Liberia’s Debt Crisis: Government Seeks to Restore Trust and Improve Economy

Liberia’s total debt stock has exceeded $2.5 billion, with domestic debt surpassing $1 billion, according to Finance Minister Augustine Ngafuan. He attributes this crisis to excessive borrowing. The government is working to restore trust, improve financial credibility, and reduce dependency on loans, while also targeting a 6% growth rate for the year. Plans for energy access and infrastructure development are critical to enhancing economic activity.

The Finance and Development Planning Minister of Liberia, Augustine Ngafuan, has expressed serious concerns regarding the country’s rising debt crisis, which has now exceeded $2.5 billion, with domestic debt accounting for more than $1 billion. Ngafuan attributes this financial burden largely to excessive borrowing during the Weah-Taylor administration, as the government increasingly relied on loans from commercial banks to finance operations, consequently accumulating unpaid obligations to various contractors and service providers.

In highlighting the impact of prior administrations’ defaults on payments, Ngafuan noted the resulting trust deficit between the government and its creditors. This erosion of trust has deterred vendors and contractors from engaging in business dealings with the state. He reaffirmed, “The debt stock of Liberia is over $2.5 billion… The Liberian government owes a lot,” underscoring the pressing need for fiscal responsibility.

Ngafuan shared plans for restoring financial credibility in Liberia, including an $80 million loan from the Central Bank of Liberia aimed at facilitating civil servants’ salaries. He highlighted positive developments, stating that trust from commercial banks is gradually returning as the government fulfills interest payments. Vendors who were previously hesitant are now engaging with the government, leading to improved business relations.

The minister informed that the General Auditing Commission (GAC) is actively working to verify debts owed, resulting in the identification of more than $400 million in fraudulent claims. Ngafuan noted, “We are reversing the situation, and confidence is returning. Now, vendors must deliver before the government makes payments,” highlighting ongoing efforts to enhance accountability.

Despite the prevailing challenges, Ngafuan remains optimistic regarding Liberia’s economic future, predicting a growth rate of 6% for the year. He emphasized the government’s dedication to broadening the tax base and enhancing revenue mobilization to diminish reliance on lending. Plans to expand the extractive sector’s financial returns are underway, and the government aims to limit dependency on aid.

Moreover, Ngafuan announced that Liberia has been recognized by the World Bank and the African Development Bank to develop an energy compact, intending to boost electricity access from the current 30% to between 75% and 80% by 2030. A new hydroelectric facility, St. Paul Two, alongside an expansion of solar energy generation, is part of this ambitious plan, requiring a total investment of approximately $1.3 billion, with some funding commitments already secured.

He pointed out that high electricity costs are a significant barrier to economic growth and job creation, particularly affecting small businesses struggling with operational expenses. Improvements in electricity accessibility and affordability are crucial for alleviating these financial strains on businesses.

Ngafuan further highlighted the significance of infrastructure development, particularly road improvements, for stimulating economic activity. He articulated that better roads facilitate improved connectivity for farmers, enabling the efficient transport of goods and minimizing spoilage losses.

In addition, ongoing discussions with the National Port Authority aim to eliminate barriers to business operations, which could involve extending port hours and facilitating online transactions to enhance operational efficiency. As he concluded, Ngafuan reaffirmed the government’s commitment to stabilizing the economy and rebuilding trust among creditors and investors, indicating a strategic approach to fostering sustainable growth and development in Liberia.

In summary, Liberia faces significant financial challenges with a debt stock exceeding $2.5 billion. The government is focused on restoring trust with creditors and vendors, streamlining financial processes, and reducing reliance on loans through enhanced revenue generation. Optimism about economic growth persists, bolstered by initiatives for energy access and infrastructure development. The government remains committed to stabilizing the economy and driving sustainable development in the country.

Original Source: frontpageafricaonline.com