By Dr. Togbah-Na Tipoteh
Having served as Chairman of the African Group of Governors of the World Bank (WB) and the International Monetary Fund (IMF), I am aware of the principal objective of these biggest global financial institutions. 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, but the majority of the shareholders 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 percent of the shares, Therefore, the decision-making of the WB/IMF remains under the control of the Group of Six. It was the 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.
The principal objective of the WB/IMF is profit-maximization in their benefit. 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.
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 percent growth during the 2014-2016 period, with negative growth of -1.2 percent in 2016. The World Bank made a forecast that growth of the Liberian economy in 2017, 2018, and 2019 would be 3 percent, 5.3 percent, and 5.7 percent, respectively; however, growth was less than 1 percent in 2019 ( WB. CBL, 2020 Annual Message of the President of Liberia).
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 percent in 2019 and remain less than 2 percent over the medium-term. The assessment Report of the IMF Board on the Liberian economy, published June 11, 2019, 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.
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. 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, as approved by the IMF. The IMF went ahead to forecast a 2021 growth rate of 3.2 percent for the Liberian economy.
The IMF is donating USD38 million to the government of Liberia with praises at a time when the CBL has indicated that it is facing a shortage of Liberian Dollars (LD) in circulation, given the USD2 billion in the CBL and LD20b out of circulation (not in the commercial banks). As the solution to the LD shortage problem, the Executive Branch of the government is seeking the approval of the National Legislature for the printing of LD4 billion. the government’s perceived solution comes during the dismal state of high and rising unemployment (CBL, WB, AfDB). The solution to the LD shortage problem, as presented by me publicly, is in the better management of money rather than in the printing of money.
The government should 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. Grants should also be placed in the CBL and made available to the commercial banks. With an adequate supply of LD in circulation, the confidence of depositors will be restored and hoarding will stop and LD in circulation will be returned to its acceptable pre-2018 level.
Let us take non-violent action now to end the long lines of people at commercial banks that have insufficient money, as corruption and the possibility for frustration-induced violence mount.
The problem of the LD shortage has been known publicly since the beginning of 2018 when such was announced by the commercial banks. Any problem becomes worse when there is a lack of Will to solve the problem. The LD problem in the Liberian economy remains unsolved because there is a lack of the Will to solve the LD shortage problem.
Clearly, with the persistence of vexing corruption, the placement of more money into the den of corruption remains a Non-starter! 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. The solution to the LD shortage problem is Better Money Management Not More Money Printing.
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. Witness 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 percent 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; 2020 Annual Message of the President of Liberia). Some World Bank senior staffers, in their Liberian Economy Update, predict a 3.7 percent 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, placing Liberia in the low development category and the second poorest country in Africa (UNDP). With the donation of US38 million, the IMF is predicting another 3.2 percent 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 percent) and rising (CBL, WB/IMF, AfDB). Finally, let it be known in this 2021 New Year that the Way Forward for the Better is Better Money Management Not More Money Printing.
HAPPY NEW YEAR TO ALL
Main Photo: Dr. Togbah-Nah Tipoteh