Economy

Liberia is an underdeveloped country with a majority of its population living in dire poverty. It experienced a 14-year civil war from 1989 to 2003 that caused complete economic decline. After the war ended, there was some economic growth during the Sirleaf administration, but the nation continues to lag behind most of its West African counterparts. Additionally, factors like the Ebola epidemic, withdrawal of the United Nations peacekeepers and other relief agencies over the past few years, and decrease in the prices of Liberia’s exports have hindered economic progress.

In addition to the war and economic shock factors, this ongoing underdeveloped status is also attributed to the greed and corruption that has always plagued Liberia’s progress, its reliance on exports of raw materials, import of many basic consumer products, dollarization and the use of dual currency, lack of widespread development, and the nation’s high debt rate. Liberia is rich in many natural resources, forests, vast water sources and land suitable for agriculture, but remains one of the world’s lowest income countries.

Gross Domestic Product (GDP) Growth and Inflation

Corruption and Government Mismanagement

Corruption and public mismanagement has permeated Liberia’s government and leadership for many decades with allegations of patronage, nepotism, cronyism and a very weak judicial system. This largely accounts for the nation’s current status as one of the world’s poorest countries, lacking basic services and amenities. When Ellen Johnson Sirleaf became president in 2006, she declared corruption as public enemy number one. After twelve years of her presidency, when George Weah was elected in 2017, he pledged to tackle entrenched corruption in the government. These were merely political assertions as Sirleaf’s presidency was marred with corruption, and Weah has had his share of similar allegations.

During Sirleaf’s first term from 2006 to 2012, over twenty government ministers were accused of corruption by the nation’s anti-corruption group, the General Auditing Commission (GAC). However, none of them was prosecuted, and Johnson Sirleaf claimed it was due to an ineffective judicial system in the country.

Her second term had similar problems with another anti-corruption group called Global Witness, reporting that twenty of the largest logging contracts in Liberia were illegally awarded. More corruption allegations followed; among them, members of her family holding high ranking government positions, and missing money that the international community had given Liberia for the Ebola crisis.

In Weah’s case, he has focused on personal projects as compared to national development. During the first year of his presidency, he built a private housing compound that includes multiple homes, a church, and a theater, in the Baptist Seminary community on RIA highway. Nothing comparable has been done for the public.

There have been reported instances of of missing currency notes that the Central Bank of Liberia had ordered. This includes millions of US dollars and billions of Liberian dollars that came into the airport and FreePort of Monrovia between 2017 and 2018. Liberians have taken to the streets multiple times to protest and demand answers about the missing funds.

Another problem creating hardship for Liberians is that civil servants are unpaid for multiple months, but still expected to continue working. This has also lead to public school students protesting as their teachers have gone on strike.

Overall, the Liberian economy has been in further decline since Weah took office. In June 2019, the International Monetary Fund sent a mission to Liberia to review the economic situation and help the nation setting goals to improve its economy. Some of the mission’s recommendations included having a pragmatic national budget, reducing the government’s compensation bill and funding government projects. Other measures include implementing policies on management government funds, promoting a business friendly atmosphere and fighting corruption.

Imports and Exports

A majority of the resources that Liberia exports include timber, rubber, gold, diamond and iron ore, diamond, cocoa and coffee. Most of these are exported as raw materials. Many common products that Liberians use are imported. A majority of rice, beverages, tobacco, petroleum products, medications, transportation equipment, clothing and numerous food items are all imported into Liberia.

Dollarization and Dual Currency

Liberia has a dual currency system where both the Liberian Dollar and US Dollar are used as legal tender. The value of the Liberian Dollar continues to depreciate and in July 2019, one US Dollar was equivalent to approximately 200 Liberian Dollars. At such low rate, Liberia does not have coins in circulation as they have no value.

The use of the US dollar continues to increase as the Liberian Dollar declines in value. There is a preference for the US Dollar in all transactions as the exchange rate is unstable. Other issues with the dual currency system is the government’s inability to know or control the quantity of US dollars in circulation. This prevents the government from adequately planning and effectively implementing monetary policies when there is dual currency.

National Debt

Due to Liberia’s constant need for assistance, it has accrued a significant amount of debt over the years. At the end of 2004, the Liberian government owed a total of 4.1 billion US dollars. This amount represented 841% of the country’s GDP. Of this amount, 93% was owed to external creditors and 7% owed domestically.

By mid-2010, Liberia’s debt had climbed to 4.6 billion US dollars. In June of of year, the International Monetary Fund (IMF) and the World Bank, under the Heavily Indebted Poor Country (HIPC) Initiative, made the final decision to relieve Liberia of all her debt, crediting measures of the Sirleaf administration.

However, Liberia has since accumulated a debt stock from domestic and external lenders. At the end of 2017, the Central Bank of Liberia reported that the nation’s total debt was $US 874 million. This included US$608.3 million external debt and US$266.1 million domestic debt. Per the World Bank, Liberia’s external debt had increased to $US 1.256 billion in 2018.

National Budget

Liberia’s approved budget for fiscal year 2018 – 2019 was about 570.1 million US dollars. This amount was a 6% increase from the previous year’s budget. Domestic revenue accounted for 89% of the budget and external revenue constituted 11% of the country’s budget.

Ten percent of the budget was allocated towards public sector investment while 90% was for recurrent expenditure. Major sectors of the recurrent budget included Goods and Services, Grants, Subsidy, Social Benefits, Non-Financial Asset, and Employee Compensation which alone represented 62%.

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Sources

About Liberia. United Nations Development Programme (UNDP) Web.

Central Bank of Liberia. Web.

External debt stocks, total (DOD, current US$) – Liberia. The World Bank, International Debt Statistics. 2018.

Harmon, William Q. Liberia’s Debt Cruises Past US$2 Billion. Liberian Observer. 11 Jun. 2018.

IMF Staff Completes 2018 Article IV Mission to Liberia. International Monetary Fund. 20 Mar 2018.

IMF Staff Concludes Visit to Liberia. IMF Communications Department. 26 Jun. 2019.

Liberia Economic Outlook. African Development Bank Group. 2019

Liberia Macro Poverty Outlook. The World Bank. 2019.

Liberia Overview. The World Bank. 16 Oct. 2019.

Liberia: Overview of corruption and anti-corruption. Transparency International. 7 Sep. 2019.

Liberia: Report on Post-Conflict Economic Situation and Prospects for January – June 2004- Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Liberia. IMF Country Report. International Monetary Fund. Mar. 2004.

Liberia. Staff Report for the 2018 Article IV Consultation – Debt Sustainability Analysis. International Monetary Fund. 24 May 2018.

Liberians Take to Streets to Demand Return of Lost Millions. VOA News. 24 Sep. 2018.

McAllister, Edward. President-elect Weah says Liberia ‘open for business’, vows to fight corruption. Reuters. 20 Dec. 2017.

Monetary Policy Framework of the Central Bank of Liberia as Approved by the Board of Governors of the Bank (Resolution No. BR/R-02/2005) during its 2nd Regular Meeting held on June 22, 2005. Central Bank of Liberia. 22 Jun. 2005.

National Budget, Fiscal Year 2018/19, Ministry of Finance and Development Planning, Republic of Liberia. 14 Jul. 2018.

Sieh, Rodney. Ebola Corruption Contrast: Guinea Sentences Pair For Embezzlement, Liberia Defends Irregularities. Front Page Africa. 07 Jul. 2016.

The World Factbook: Liberia. Central Intelligence Agency. Web.

Thousands protest in Liberia against corruption, economic decline. Reuters. 7 Jun. 2019.

Weeks, Milton A. Dollarization and Dual Currency Issues and Recommendations. Central Bank of Liberia. 11 Aug. 2016.

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