The Central Bank of Liberia (CBL) recently reported that the end of quarter two of 2020, inflation moderated to 18.0percent, a reduction by a point of 5.7percent in the previous quarter. The bank also projected a 17percent headline inflation rate for quarter three of 2020 and is expected to further drop to 15percent in the first quarter of 2021. The pronouncement was greeted with a thunderous excitement by officials of the Weah government. The sliver of “economic miracle” has been promoted by the pro-government propagandists as a macroeconomic milestone which can only be achieved by a government headed by Mr. Weah.
Amid the declining living standards, high unemployment, extreme trade deficit, a -2.5percent GDP growth, etc., it is only in a country where ignorance is bliss and pervasive, and poverty has been concluded as the final lot of the people that a government would celebrate an 18percent double-digit rate of inflation which one cannot be traced to any meaningful transformation in the real economy. Suffice it to mean that the fall in the rate of inflation is not an outcome of a savvy fiscal policy framework which produces an increase in national income and positively impacts the value of the Liberian dollars and stabilizes the exchange rate. The price and exchange rate stability is not tied to an expansion in the country’s productive capacity neither is it a result of a growth strategy since in fact revenue has plummeted (projected revenue has lingered between 520m and 535m in the last three years) and GDP growth is projected at -2.5percent in 2020.
An IMF initiative, under the Extended Credit Facility, was negotiated and concluded between the Fund and the Liberian government in December 2019. The package is a four-year arrangement in the tone of US$ 213.6m. With direct oversight from the IMF, the CBL is using the funds to ensure “macroeconomic stability”. The funds are being used exclusively to make monetary interventions in the economy–from paying for imports through foreign currency auction to other short term monetary policy mechanisms. Thus, implementation of the package is the chief driver of the stability in the exchange rate and by extension the inflation rate.
Basically, the IMF is overseeing the implementation of our monetary policies, while USAID is also keeping an eye on the CBL since the latter hired Kroll Associates to facilitate the printing of L$4billion to be infused into the economy. Hence, Liberia has now become a zombie state and its sovereignty has been sold out to these international organizations that are controlled by big powers with a vested interest, in contrast to the interests of the working and oppressed people of Liberia.
The IMF package is not a free lunch. It is not a humanitarian gesture. The IMF serves the interest of international finance capital that is tied to foreign monopolies. Thus, it takes advantage of countries that suffer from hyperinflationary shocks and are in desperate need of debt relief and emergency loans to keep them under its jackboot of dependency. The fund pushes demands such as privatization of state-owned enterprises, deregulation of the economy or removal of barriers to free trade, and disastrous austerity measures such as wage cut, lay off of public sector workers, drastic cut back to government spending, etc. These brutal measures do not only stall socio-economic growth and development, they create the condition for a takeover of the country’s productive sectors by multinational corporations.
As preconditions for the implementation of the package negotiated with the Liberian government, the IMF demanded a realistic budget that commits the government to spend within its limits and keep the deficit at about 3% of GDP. It also demanded the government to not default on its domestic and external debt obligations. The wage bill of the government accounts for more than 50percent of total expenditure. Thus, running a balanced budget requires deep cuts in the wages of civil servants. This necessitated the government’s so-called wage bill “harmonization” which butchered the wages of over 30,000 public sector workers.
Need we say more about the disastrous consequences of these brutal measures amid a general and unending economic decline? The World Bank has projected that about 335,000 to 526,000 Liberians are at risk of falling into extreme poverty at the end of 2020. Fiscal deficit widened from 4.8percent in FY2018/2019 to 6.2percent in FY2019/2020 and is expected to widen further in the current fiscal year as the social needs of the country increases while revenue continues to fall. The debt stock has ballooned by 71.5percent in two years, three months or from 898.68million at the end of 2017 to 1.503.8billion at the end of March 2020. Liberia is at the verge of being listed once again as a heavily indebted poor country. Why would our people bear such brunt when we have gold, iron ore, arable land, diamond, timber, etc. which can be monetized to deal with the questions of underdevelopment? Liberia is a liberal capitalist economy that doles out these assets to foreign capital that repatriate surplus values produced by the labor power of Liberian workers.
So, among other factors such as the fall in demand for goods and services or decline in economic activities caused by the coronavirus pandemic, the IMF intervention is responsible for the price and exchange rate stability. It is a short term monetary palliative that provides a short-term respite and is not sustainable. Worst of all, it wouldn’t culminate in solid social-economic development that would increase employment, improve living standards, and create new revenue streams to boost domestic revenue generation. Under a neoliberal regime, Ellen Johnson Sirleaf mortgaged the commanding heights of the economy through 66 bogus concessions agreements and did not address major structural imbalances in the economy. Also, the global economic crisis creates doubt for new foreign direct investments and the discovery and exploitation of new sources of mineral and natural resources which would give the government revenue from export receipts.
What would happen when the proceeds of the Special Drawing Rights under the IMF Extended credit facility get exhausted and there’s scarcity of foreign currency to pay for imports and implement other short term monetary policy actions? Obviously, like Ecuador, the government would run back to the IMF to negotiate another austerity-prone package under the extended credit facility. The country would be plunged into a perennial debt crisis which would further worsen the economic crisis. This is the neoliberal capitalist playbook which has had devastating effects on suffering humanity! Like Amilcar Cabral said, “Tell no lies; claim no easy victories” The Liberian economy is in utter shamble and this is the catalyst for the revolutionary eruption of the people!
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