“Unpopular Policy”, But Real, Is Good. So, Cut Wages To Create Jobs 

By J. Yanqui Zaza
Economic Editor, The Perspective

Is the Pro Poor Policy for the likes of the Above, Or for the Pro Quid Pro Richmen  Like Nathaniel McGill et al.?

It is never easy for any government to institute pro-poor policy; neither is it usual or popular for an individual to do the right thing. That is why almost everybody overstates his/her value, experience, worth, etc. A homebuyer overestimates his/her monthly earnings to convince a bank that he/she can afford the mortgage payment. A big business includes non-business money (for example, a loan from a related party) to increase its revenue; searching for a loan, a government inflates its assets; it accepts anti-poor policy dictated by money-lending institutions, or it under-reports its unemployment rate.
In Liberia, the former regime, while it downsized slave-wage-employees and at the same pay excessive wages to a few advisers, it also understated Liberia’s unemployment rate at 3.7%. (https://www.statista.com/statistics/808768/unemployment-rate-in-liberia/). In calculating this rate, the regime did not include many employable citizens. For instance, residents of rural towns were not counted because there are a few or no employers within rural towns for residents to seek employment or many residents of urban cities were not counted because they have given up the efforts to search for employment.

To be perceived as a global reformer, former President Sirleaf did not only manipulate the employment rate but overestimated government revenue and underreported expenditure. To cover up the shortfall in revenue, Mr. Amara Konneh, the minister of Finance diverted the European donation of $13 million slated for combating maternity maternity even though his counterpart Dr. Walter Gwenigala  of the health ministry had sent a  letter to the Finance Ministry for this  money  to be  wired  to the bank  account of the Ministry of Health  and Social welfare.

 The International Monetary Fund (IMF) stated in its 2016 Report that the government spent $80M (i.e., on unidentified projects), but did not include the $80M expenditure within the Annual Budget, an example of underreporting. Additionally, in 2016, when the government did not receive money from outside of government to cover up the shortfall in revenue, Mrs. Sirleaf asserted in September that the decline in global prices was responsible for the liquidity crisis. But, the Chart below, shows that global prices for our two major exports (iron ore and rubber) went up in 2017 and 2016 as well as oil’s and rice’s prices (i.e., two of our imported items), according to CBL.

Table 2: Selected Global Commodity Prices (2015-2017) by Central Bank of Liberia

Sadly, CBL, a nonpolitical entity, is also engaged in producing rosy economic reports. For instance, CBL increased its assets on the balance sheet by including Special Drawing Rights (i.e., a privilege of the IMF to borrow money). Also, the 2017 CBL’s annual report indicated that Liberia economic position   “…remained…resilient…banking industry continued to witness improvements in profitability…” Total credit to all sectors of the economy during the year expanded by 31.0 percent…the private sector accounted for about 98.0 percent of the overall credit to the economy, reflecting the expansion of the private sector…”
However, Liberia’s real Gross Domestic Product (i.e., unlike its Nominal Gross Domestic Product) is not impressive as depicted in the Chart below. A slow increase from $896 in 2015 to $904 in 2016 or from $904 in 2016 to $936 in 2017 does not support the Governor’s assertion that Liberia’s economy is resilient. More so, the 31.0 percent expansion of more money is not reflected in the real Gross Domestic Products.  Worse, a significant amount of the loans from the commercial banks was lent to retail and service economic sectors that do not employ a large number of people.
Source: Liberian Authorities & IMF Staff estimates and projections * Projections + Revised/Actual.  

(In Millions of US$)

Furthermore, out of the 2,441 registered businesses in the sample survey, including the retail and service industries, are largely located within four Counties (Monsterrado County, 1,271; Nimba, 170; Bong, 130; Bassa, 81) out of the fifteen Counties, according to http://buildingmarkets.org/sites/default/files/pdm_reports/liberian_businesses_-_the_engines_of_economic_recovery_and_growth.pdf). On the downside, Gbarpolu County, (1) one registered business, Grand Cape Mount, 13; Grand Geddeh, 14; Lofa, 40, etc. These kinds of economic arrangements have been around even before the creation of the Liberia Bank for Development and Investment (LBDI) in 1962.

Why did LBDI not spur manufacturing activities such as food production across the country? This is because past governments succumbed to the World Bank’s anti-poor agricultural policy, according to Mr. Kjell Havnevik and Others (African Agriculture and the World Bank (WB): Development or Impoverishment). Okay, if the government should play a limited role, then profiteers should increase investment in gold, diamond, food production, etc. But they have not. Therefore, the Pro-Poor government should focus less on capital-intensive investment such as the Hotel Africa in the 70s, expensive government buildings in the 90s or the proposed investment in Bali Island or Coastal Highway. Rather, it should cut additional wages and invest the amount in labor-intensive projects. Food production, for example, (a labor-intensive investment), might not only reduce Liberia’s trade deficit but rather increase rural activities, subsequently, discouraging rural-town residents from migrating into our already crowded urban cities. Further, by increasing agricultural activities, other economic sectors, including retail sector, service sector, entertainment, legal, healthcare, accounting, education, etc. will find a business reason to locate within those rural towns. Last, but not the least, with a minimal amount of money allocated for capital-intensive projects, profiteers and government bureaucrats will not find a conducive environment to siphon limited resources.