconomic Challenges of Adopting a Realistic Exchange Rate Regime for Liberia”; Lead Article – Liberia Studies Journal, XXII, 2 (1997) – Published by the Liberia Studies Association
Ponder W. “My Response to Developing an Inclusive Financial Sector: By – William F. Ponder, Liberia’s Case Study”, Presenter – African Studies Program, 2001 , Association Lecture, Series, Boston University African Studies Lecture Series
Report on the Liberia Labor Force Survey 2010, Liberia Institute of Statistics and Geo‐Information Services (LISGIS)
World Development Report, Liberia At A Glance – Economic Growth Data, 2015 -2017, the World Bank Group
About the author:
Mr. William Ponder is a graduate of the University of Liberia where he earned a BSc in Economics and from Boston University where he earned an MBA in Public Management.
Mr. Ponder has over 30 years of work experience as a public policy specialist and banker. He once served as an economic researcher with the National Bank of Liberia (NBL), the precursor to what is today, the Central Bank of Liberia (CBL). More recently he worked for several years in private banking and investor services with the Brown Brothers Harriman and Company, the oldest private banking firm in the United States headquartered in Boston, Massachusetts, USA.
The author is an avid researcher and has published several articles major among which includes, “The Macroeconomic Challenges of Adopting a Realistic Exchange Rate Regime for Liberia” a 38-page leading article published in the Liberia Studies Journal, XXII 2, 1997.
Mr. Ponder’s research interests are centered around structural reform and economic diversification, achieving debt sustainability, and adopting an inclusive environment for the growth of small and medium-sized businesses.
Monrovia — Apparent failure by the five-month-old government in Liberia to keenly observe existing transparency, integrity and legal obligations risks creating hurdles in the path of its pronounced eagerness to fast track its pro poor development agenda in the country.
A code of conduct to ensure transparency extracted from the
constitution requires all officials in the three branches of government to declare their assets upon taking up assignments as well as quitting office.
When former president Ellen Johnson Sirleaf tried to enforce this integrity and transparently law enshrined in the constitution, legislators and judicial officials went up in arms saying they would rather declare assets to bodies established in their institutions.
Legislators even exempted themselves from a cardinal clause which required government officials first to resign before contesting for elected positions.
They resisted that clause, whose wisdom was to stem misuse of government resources for political aggrandizement, to appointed officials.
Sirleaf and most of her officials then declared their assets to the LACC (Liberia Anti Corruption Commission).
Flag of Liberia
But five months on in government, President George M. Weah and his officials are yet to declare their assets while he implements quick impact community projects like the Doe community road without expressed budgetary allocation.
After breaking grounds for his flagship 14 military hospital, the President cut sod for a multimillion dollar Mahatma Gandhi complex center on Bali Island saying Delhi offered to build it. The project will require a flyover to connect Crown Hill with Bushrod Island, but total cost and timeline of these projects remain undisclosed.
Ratification for a USD 530 million loan agreement with a private company in Malaysia is pending at the Legislature. The money is earmarked for construction of road networks in southeastern counties.
But critics question the company’s creditworthiness saying its repayment term will impose hefty financial burden on Liberia.
“I know one day Liberians will get tired of me, so I want to leave a big mark before that time,” Weah often tell youthful partisans of his coalition for Democratic change.
Because he wants to say and see it done quickly, Weah believes feasibility studies and competitive bidding at the PPCC impede the fast tracking of his pro poor agenda for a population having very high expectations from their populist President.
Strict adherence to these integrity regulations cannot be overemphasized because they determine a benchmark for international best practice.
After President William Tolbert accused Liberians of having no time for time, he created the Action for Development Ministry under his direct supervision to do quick impact projects.