President Sirleaf And IMF: Rosy Economic Prediction Begets
 More Debt, But No Development

By J. Yanqui Zaza 

The Perspective
Atlanta, Georgia
June 14, 2013

The adage that says "Bad Habits Die Hard" is alive in Liberia. For instance, corruption, for which Liberians fought a civil war to reduce, is not just back, but is rampant. Another bad habit, the practice of government officials to make rosy prediction, is also on the rise. Yes, rosy predictions, that usually gives rise to false hope, is once again encouraging public officials to borrow more money.

So it was not a surprise when experts of the International Monetary Fund (IMF) and President Ellen Johnson Sirleaf uttered the phrase “Strong Growth,” and of course “Without Development,” which re-echoes economic news in the 1970s. In the 70s' Liberian officials did brag about the country's increase in export, even though the government didn't receive any revenue. Neither did companies such as Firestone or LAMCO hire more workers or finance social programs. Yet, officials used the increase in export to accumulate Liberia's onerous debt of $4.7 billion.

Here is a list of some products exported by Liberia (Trade Map-International Trade Statistics) 

Looking at the schedule above, it is true that Liberia’s export increased from $925,584.00 in 2011 to $1,027,844 in 2012. Or specifically, Iron Ore export grew from $10,687.00 in 2011 to $236,750.00 in 2012. But since Liberia does not own or share in the profits of any of the exports, what impact does an increase in iron ore production have on Liberia? Or by what means does Liberia benefit from the increase in exports, be it rubber products latex or iron ore? This is because the arrangement of our economic system limits Liberia's benefits to a few items such as taxes on export and, or tax on taxable income/profits. 

(Source: Government of Liberia Budget)

Again, the tax on export as per the schedule is negligible, about 1.12 percent ($3,185,000/$283,549,000) of the total tax revenue in 2012. However, on the other hand, government received more revenue, about 37% ($104,887,000/$283,549,000), by taxing imported goods and services that poor people bought.

Without doubt, IMF experts and President Sirleaf are aware of the fact the profits made from the sale of latex, iron ore or diamonds, etc. do not go into government coffers. So why did the Liberian President state that the economy of Liberia was strong at a recent interview with Mr. Axel Threlfall, a Thompson Reuters reporter? What yardstick did she use? Was it employment or increase in government in-take? Obviously, no.

Alternatively, neither had any of the investors such as Mittal Steel finance any community program, according a study called "Smell No Taste" completed in 2012 by professors of Columbia University, USA. (www.cir-columbia.org/wp-content/uploads/2012...Smell-No-Taste). The researchers concluded that citizens are beginning to express their anger because investors have not fulfilled their promises.

If after looking at the numbers you don’t understand where IMF experts and President Sirleaf got their facts from, please don’t fault them. Nowadays image making, whether one calls it advertisement or public relation, is everybody’s business. In fact, profit-making corporations spend more money on advertisement than Research and Development, according to Thomas Freidman, NY Times Op-Ed writer. Also, commenting of the 2008 financial crisis, Mr. Benjamin M. Lawsky, NY Superintendent of financial Services stated that companies overstated their profits and stock prices in order for their financial statements to look good.

Trying to uplift Liberia, President Sirleaf gave a good image of Liberia to Mr. Axel Threlfall, a Thompson Reuters reporter, repeating some of the image making statements she had made at the Harvard University Graduation Ceremony when she served as Keynote. In Boston, the President emphasized that while her government faces a herculean tasks, she and her advisers were defeating corruption, etc. Really? Well, not according to Global Witness (www.Ocourtney@globalwitness.org). Commenting on a recent Audit Reports commissioned by EITTI, Global Witness stated that corruption was pervasive in Liberia.

Arguably, Liberia is losing the war on corruption. But the image making statement "Liberia's economy is strong" might be a significant problem as well. Yes, the problem might be more debt for Liberia. But both President Sirleaf and the IMF want Liberia to get more debt. Why? The IMF (i.e., a profit-making entity) has $220 billion cash to loan to poor countries, although at a reduced interest rate. On the other hand, Liberia needs the new debt to make up the shortfalls in government revenue. However, they have agreed that Liberia's eligibility for a new debt will be based on increase in economic growth, even if there is no increase in government in-take or increase in employment.

So, wait a minute, did President Ellen Johnson Sirleaf get her talking points from the International Monetary Fund (IMF)? In the May 12, 2012 IMF Report, the writer stated that the production of iron ore was uplifting Liberia's economy. Later on in March of 2013, a representative of the IMF, Ms. Catherine McAuliffe added her voice to the increase in iron ore production. In a press release dated March 22, 2013, the IMF representative, while commenting on Liberia's eligibility of incurring more debt stated that Liberia's economic growth is on an upward trajectory. Better yet, economic prospects over the median term remain favorable, Ms. Catherine continued. Further, she added that real gross domestic product growth is estimated at about 8.3% in 2012 and 7.5 percent in 2013, driven by strong growth in iron ore production.

The next time President Sirleaf and, or the World Bank/International Monetary Fund states that Liberia’s economy is strong, please look at the increase in government in-take or increase in employment. If the government's assertions do not translate into additional employment, dividends, royalties, interest income, rent income, taxes on corporate profits or an increase in export taxes, remind them not to repeat Liberia’s past mistakes, by relying on increase in Liberia’s export to borrow more money. 

jyanqui@aol.com