Monrovia – As Liberia’s debt continues to climb rapidly, there are growing calls for the government to revisit its borrowing policies to avert a potential debt crisis.
By Gerald C. Koinyeneh, [email protected]
A debt crisis occurs when a government loses the ability to repay its debt. This situation often arises when a government’s expenditures exceed its tax revenues over an extended period, leading to an unsustainable debt burden.
According to the World Bank, Liberia’s fiscal deficit remained high in 2023, estimated at 5.5% of GDP—just 0.1 percentage points lower than in 2022—due to declines in revenue and grants, coupled with increased consumption spending. With a debt-to-GDP ratio of 54.5%, Liberia is assessed to be at moderate risk of external debt distress and high risk of overall debt distress, the World Bank reported.
The World Bank’s findings were based on Liberia’s Annual Public Debt Management Report for Fiscal Year 2023, published by the Ministry of Finance and Development Planning (MFDP). The report noted, “Public debt grew by 15.30% to US$2.3 billion at the end of December 2023, compared to US$2.03 billion at the end of December 2022.”
According to the Ministry, the increase in debt was driven by disbursements from both domestic and external creditors. The external component of the debt stood at approximately US$1.375 billion, representing 57.38% of the total debt stock. This growth was primarily fueled by disbursements from the World Bank (US$145.67 million) and the African Development Bank (AfDB) (US$36.94 million), among others. The domestic debt totaled US$1.021 billion, representing 42.62%, driven by disbursements from the Central Bank of Liberia (CBL), commercial banks, and other recognized debt holders.
These statistics have drawn the attention of economists, opposition figures, and members of the 55th Legislature. Among them is Gbarpolu County Senator Amara Konneh, who chairs the Senate Committee on Public Accounts and Expenditure.
In his latest communication to the plenary of the Liberian Senate, through President Pro Tempore Nyonblee Karnga Lawrence, Senator Konneh expressed concern about the status of various loan agreements that the government entered into with international financial institutions and ratified by the 54th Legislature, and their impacts on the nation’s development.
“As the debt report suggests, the Government must pay urgent attention to our debt situation, particularly domestic debt, which has the potential to impact the financial sector and stunt economic growth,” said Konneh, who served as Liberia’s Finance and Development Planning Minister during the Sirleaf-Boakai administration. “We request that this matter be given the utmost attention before we close for recess. We stand ready to provide any assistance or support necessary to facilitate the inquiry process.”
This was the second communication Senator Konneh has sent to the plenary within four months. His first communication was referred to the Senate Committee on Ways, Means, and Finance, but the committee did not report back to the plenary, prompting him to send a reminder.
Konneh emphasized that his inquiry is an essential oversight responsibility of the Senate, not only for ensuring transparency in public debt management but also for strengthening public trust in the government’s financial practices and safeguarding future generations from inheriting a burdensome debt load—especially when the country’s creditworthiness is at a high debt distress level, which could hinder future administrations from borrowing for development.
A History of Debt Burden
Liberia plunged into a debt crisis following its devastating 14-year civil war. The first democratically elected government after the war, led by Ellen Johnson Sirleaf, inherited this crisis in 2006. It took four years for international donors to waive Liberia’s US$4.6 billion debt.
The World Bank’s International Development Association (IDA), which provides interest-free credits and grants to the poorest countries, and the International Monetary Fund (IMF) decided in 2010 that Liberia qualified for complete debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. This decision granted Liberia a total debt relief of US$4.6 billion.
“I was confident that Liberia would meet the HIPC completion point despite the challenges,” said then-President Ellen Johnson Sirleaf. “We concentrated on building institutions, passing laws, implementing a robust public financial management law, establishing a functioning General Auditing Commission, and making anti-corruption measures effective.”
The HIPC program, overseen by the World Bank and IMF, was created in 1996 to reduce the external debt of eligible low-income countries, enabling them to allocate additional resources toward achieving the Millennium Development Goals (MDGs). Reaching the HIPC “completion point” marked the end of the debt relief process for Liberia, which began in 2005 when the IMF and World Bank agreed that Liberia had met the requirements for reaching the “decision point” and started receiving debt relief on an interim basis.
No War, But Corruption
Liberia’s previous debt crisis was fueled by years of civil war and political instability. A military coup in 1980 eventually led to two civil wars that claimed hundreds of thousands of lives, devastated the country’s infrastructure, and traumatized a generation of child soldiers.
A Comprehensive Peace Agreement was signed in 2003, and the country has been gradually recovering from the war’s devastating effects and the accompanying economic dislocation.
The cancellation of Liberia’s debt under the HIPC initiative depended on policies that contributed to poverty reduction. Liberia’s Poverty Reduction Strategy, approved in March 2008, focused on improving human security, strengthening national integrity and justice, engaging civil society, and establishing the Liberia Anti-Corruption Commission. The government also undertook significant infrastructure projects and made notable improvements in the education and health sectors.
“We congratulate Liberia on the notable progress made towards this important milestone,” said Obiageli Ezekwesili, then World Bank’s Vice President for the Africa Region. “Despite a difficult post-conflict environment and economic challenges, the government has implemented critical reforms to reach the HIPC Completion Point. Debt relief will significantly reduce Liberia’s debt burden and free up resources needed to finance key areas critical to meeting the Millennium Development Goals.”
As the debt report suggests, the Government must pay urgent attention to our debt situation, specifically domestic debt, which has the propensity to affect the financial sector and potentially stunt economic growth. We therefore request that this matter be given the utmost attention before we close for recess. We stand ready to provide any assistance or support necessary to facilitate the inquiry process.
Senator Amara Konneh, Chairman, Senate Public Accounts Committee
However, the country’s debt continues to climb rapidly. And this is happening as current ad past government officials blame each other for the rise in the country’s debt.
Former Finance Minister Samuel Tweah, charged with economic sabotage, alleged that his Coalition for Democratic Change (CDC) government covered up the Unity Party’s (UP) poor credit records in government accounts. He has challenged the UP to conduct an audit of its previous regime.
In a social media post, Tweah said that an audit of both governments would reveal the financial malpractice of the ruling Unity Party. He specifically called for an audit of the Central Bank of Liberia and the Consolidated Accounts, claiming the UP borrowed hundreds of millions from the CBL, which was hidden from the public.
“Yes, it had to take the IMF to force us to include this borrowing in Liberia’s official debt statistics. More than US$300 million in borrowing with no financial record,” Tweah said. “As minister, I resisted this attempt, but the IMF argued they do not distinguish between UP-governed Liberia and CDC-governed Liberia, so we had to include the borrowing in the debt. In the end, we compromised with the IMF in the interest of Liberians and the IMF program but took about USD 100 million off the stock of hidden debt, which is still hanging at CBL.”
‘Resist the Urge to Borrow’
While the debt relief was expected to significantly reduce Liberia’s debt burden and free up resources for critical expenditures, the situation has not unfolded as hoped. As the latest statistics show, Liberia’s debt has risen to US$2.3 billion as of December 2023—half the amount waived in 2010.
With nearly all of Liberia’s fiscal budget allocated to recurrent expenditures, economists warn that the country will continue to face pressure to borrow.
President Boakai’s ambitious ARREST agenda, which promises development in areas like agriculture and road construction, will likely require external financing. This has prompted the Liberia People’s Party (LPP) to issue a cautionary statement.
“A sustainable development strategy cannot rely on excessive borrowing,” said the LPP. The party urged the government to “resist the urge to borrow excessively based on rosy economic projections, which may prove unfounded and leave the government unable to repay those loans at maturity.”
