Liberia’s Economic Problems: Longstanding and Widespread Poverty, Unbearably High Foreign exchange rate
A Report published by the Liberian Economy Group (LEG)
The Perspective
Atlanta, Georgia
November 3, 2019
Dr. Togba-Nah Tipoteh Editor’s Note:
As the challenges of the Liberian economy and the sufferings of the Liberian people intensify, The Perspective welcomes the following paper, put together by Dr. Togba-Nah Tipoteh and his group, with the hope that it would encourage increased interests in the discussions and writings on the issues confronting the Liberian economy. Obviously, one paper or a position from one group of economists may not represent a consensus of the views of the majority of the Liberian economists and policy researchers on the causes and solutions to Liberia’s current economic and social problems. Notwithstanding, the paper raises alarm and draws attention to some of Liberia’s major problems: culture, infrastructure, and poverty. It certainly does not provide a silver bullet to address all of Liberia’s current economic problems. Nevertheless, we at The Perspective encourage all Liberian economists, researchers, policy enthusiasts, ordinary Liberians, etc. to give more attention to Liberia’s challenges by contributing to the discussions and writings on the economy to move the country forward. Please read the statement from LEG and join the debate.
1.0 Introduction
With the experience of the 1989-2003 Civil War in Liberia, with its dismal consequences of nearly 300,000 deaths and more persons injured, covering ten percent of the population of Liberia, the people of Liberia spoke loudly and clearly to the effect that they prefer peace to war. This preference of peace over war emanates from the reality of perennial and pervasive poverty in Liberia.
1.0 In the evolution of the Liberian society, Former President of Liberia Ellen Johnson Sir leaf correctly designated this prevailing situation as being dominated by corruption that has now attained the vampire status (State of the Nation Address, 2015). In such a situation, several State pronouncements have announced that mass poverty will be eliminated, but the situation worsens, as seen in the deterioration of the Liberian dollar (LD) from LD130 to one United States dollar (USD) in December 2018 to LD215 to USD1 in September 2019, with the attendant dismal impact on mass living conditions through the cost of living, especially with respect to food. This prevailing situation breeds frustration that becomes violence-oriented, leading to the preference of war over peace, as witnessed in Liberia's Civil War.
1.2 It is against the foregoing background that some independent Liberian professionals have come together to form themselves into the Liberian Economy Group (LEG). These Liberians, seven in number, are scientists with extensive working knowledge about problem identification and problem solution with respect to the Liberian economy and are prepared to use such knowledge to promote peaceful actions that lead to the elimination of mass poverty in Liberia.
2.0 Identification of the Problem
The main societal problem in Liberia is longstanding and widespread poverty, with two-thirds of the children who should be in school not in school, the world's worst record according to UNICEF, world authority on children (UNICEF Annual Report, 2017). Additionally, Liberia is the second poorest country in Africa and the fourth poorest country in the world (ADB/WB/IMF Annual Reports). The unbearably high and rising foreign exchange rate between the Liberian dollar and the United States dollar became the pretext for the massive outdoor protest of June 7, 2019.
3.0 Identification of the Solution to the Problem
The recent Ebola epidemic experience in Liberia provides highly useful knowledge about how to solve societal problems. Upon becoming aware of the Ebola problem, through the spread of knowledge by credible persons, communities throughout Liberia took ownership of the anti-Ebola process and what happened ended the Ebola epidemic in Liberia. Prior to the identification of the solution to the problem, it is most important to know the source(s) of the problem. This is why the publication of the late Veteran Journalist Stanton Peabody in the Daily Observer Newspaper is most instructive here. Journalist Peabody said that the main problem of Liberia is the Over–Americanization of Liberia. Peabody was correct because it is the making of national decisions on the basis of American cultural values rather than Liberian cultural values that lead to the worsening of the living conditions of Liberians. The living conditions of Liberians become bad and worse when Liberians prefer what is American over what is Liberian. The living conditions of Liberians become bad and worse through the production of Liberian raw materials mainly for export where value is added abroad in America and Europe rather than in Liberia. It is impossible to solve Liberia’s problems with the understanding of America’s problems rather than Liberia’s problem. Therefore, the most important problem-solving action to be taken is the raising of consciousness by all sectors of Liberia: Families, Communities, Schools, Civil Society, including Religious Houses and Political Parties, Government and Private Businesses.
3.1 What does this raising of awareness consist of? In the first place, the people should be informed about the nature of mass poverty by credible persons, meaning honest persons with the relevant record of performance. Then the people should be informed about the action steps that they can take to solve the problem of mass poverty. This awareness-raising function is at once the right and duty of all Liberian citizens under the Constitution of Liberia.
3.2 How can this raising of awareness be done? This awareness-raising can be done through the meetings/gatherings of Families, Communities, Civil Society Organizations, the Government and Private Businesses. Private and public media, meaning the radio stations and newspapers as well as social media should be used to reach the people everywhere because the people can only take action to solve problems when they know about the problems and the sources of the problems; the people should be made aware that the only way to solve any societal problem is through the Rule of Law, as found in the Constitution of Liberia; for communicating with the people, it is most useful to use Liberian languages, Liberian English and, of course, standard English.
4.0 The Problem Solving Action Steps
In the pursuance of their rights and duties under the Constitution of Liberia, the people of Liberia can take action in their interest; where the people want change they can bring about change through the Rule of Law. Therefore, it is precisely through the Rule of Law that the following changes should be made to change Liberia for the betterment of all Liberians;
4.1 Change the Electoral System to make sure that it operated according to the Constitution of Liberia in order for FAIR ELECTIONS to be held to get persons with good records of taking actions in the people's interest to become elected; it is only through FAIR ELECTIONS that good leaders can be elected to engage in good governance, which ends systemic corruption and eliminates mass poverty, thereby promoting the sustainable improvement in the living conditions of the masses of the people;
4.2. Use the Value Addition Approach. value addition must be used first to increase the value of human resources, through education, so that they can learn and become committed to make choices that help to make Liberia better for all Liberians; such education must necessarily be based on the use of Liberian culture as the basis for educational development in Liberia; the persistence of the longstanding domination by western culture, especially American culture, in Liberia's educational system makes it impossible for Liberians to understand Liberia's problems and take action steps to solve these problems; it is essentially this domination by western culture that explains principally the longstanding and widespread poverty in Liberia; it is impossible to solve Liberia's problems by learning mainly about western problems; value must be added to Liberia's natural resources, as in the production of raw materials mainly for local consumption rather than for foreign consumption; Liberia must STOP adding value in foreign economies, as seen in Liberian raw materials being exported to foreign countries where value is added through manufacturing, instead, Liberia must add value to our raw materials through manufacturing to provide for local consumption and have the rest to be exported; State managers in Liberia explain the economic malaise in Liberia by pointing to the fall in the global prices of raw materials and the high price goods imported by Liberians; were Liberia not to produce raw materials mainly for export, and import goods manufactured from Liberia. s raw materials, the problem of falling global prices of Liberia's exports and high global prices of Liberia's imports would not arise; the People's Republic of China (PRC) promotes the value addition of resources in PRC and this is how PRC thrives well, having reduced the poverty rate in PRC from 80 percent to 3 percent, as PRC celebrates 70 years of existence as a Republic; this mode of decision-making in PRC has resulted in PRC having a near 7 per cent rate of economic growth, while western economies are struggling to get positive growth rates and the United States of America owes PRC 1.2 trillion United States dollars and PRC has 4.7 United States dollars as part of PRC's reserves, despite the global financial crisis of 2008; Liberia's State managers continue to be engaged in national decision-making that makes nearly all Liberians poor and poorer, while making the State managers and foreigners rich and richer; witness what happens in the commercial sector, dominated and controlled by foreigners, who continue to collect from the Liberian economy, at least USD50 million ( fifty million United States dollars) a month doing jobs and owning businesses that Liberians can do and own;
4.3. Use the Local Purchasing Approach; Liberians must not import what can be produced in Liberia. Liberians must not facilitate the importation of products that can be produced in Liberia or products that cannot be produced in Liberia but are imported by Liberians; the Central Bank of Liberia (CBL) must facilitate the flow of commercial bank loans to mainly Liberian businesses rather than foreign businesses, as continues to be the practice; and
4.4. Use the Savings Generation Approach; Liberians should generate savings privately and publicly to finance what Liberians can do but foreigners are doing.
5.0 Savings per year from Families, Communities Civil Society, as the Result of Awareness Raising
Through the use of private and public, people can b convinced to buy Liberian made and owned products as well as what Liberians sell that cannot be produced in Liberia, at this time, savings can be made minimally in the amount of USD100, 000,000 (one hundred million United States dollars), given the average of such spending in one year by nearly ten per cent of the people who are not poor, meaning that they live on more than USD2 (two United States dollars) a day.
6.0 Savings per year from the Government of Liberia (GOL) under the 2019/2020 National Budget and the GOL Budgets in the next four years.
6.1 Proposed Salaries per year. (USD) But Paid in LD; deductions from the respective offices below determine the savings as found in section 7.2
6.1.1 President ………………………………… 60,000
6.1.2 Vice President …………………………… 48,000
6.1.3 Speaker ………………………………….. 45,000
6.1.4 Deputy Speaker……………………………40,000
6.1.5 President Pro-Tempore ……………………45,000
6.1.6 Chief Justice ………………………………45, 000
6.1.7 Each Associate Justice……………………..40,000
6.1.8 Each Legislator ……………………………36, 000
6.2 Foreign Travel
Only the President or his Designate, like the Vice President, and the Foreign Minister, with entourage of seven and two, respectively, are to travel abroad on GOL Missions, while the Finance and Development Planning Minister and the Central Bank Executive Governor, with entourages of two, respectively, can attend the ADB/ WB/IMF Annual Meetings. Ambassadors could represent Liberia adequately, with the strengthening of the Embassies. Legislators who are members of the ECOWAS Parliament can travel to ECOWAS Parliament meetings with no entourage.
6.3. Use of Vehicles
Only the President, the Vice President, and the Foreign Minister are to have official vehicles, with provisions for petroleum products and repairs. GSA is to have a pool of vehicles for use by GOL foreign guests, upon the directive of the President;
6.4. Purchases
To be credible, GOL must lead in purchases by purchasing only from Liberian businesses what they can produce in Liberia and what they sell that cannot produce in Liberia, at this time;
6.5. Remuneration
GOL must pay only salaries, and do so in Liberians dollars, with no allowances, vehicles, credit cards, except for the exceptions mentioned above;
6.6. The Budget
The Budget must be designated in Liberian dollars, according to the Constitution of Liberia.
6.7. Cut off All Donations Made By Public Corporations and Autonomous Agencies/Direct Such Amounts To The GOL Treasury; and
6.8 Revamp NOCAL
7.0. The Total Savings are as follows:
7.1 Non-GOL (USD) 100,000,000
7.2 GOL (USD) 245,000,000
7.2.1 President's Office 2,000,000
7.2.2 Vice President's Office 1,000,000
7.2.3 NSA 5,000,000
7.2.4 EPS 2,000,000
7.2.5 Grants 40,000,000
7.2.6 Infrastructure 20,000,000
7.2.7 Legislature 20,000,000
7.2.8 Judiciary 5,000,000
7.2.9 Merit System Utilized 100,000,000
7.2.10 NOCAL 50,000,000
Total Savings ......................................................................$345,000,000
p.s. From the initial Report of the Assets Recovery Committee, the total savings could be increased by at least USD2,000,000,000 (two billion United States dollars); however, as the Committee has not submitted its Final Report and the likelihood of the collection of the Stolen Assets remains unknown, this amount has not been included in the Savings under this Report.
8.0. Having pointed out several areas for savings (USD), the Uses of these Savings are indicated below:
8.1 Food Production and Distribution could be enhanced through the purchasing and use of 100 caterpillars for land clearing in all of the Counties …… 5,000,000
8.2. Hiring Liberian Contractors to Do Farm To Market Roads...................................................................................................................................35,000,000
8.3. Buy chairs and desks made by Liberian businesses for Public Schools……………………………………………………… ..............................10,000,000
8.4. Contract Liberians to Build and Renovate Public Schools, using locally produced inputs 40,000,000
8.5. Regularizing Teachers' Salaries.............................................................................................................................................................................20,000,000
8.6. Regularizing Health Workers Salaries..................................................................................................................................................................10,000,000
8.7. Financial Assistance/Training to Get Excess GOL Employees into Income Generating Situations in the Private Sector 20,000,000
8.8. Road Construction/Road Maintenance................................................................................................................................................................200,000,000
8.9. Sensitization and Action on Sanitation .....................................................................................................................................................................3,000,000
8.10. Sensitization and Action on Climate Change..........................................................................................................................................................2,000,000
Total Uses of Savings......................................................................................................................................................................................345, 000,000
p.s. Were Savings to be generated from the Assets Recovery Efforts by GOL, then such Savings Directed towards Road Construction/Road Maintenance.
9.0. How the Liberian Dollar Will Get Better and the Mass Poverty Reduced?
The Liberian dollar is high and rising with Liberians Catching Hard Times because Liberians prefer the United States dollar to the Liberian dollar. Too much Liberian dollars are running after United States dollars and the United States dollar is playing Hard to Get. While making his Statement at the Senate Confirmation Hearing, the former Executive Governor of the Central Bank of Liberia, Mr. Nathaniel Patray, said that LD16 billion (sixteen billion Liberian dollars were imported by the GOL into Liberia between 2016 and 2018, but by July 2018, LD15, 242,000,000 (fifteen billion, two hundred and forty-two billion Liberian dollars) were outside of the banking system in Liberia. Therefore, to get the United States dollar, more Liberian dollars have to be used, and with the use of more Liberian dollars, the foreign rate of exchange will continue to go up. To get the foreign exchange rate to go down, Liberians will have to prefer the Liberian dollar to the United States dollar. Such preference takes place when raw materials in Liberia are produced mainly for local production and consumption, through manufacturing. Liberians have to produce what they can produce and stop importing products that they can produce. Liberians have to buy from Liberian owned businesses, paying in Liberian dollars. The Government has to pay salaries in Liberian dollars and collect taxes in Liberian dollars. When Liberia adds value to the production of Liberia's raw materials, through manufacturing, and export the manufactured products, after attending to local consumption, then we get needed foreign exchange to import products that we cannot produce. When Liberia imports only those products that we cannot produce, at his time, while concentrating on local production and consumption of products from Liberian businesses, the Liberian dollar gets stronger, local prices become bearable and mass poverty elimination moves towards reality.
LIBERIAN ECONOMY GROUP (LEG)
Togba-Nah Tipoteh Ph.D. (Economics) – Chairperson
Professor of Economics; Former Minister of Planning and Economic Affairs; Former Chairman of the Africa Group of Governors of the World Bank and the International Monetary Fund (IMF); Former Senior Advisor, United Nations; Board Chairperson, Susukuu, the 48years old Poverty Alleviation Organization and Board Chairperson, Kukatornon Reconstruction Corporation.
David Vinton MBA(Finance) – Vice-Chairperson
Lecturer, Finance and Management, University of Liberia; Former Executive Governor, National Bank of Liberia (now Central Bank of Liberia), Owner/CEO Magus Investment Corporation.
Estelle Liberty, MSc. (Economics) – Member
Former Senior Staffer, Ministry of Planning and Economics Affairs;
Former Deputy Minister, Ministries of Gender, Children and Social Protection, Postal Affairs and Internal Affairs, respectively; Former Commissioner, Land Commission, and Public Procurement and Concessions Commission, respectively; Entrepreneur
Amin Modad, MBA (Business Development) – Member
Former Senior Staffer, Ministry of Commerce and Industry; Former Government of Liberia Representative to the World Trade Organization (WTO) and Owner/CEO MI Group of Companies, includes the Bella Casa Hotel.
Geepu Nah Tiepoh, Ph.D. (Economics) – Member
Chairman, Department of Economics, Vanier College, Canada; Consultant, Ad- Hoc Price Commission of Liberia
Liberian Economy Group (LEG)
Bella Casa Hotel
Sinkor, Monrovia.
Cell# 0777516641/088696999
Email: reservations@bellacasaliberia.com
Hon. Albert Chie
President Pro-Tempore
House of Senate
Mr. President Pro-Tempore:
Please find attached the Report of the Liberian Economy Group (LEG) on the Current Statement of the Liberian Economy. We of LEG remain confident that the Action Steps indicated in the report, when taken, can lead to the solution of Liberia’s main problem, longstanding and widespread Poverty.
Respectfully Yours
Liberian Economy Group (LEG)
Togba-Nah Tipoteh
Chairperson