It is said that “Elections have consequences!” This assertion has become a cliche among political pundits the world over, but nowhere are the consequences more dire and the impact more profound than in Sub-Saharan Africa and especially in Liberia. The country is celebrating 177 years of existence, but its people continue to languish in the throes of poverty due to the failures of successive governments to chart an effective course towards economic prosperity.
Liberians recently exercised their rights, via a democratic process, and implanted a new government under the aegis of His Excellency Joseph Nyuma Boakai. Prominent Liberian politicians and technocrats alike jostled for inclusion in the formation of the new governance structure that, purportedly, is intended to bring enhanced socio-economic change to the lives of ordinary Liberians. However, within six months of being put in place, there are rumblings of various degrees of magnitude within the government, but none greater than the, seemingly, premature resignation of the minister of finance.
The resignation of Hon. Boima Karmara as Minister of Finance sent shockwaves through the length and breadth of Liberia’s political establishment, to the extent that Liberians in and out of the government were caught off guard, this being the first time such a prominent official had resigned so early in the process after an election. His early departure is of greater impact when the role of the minister of finance, assumed to be the architect of the economy, is considered.
Architect of the Economy
In any given economy, the minister of finance may be acknowledged as the architect and designer of policies and programs that provide the fiscal foundations and latitudes upon which every other area of the economy thrives. Therefore, by extension, he/she is responsible for the success or failure of the economy. This responsibility of the minister of finance, as the architect of the economy, appear to have been lost on successive Liberian ministers since each one looks to the International Monetary Fund for guidance and direction on how to manage the Liberian economy.
Since its existence, (177 years), Liberia has remained poor, having the dubious distinction of being one of the poorest countries in the world. As a result of this onerous distinction and the accompanying realities, the people have experienced generations of poverty devoid of real-life opportunities for personal growth, development, and advancement. This condition of poverty is a direct result of lack of visionary leadership, both political and fiscal, especially the failure to have a minister of finance with a clear understanding of the underlying task, and with the ability and capacity to implement a development strategy geared towards reduction of extreme poverty in a country of only 5.5 million people.
Development of a country is no longer perceived as rocket science, if ever it was. There is abundant evidence that, with proper leadership, particularly financial, as well as political will, any nation can move its people from poverty to prosperity. This is true more so when it involves nations with enormous natural resources such as Liberia’s. From Africa to Asia, countries like Ghana, Cote d’Ivoire, Kenya, Ethiopia as well as many others in Africa; Malaysia, Singapore, Indonesia, South Korea and so many others in Asia, have proven that it is very possible to change the trajectory of a nation and its people and to give hope to the hopeless.
However, to overcome the scourge of abject poverty requires investment in development of both human and infrastructure resources. Both require the infusion of massive amounts of capital that may be obtained through a combination of debt and foreign direct investments. A case in point is Singapore. According to Wikipedia, Singapore, considered one of the richest countries in the world, is like Liberia in terms of population, having a population of approximately 5.6 million. That is where the similarity ends! An island nation with a land area of only 283.9 square miles, Singapore is about 151 times smaller than Liberia. By comparison, Nimba County is 4,136 square miles, making it about 14 times larger than Singapore. With a GDP estimated at $794 billion USD and listed as the 38th richest country in the world, according to World Bank 2024 reports, Singapore has a national debt of more than $800 billion and a debt-to-GDP ratio of 131%, according to IMF 2020 reports.
Singapore achieved the herculean task of becoming the 38th richest country in the world through the utilization of a combination of debt and foreign direct investments. By comparison, Ghana has a national debt of about $52 billion USD, according to IMF 2023 reports, having an 86% debt-to-GDP ratio. Ghana has built most of its critical infrastructure through mobilization of debt. Liberia, by contrast, has national debt of about $2 billion USD with a debt-to-GDP ratio of about 56%. Based on the IMF reports of the world’s most indebted countries, there is a direct correlation between debt and wealth. The wealthiest countries are also the world’s most indebted. For example, according to the IMF, Japan, with a national debt of $9.2 trillion USD, has the highest debt-to-GDP ratio of 263% but is ranked the third richest country per capita.
No wonder the country is poor! Liberia needs, at the very least, about $5 billion USD investment in infrastructure to begin to change the economic direction of the country.
The minister of finance must be knowledgeable about the above facts, as well as how they relate to international financial opportunities and trends that could potentially benefit Liberia to boost infrastructure development. It must be carefully noted that it is nearly impossible to develop any country in the absence of an effective road network and reliable electricity. These two, roads and electricity, present insurmountable challenges to potential investors to the extent of turning them away from opportunities that would yield mutual benefits for both the investor and the country.
Harnessing every possible financial opportunity and introducing a change in basic assumptions requires that the minister of finance thinks outside of the proverbial “box.” For example, it is inexcusable that Liberia has never taken a commercial loan and has the IMF and World Bank as its biggest creditors. This approach to development is counterintuitive because those institutions are only intended to provide emergency funding to member states with acute financial challenges. Liberia does not have acute financial challenges because of relatively low national debt.
Liberia and the International Monetary Fund
Liberia has been a member of the International Monetary Fund since March 28, 1962, and has had no less than 24 Structural Adjustments or some other IMF-recommended program during this period. If the IMF were a panacea for Liberia’s economic malaise than by now the country should be among the developed countries of the world. However, that is not the case. Despite the long-standing relationship between the two, the IMF constrains Liberia’s ability to grow its economy through infrastructure development. For example, in return for a measly $253 million USD over four years, ($63 million per year), Liberia was forced to enter into an agreement with the IMF in December 2019. It can be noted that not one dime of the $253 million USD ever came into the local economy. The money was ostensibly used for balance of payments, meaning the IMF loaned Liberia $253 million USD to repay or settle outstanding arrears with the IMF and World Bank.
No sooner was the agreement in place than the IMF immediately began to flex its muscles over the financial affairs of the country. A case in point is the construction of the Robertsfield highway. This critical infrastructure project required the government to obtain commercial loans for its completion. But due to the existing four-year structural adjustment program with the IMF that placed severe restrictions on the country’s ability to borrow from external sources, the IMF refused to approve the commercial loan facility. The Robertsfield highway corridor is a major artery leading not only to the international airport but also to the Southeastern region of Liberia. Refusal by the IMF to approve the loan for this project was unconscionable to say the least.
Liberia does not print international currencies therefore needs external resources for investment in infrastructure. Funding for infrastructure can be obtained by using a combination of mortgaging natural resources to attract foreign direct investment as well as mobilization of long-term commercial debt. The perception that the IMF and World Bank are the solutions rather than the problem has been proven to be a fallacy. For example, with over 12,000 miles (about 19,312.13 km) of roads to be built, following the same worn- out IMF-World Bank path will take Liberia over a thousand years to build its infrastructure.
However, because successive finance ministers perceive the IMF and World Bank to be the solution to Liberia’s economic problems, surrendering our sovereignty to them and relying on them for direction, due to ignorance about international financial markets, the country’s infrastructure development continues to be restrained, hence the cycle of abject poverty is repeated unabatedly.
Were Liberia to have a minister of finance with the knowledge of the workings of the capital markets, as well as an understanding that there are other sources of capital available to hasten infrastructure development besides the IMF and World Bank, Liberia could potentially wrestle itself from the degradation of being one of the poorest nations on earth and lift its people out of abject poverty in a relatively short period of time.
As President Joseph Nyuma Boakai contemplates the appointment of a replacement for the erstwhile Minister of Finance, the onus is on him to seek someone outside the traditional brew of IMF and World Bank proteges, whose only claim to fame is that they “successfully” negotiated an arrangement with the IMF or World Bank. In fact, such a pedigree should be a disqualifying factor because Liberia can ill afford having a do-nothing minister of finance who sits back and lets the IMF dictate the direction of the country. At the end of the day the administration will be judged on the performance of the economy and the positive changes it brings to the lives of ordinary Liberians.
It is said that “Insanity is doing the same thing over and over and expecting different results.” If the IMF has proven anything, after 62 years of dictating the economic activities of Liberia, it is that, either they have absolutely no clue on how to effect positive economic change, or they know how but enjoy having Liberia in a subservient relationship, handing out peanuts every now and then.
By: Richard Wesley Harmon
