The Perspective
Atlanta, Georgia
January 13, 2020
                                                                              

The effort in Part I called “USAID awards $16M to Nathan to fight corruption but says nothing about the 66 fraudulent concessionary agreements and illegal wealth accumulation” was to question the idea that USAID and other foreign experts are training incompetent, inefficient, and lazy Liberian employees in order to reduce corruption and the cycle of violence. I think these views are wrong, rather USAID and others should not only question why some elected leaders are gullible to corruption, but also should analyze their own purpose of existence.

For example, are USAID and other ordinary trainers/assistants or are they agents of principals (i.e., countries) which are searching for resources on the cheap?  

If no employee is inherently incompetent or inefficient, then, certainly, Liberian employees are no exception. On the other hand, since USAID and others are merely implementors of the missions of their principals, wouldn’t it be a good idea to look beyond the policies of these agents? Why look at the interest of the principals? This is because any country (i.e., which is a principal of an agent), for example, the United States of America, is a competitor within the economic global arena. It is a  competitor in search of cheap natural resources, in search of a regular supply of unskilled labor to work at slave-wage plantation companies such as Liberian Firestone Rubber Plantation Company.

For instance, did the World Bank, one of Liberia’s economic advisers, and USAID oppose the interest of the United States of America, during the recent re-negotiation of Firestone concessionary agreements, to continue to produce tires in Dayton, Ohio, America? No, because the tire factory in Dayton, Ohio employs a significant number of US citizens. And, were Liberia to add values to latex (i.e., for example, to manufacture tires in Liberia), domestic revenue will increase, but Dayton, Ohio tire factory would not get latex from Liberia.

Adding values to the latex would generate additional revenue for Liberia. However, adding values would require an investment in Liberia’s education, which would reduce the number of unskilled labor needed to tap latex for the Dayton Ohio tire factory. The million-dollar question is did the World Bank and/or USAID  advocate for more unskilled workforce or advocate for educational policy that would reduce the number of unskilled labor? Certainly, USAID and the World Bank did nothing to undermine the interest of the Dayton  tire factory to get latex from Liberia and produce tires.

If Liberia should move ahead, stakeholders should re-evaluate Liberia’s relationship with its competitors and the different agents of our Nation-state. I am forwarding a few of my inputs for review and critical analysis:

Gold or Special Drawing Rights (i.e., a privilege to borrow money): Adding Gold and reducing Special Drawing Rights might reduce the need for Liberia to borrow money from the IMF, an arrangement that might reduce IMF’s revenue. Importantly, such an economic arrangement might not only reduce Liberia’s debt but also it could calm the fear of foreign suppliers because the Central Bank does not have money to refund or repay the debt owed by local merchants. Gold values, which price is to hit $1,650 in 2020, can be exchanged and/or sold for values. Further, an increase (i.e., by adding gold) in our country’s Net International Foreign Exchange Reserves would reduce the prices of goods and services in Liberia.

Liberia’s Unemployment rate at 3%: The 2015 Survey by USAID reported that Liberia’s unemployment rate is around 3%. This number is wrong because it includes school-age boys and girls and rural residents who live on subsistence farming. Unfortunately, this favorable percentage is encouraging money-lending institutions into believing that Liberian consumers’ buying power is high since 97% percent of the population is employed. I surmise that is part of the reason why small businesses are not paying their loans because the low unemployment number indicated that their business would be profitable. Worse, money-lending institutions have and continue to encourage Liberia’s school-age children to abandon communities of education, religion, and culture and are now obligated and committed to the cutthroat community of fast-money making activities. 

Review factors used in computing the Denominator (Nominal Gross Domestic Products). The IMF and the World Bank have advised Liberian officials to use Nominal Gross Domestic Product, which values are usually higher than the values of Real Gross Domestic Products, to compute (1) Debt to GDP ratio, (2) Budgetary shortfall, (3) Income per capital, (4) National debt to Gross revenue ratio, etc.

For example, the Liberian government to reduce its Debt to GDP ratio from 35% in 2017 to 26% in 2018. The low number indicated that Liberia could borrow more money. Thereafter, government officials and the IMF reported that the government had more room to borrow more money because Liberia’s debt to GDP ratio was 26%, far below the benchmark of 38%.

If the rise and falls in inflation (i.e., prices) should account for the difference between Real Gross Domestic Product and Nominal Gross Domestic Products, where are the factors to account for the 9% decrease? How did the IMF reported US $3B as the Nominal Gross Domestic Product in 2017, if Real Gross Domestic Product in 2017was less than $1B, according to the 2018 Annual Report of the Central Bank? The percentage of 200% (i.e., $3B minus $1B is equaled $2B increase, which is divided by $1B) is far above the 2018 inflationary rate of 25%. Predictably, the IMF likes the 26% because Liberia is perceived to be in a position to borrow more money.

Budgetary Document:
Revenue projection-The Ministry of Finance Development and Planning stated that Liberia’s economy is bad, yet its revenue projection numbers in 2016/2017 are not significantly different from the revenue projection numbers in subsequent years, including 2020/2021. I guess it wants a higher revenue projection in order to borrow more money from the Liberian Central Bank. The 1999 Central Bank Act stipulates that the Liberian Government should not borrow more than 5% of the total Liberian gross national revenue. However, GOL can borrow more money from the Central Bank if its revenue projection is higher than the actual projection.

Unearned revenue: The Liberian Revenue Authority, Central Bank of Liberia and others should prepare a schedule of reconciliation detailing earned income and unearned income, if not available. A schedule of reconciliation would help policymakers to understand that a portion of the government’s deposits at the Central Bank represents projected revenue for the previous fiscal period or subsequent fiscal period. This schedule is even important since the Central Bank reports on a calendar basis, while the government prepares its budget on the fiscal year (July 1 through June 30).
Buy used vehicles and re-used vehicles:  Liberian government should buy durable-used vehicles, apply Generally Accepted Accounting Principles (ISA 16) and end the selling of government vehicles at book value: Officials are selling government’s vehicles after a few years in operation because the vehicles have reached their threshold (i.e., may be set at $500 or $10,000), over which it depreciates as assets. Re-using vehicles would reduce our budgetary deficit and, by extension, reduce interest rates and increase poor people’s purchasing power.

Financial Capital Market: If a Liberian financial market is to be useful for trading, our Central Bank should ensure that: (1) businesses should publish financial data such as revenue projection, earnings per share, debt to assets ratio, prices of short-term and long-term bonds, assets, liabilities, equity, etc.; (2) underwriters/consultants should evaluate a business’s Initial Offering Price, (3) independent rating agencies should appraise and assign grades (AAA+ BBB, etc.) to bonds/stocks, (4) create or encourage private-capitalists to establish financial institutions similar to institutions such as Bloomberg, LLC and New York Stock Exchange, which are equip and capable to provide trading platforms; and (5) Security Exchange Commission monitors and regulates trading.

Domestic revenue mobilization:
Reduce utility cost by encouraging them to publish financial statements: Institute measures to increase the buying power of consumers since more cash in the hands of consumers would result in an increase in tax revenue. For instance, accountability and transparency, in the form of publishing financial statements, usually result in increasing cash-savings of customers. Therefore Government should require both public and private utility providers to publish their financial statements in accordance with Section 2-5 of the September 16, 2010 Freedom of Information Act.

Decentralize government administration office-buildings across the fifteen counties. This approach would reduce the cost of housing (rent expense), thereby, allowing tenants to use their cash-savings from exorbitant rent to buy other goods and services, which will increase tax revenue.

AGRICULTURE THE ENGINE OF ECONOMY:
Let us not allow the World Food Program and the International Monetary Fund to dictate our agricultural program. The idea put forward by the IMF that a government should not play a role in our agriculture is ill-advised because Western countries are playing a role in their agriculture. For instance, if the government agent (i.e., the World Food Program) did not purchase the excess food produced by farmers in western countries and ship the excess food to poor countries, those farmers would not be profitable. Why farmers would not profitable? Every year, farmers produce more food than customers in those countries' demand for, which would force the price of food to drop below a profitable price. In order to keep the price of food at a profitable price for farmers in Western countries, the World Food Program purchases the excess food and ships the excess to poor countries.

The government should investigate pre-1980 policies of the Agricultural Cooperative Development Bank(ACDB), and review reasons, if any, why many entrepreneurs do not borrow money to produce food. For example, commercial banks appropriated L$72B loan for entrepreneurs in 2018 and CBL allocated US$5M to agriculture in 2018. Also, the government should serve food at government ceremonies, which might have the effect of increased production. This initiative might encourage the public to consume more, and by extension, increase the consumption of local food.

If Liberians begin to become real, accountable, transparent, and honest it might be difficult for agents and/or Liberia’s competitors to deceive and dictate Liberia’s policy, and by extension, our destiny. 

By J. Yanqui Zaza

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