– SAY IT DOES NOT REFLECT THE REALITIES IN THEIR LIVES
By Jerromie S. Walters
Monrovia, Liberia – The World Bank has launched its fifth edition of the Liberia Economic Update, titled “Powering Growth with Reliable, Affordable, and Sustainable Energy Access,” and it highlights the curre state of Liberia’s economy, which has shown signs of recovery but remains vulnerable to various macroeconomic challenges.
Launched at a ceremony held at Monrovia City Hall on Thursday, September 12, 2024, the report states that after a rebound in 2021, Liberia’s economic growth has stabilized around 5.0 percent, with a reported growth rate of 4.7 percent in 2023, primarily driven by the mining sector. However, the report indicates that the country is grappling with elevated fiscal and current account deficits. The fiscal deficit increased by 0.5 percentage points of GDP, reaching 6.1 percent, attributed to reduced domestic revenue and overspending. To finance this deficit, Liberia resorted to inflationary debt monetization, leading to a current account deficit of 24 percent of GDP.
“Economic growth has rebounded over the past three years but is still fragile due to increased macroeconomic vulnerabilities. Growth rebounded in 2021 and has hovered around 5.0 percent, but Liberia’s fiscal and current account deficits have been elevated.
In 2023, Liberia’s economy grew by 4.7 percent, primarily driven by the mining sector. Meanwhile, the country’s fiscal deficit increased by 0.5 percentage points of GDP to 6.1 percent, mainly due to reduced domestic revenue and overspending.”
The repercussions of these economic vulnerabilities are evident, as inflation surged to 10.1 percent in 2023, up from 7.6 percent the previous year. The country’s gross external reserves also fell to USD 496 million, equivalent to approximately 2.3 months of imports, down from USD 644 million. Furthermore, Liberia faces a moderate risk of external debt distress and a high risk of overall debt distress, with a public debt ratio of 57.5 percent of GDP.
“Consequently, inflation rose to a double-digit rate of 10.1 percent, up from 7.6 percent in 2022. The country’s gross external reserves decreased to USD 496 million (about 2.3 months of imports) from USD 644 million (3.0 months of imports) in December 2022. Noteworthy, Liberia remained at a moderate risk of external debt distress and a high risk of overall debt distress with a public debt ratio of 57.5 percent of GDP in 2023, up from 55.4 percent in 2022. The industrial sector has been a key driver of Liberia’s economic growth, particularly in 2023. The industrial sector, experienced a significant 164 percent increase in gold production, contributing 25 percentage points to the Overall economic growth in 2023,” the report indicates.
The industrial sector emerged as a significant contributor to economic growth, particularly in 2023, with gold production soaring by 164 percent and contributing 25 percentage points to overall economic growth. The construction, cement, and beverage sectors also played a vital role in bolstering industrial output. The services sector, buoyed by improvements in financial, hospitality, trade, and transport services, grew by 3.8 percent. In contrast, the agricultural sector struggled, achieving only 14 percent growth, largely due to declines in cocoa, palm oil, and rubber production driven by global price drops and export restrictions.
The report emphasizes the need for structural reforms to enhance Liberia’s economic diversification and resilience. It points to the urgent necessity of addressing challenges within the agricultural sector, which has been adversely affected by external factors. The document also stresses the importance of improving the overall business environment, investing in education, and accelerating infrastructure projects to unlock the country’s growth potential.
“Sustaining growth also requires addressing macroeconomic and fiscal challenges. Amidst shifting overseas development assistance and global investment trends, taking concrete steps to address macroeconomic and fiscal challenges is necessary to generate the resources needed to support public investment for a better Liberia. The implementation of the recently enacted value-added tax (VAT) law will help boost domestic resource mobilization.
On the expenditure side, the full utilization of existing systems such as the Integrated Financial and Management Information System (IFMIS) and the rollout of an electronic procurement system will help enhance expenditure in the near term. On the monetary front, ending the monetization of the fiscal deficit and taking concrete steps towards de-dollarization would help enhance the effectiveness and credibility of monetary policy.”
To sustain economic growth, the report calls for decisive action to tackle macroeconomic and fiscal challenges. The implementation of the recently enacted value-added tax (VAT) law is expected to bolster domestic resource mobilization. Additionally, optimizing existing financial management systems and enhancing expenditure monitoring will be crucial in the near term. On the monetary front, the report advocates for an end to the monetization of the fiscal deficit and concrete steps towards de-dollarization to strengthen monetary policy effectiveness.
A key focus of the report is the critical challenge of achieving universal electricity access, which is vital for supporting economic growth and improving public service delivery. The Liberia Electricity Corporation (LEC) has made notable strides, reducing commercial losses from 47.7 percent in 2021 to 31.4 percent in 2023, while nearly doubling customer connections from 142,947 to 282,505 during the same period. However, significant urban-rural disparities remain, with two-thirds of the population still lacking access to electricity.
“Achieving universal access to electricity remains a crucial challenge for supporting Liberia’s economic growth, public service delivery, and household well-being. Recent achievements by the Liberia Electricity Corporation (LEC) are showing promising signs that the Country is on the right path to achieving universal electricity access targets in a reliable, affordable, and sustainable manner. Over the past few years, commercial losses have dropped substantially from about 47.7 percent in 2021 to about 31.4 percent in 2023. At the same time, the number of customer connections has almost doubled from 142,947 in 2021 to 282,505 In 2023. Despite these advances, urban-rural disparities persist, with about two-thirds of the population still lacking access to electricity.”
Debunking the poverty reduction aspect
In response to the economic recovery highlighted in the World Bank report, Liberians say it doesn’t reflect on the masses. A Liberian, Bialo Barry writes: “This statistic does not reflect the reality on the ground more Liberians are swimming into poverty.” Like him, Ducar Podonewehson reacted: “Growth without Development, Improvement, Empowerment, Advancement, etc. = Empty worthless GROWTH”.
Another Liberian, Musa V. Wallie says: “World Bank is one of the problems for Africa! They come out with these numbers just to make their institution look good! Liberia has not invested in anything tangible to support the decline in poverty.” Like Wallie, another Liberian, Vita Ishmael Tue noted: “I’m interested in seeing the metrics and indicators used by World Bank that indicate the reduction in Liberia’s poverty rate over the last three years.”
