July 5, 2011Doug Hadden
Carlos Lipari, FreeBalance Washington
On her latest official visit to the United States, the first and only women president in Africa, the Liberian president, Ellen Johnson Sirleaf, shared many impressive achievements that Liberia has experienced since the end of its last civil war in 2003.
After listening to president Sirleaf, I must confess that I was positively impressed by what had been presented. President Sirleaf’s remarkable speech made it clear how, after two consecutive civil wars that lasted from 1989 to 2003, devastating the nation, Liberia was now on its way to becoming a post conflict success history. The numbers of Liberia where impressive, reflecting an economy in rapid recovery.
Economic growth rates have been strong since 2005, with the yearly average economic growth reaching an impressive 6.8% from 2006 to 2010 and a 7.7% growth rate being expected for the 2011 to 2015 period. At the same time, the country has managed to keep inflation at single digit levels (under 10%), reconstruct itself, to drastically reduce its public and external debts and improve its poverty levels.
Even so, not all is well in Liberia. The country still has one of the lowest GDP per capita on earth, of 260 dollars (less than 1% of the US per capita, currently at $48 666 US). Also, it has very high unemployment rates (with latest estimates pointing out to impressive rates of more than 80%) along with extremely high external account deficits, lack of basic infrastructures and high illiteracy.
It should be acknowledged that most of the economy is left out of what we can classify as “formal economy” and, therefore, one should question the reliability of certain indicators, such as the unemployment rate. Even so, it is very clear that poverty, illiteracy and unemployment continue to represent big threats to the development of this African nation.
Another weakness of Liberia is its current accounts. Liberia imports more than what it exports. Current account deficits are expected to reach 66 and 69% per cent of the GDP by 2012 and 2013. In order to have an idea of on the size of the unbalances, one should recall that the so called “big” US current account deficits, are currently at around 3% of the GDP, and have never been above 6%.
Therefore, current account deficits of more than 60 percent of the GDP are unsustainable. These have been possible in the short-term due to the very large amount of development assistance that this country is receiving. In fact, despite all its recent development, growth and optimism regarding the future of Liberia, development assistance in Liberia still represents a higher percentage of the country’s GDP than the entire volume of government expenditures or revenues.
Role of Public Financial Management
Low literacy, poor health, corruption and an absence of basic infrastructure are massive obstacles that the current President has been trying to overcome since she arrived to office in January 2006. In fact, half of the adult population is illiterate, about 35% is continuously malnourished. In addition, 68% of the population is living below the poverty line (less than 1.25 dollars PPP per day), life expectancy is low (about 59 years) and only 25% of the population has access to drinking water. Therefore, Liberia has a long way to go. More than most countries, it needs to maintain its good Public Financial Management, to move on with its reform agenda and will continue to need substantial levels of development assistance in the years to come.
Despite all constraints, President Sirleaf has had a major role in the recent success history of its country. One of the main achievements that have resulted from her policy reforms was having Western countries and major financial institutions such as the IMF or the World Bank persuaded to waive the country’s public and external debts. As a result of this, Liberia moved from a nation with an unsustainable public debt of over 500% of its GDP in 2005 to a much more symbolic 31% in 2011 (a very low level even compared with the debt levels of its donors). As a result of this, Liberia can now invest the resources it would have been forced to commit to the payment of debt interests on its own reconstruction, education and other unemployment and poverty reduction policies.
The main question about Liberia is to understand whether this success history will continue in the long run and how will the country actually increase its own savings levels to ensure long term growth. President Sirleaf mentioned during her speech at the U.S Institute of Peace, that she was committed to having the country grow on its own. Will Liberia reach such an ambitious goal by 2021? Looking at the figures one might think that this probably will not happen that soon, but if it does not happen by 2021, as long as the country manages to keep up with its most recent economic growth rates and to give important steps towards a greater economic autonomy, then we should probably be proud of having supported the development of this African nation who is leveraging the FreeBalance Accountability Suite Helping Liberia means more than helping just one country. Helping this nation to become a successful post conflict democratic country might even inspire several other countries in Africa to follow the same type of steps, working towards a lasting peace in a region that, clearly, has a lot to offer.