In the wake of acute shortage of the Liberian bank notes in the commercial banks, a prominent Liberian economist, Dr. Togba-Nah Tippoteh has stated that the solution to improving the liquidity problem does not lie with printing more Money, but can be achieved by the government through better money management. Dr. Tipoteh statement was contained in a release he titled 2021 NEW YEAR’S MESSAGE in which he criticized the World Bank(WB) and the International Monetary Fund (IMF) for the praises showered on the government when the IMF extended credit facility of USD38 to Liberia at the time when the Central Bank of Liberia has indicated that it was facing serious shortage of Liberian dollars in circulation given the fact that the CBL has in its vault only LD 2 billion and about LD20 billion out of circulation which was not in the commercial banks.
Dr. Tipoteh, a onetime former Minister of Planning and Economic Affairs during the military era blamed the deteriorating liquidity problem facing the country on the lack of the will to solve the shortage of the Liberian dollars and the persistence of vexing corruption, furthering that the placement of more money into the den of corruption remains a “Non-starter.” Commenting on this, Dr. Tipoteh said the problem of the LD shortage has been known publicly since the beginning of 2018 when such was announced by the commercial banks, and the problem got worse when there was a clear lack of will by the authority to solve the problem.
Dr. Tipoteh, who was once a Chairman of the African Group of Governors of the World Bank and the International Monetary Fund, indicated that confidence of depositors will be restored and hoarding will stop and LD in circulation will be returned to its acceptable pre-2018 level provided the government cut drastically its luxurious spending, as seen in non-salary expenditures, and place the savings in the CBL to be made available to the commercial banks for circulation in the Liberian economy. He implored economic state actors to “Cut luxurious State spending and place the savings into the commercial banks to increase the money in circulation adequately to restore the confidence of depositors, to stop the hoarding of LD and promote the boarding of depositors on the Liberian ship headed for a better land through smooth winds.
Dr. Tippoteh who did not take lightly the way the Bretton Wood institutions deal with developing countries like Liberia said in most cases their intention was always driven by profit making motives and not to help those countries in need of genuine assistance for development. Laying the premise of his critique, he said the Executive Board of the IMF concluded its Article IV Consultation on Liberia at the end of May 2019, predicting that the growth of the Liberian economy would be 0.4 per cent in 2019 and remain less than 2 per cent over the medium-term.
The assessment Report of the IMF Board on the Liberian economy, as published on June 11, 2019, further indicated that the government of Liberia should formulate realistic budgets, avoiding extra-budgetary spending, and implement a borrowing plan to ensure debt stability and progress in public financial management. The Board went on to call upon the government to stamp out corruption. But apparently to the contrary in six months later, on December 21, 2020, the IMF donated an amount of USD38 million to the government of Liberia, as additional financial assistance in the midst of the Corona Pandemic, to stabilize the already fragile Liberian economy.
He recalled how the IMF’s Acting Chairperson and Deputy Managing Director, Tao Zhang, praised the government of Liberia for its fiscal discipline and further improvements in cash management, transparency and accountability in spending and domestic revenue mobilization to finance its development agenda, as approved by the IMF. The IMF went ahead to forecast a 2021 growth rate of 3.2 per cent for the Liberian economy, according to Dr. Tipoteh.
At the time, he noted that the Acting Chairperson and Deputy Managing Director of the IMF Tao Zhang praised the government of Liberia for its fiscal discipline and further improvements in cash management, transparency and accountability in spending and domestic revenue mobilization to finance its development agenda, which was approved earlier by the IMF Board.
He asserted that the IMF also projected a 2021 economic growth rate of 3.2 per cent for the economy of Liberia, and pointed out that the WB/IMF global financial institutions are well known for making predictions on the economic growth of their members to suit the enhancement of their principal objective.
However, he accentuated that the IMF projection witnessed how the Liberian economy experienced negative growth rates during the pre-Civil War period with negative, zero and low growth rates in the post-war period, yet the WB/IF projected a 3.2 per cent growth rate for the Liberian economy in 2018 only to have a less than one per cent growth rate in 2019 (CBL Governor at the Liberian Senate) as contained in 2020 Annual Message of the President of Liberia.
Some World Bank senior staffers, in their Liberian Economy Update, predict a 3.7 per cent growth rate in 2021/2022, but the World Bank is not taking responsibility for their prediction; although it is made in a document bearing the letterhead of the World Bank.
The Human Development Index (HDI) for Liberia during the period is 177 out of 188 countries, Dr. Tipoteh observed, places Liberia in the low development category and the second poorest country in Africa (UNDP), adding that with the donation of US38 million, the IMF is predicting another 3.2 per cent growth for the Liberian economy in 2021.
The praising and prediction of the IMF are forthcoming while there is persistent lack of confidence on the part of depositors in the financial management capability of the government, leading to massive hoarding by depositors, and unemployment remains high (above 80 per cent) and rising (CBL, WB/IMF, AfDB), Dr. Tipoteh added.
“While the Marshall Plan focused on the rehabilitation of post-World War Two Western Europe, these Bretton Woods Entities focused on providing assistance funds globally, especially for the developing countries, who constitute the majority of the membership of these Institutions, Dr. intimated
However, he said the majority of the shareholdership remains in the hands of the Group of Six (United States of America, Canada, Germany, Great Britain, France and Japan), led by the USA, with over 50 per cent of the shares. Therefore, the decision-making of the WB/IMF remains under the control of the Group of Six.
Pointing out that the principal objective of the WB/IMF is profit-maximization in their benefit, the Liberian political economist said whatever these institutions do has to do with the enhancement of their profitability position. It is within the foregoing context that grants and concessional loans are made, not forgetting the evaluation of the performance of members, like Liberia.
He recalled that it was the same Group of Six that gave approval for the USD1.2 billion loan to the apartheid regime of South Africa when Arch-Bishop Desmond Tutu led a global campaign, in which I served as a Coordinator, to block the loan, adding the although the World Bank and the International Monetary Fund make forecasts and evaluations respectively at times, they make decisions in line with their profit maximization objective.
According to the World Bank, the Liberian economy experienced an average 0 per cent growth during the 2014-2016 period, with negative growth of -1.2 per cent in 2016.
He disclosed that the World Bank made a forecast that growth of the Liberian economy in 2017, 2018 and 2019 would be 3 per cent, 5.3 per cent and 5.7 per cent, respectively; but added that growth instead was less than 1 per cent in 2019 ( WB. CBL, 2020 Annual Message of the President of Liberia).” He then extended happy New Year to all.