The economy of Liberia has in the past been threatened by the civil unrest in the country which is the major cause deterioration in employment and rising levels of poverty. Liberia suffered a 14-year civil war between 1984 and 2003 which not only displaced people and left scores dead but also heavily impacted on the economy.
Businesses and more so foreign investments were destroyed leaving many people jobless hence acceleration of poverty. The major economic activities came to a standstill. Consequently there was a sharp economic decline. Liberia also suffers from high levels of illiteracy which has fueled unemployment and poverty in the country. Due to the high corruption in previous governments, the country also suffers from high economic inequality.
Various strategies have been implemented to try and revive Liberia’s economy but the country can be said to be far from achieving its objectives. The economic policy that the country has currently needs to be improved so as to ensure economic development.
With a well designed economic policy, it is possible for Liberia to improve its economy. The country has a great deal of resources which can be used to improve the economy. These include the both agricultural and mineral resources. Some of these lie unused either due to lack of funds or due to unsolved land disputes.
These should be reviewed to ensure no resource is lost. The Maritime registry should also form a better source of finance for the country. If Liberia improves the education system, there is a high possibility that it will be liberated from financial difficulties. A learned nation is better placed both in terms of investment and in terms of national development due to the provision of manpower.
This memo’s main agenda is on the building of an effective economic policy for Liberia. It addresses the current problems in Liberia concentrating more on the high levels of poverty, unemployment and inequality which have to a large extent affected the economic development of this country. This memo will provide an insight on the Liberian economic policy and examine the various effects that the policy has had on the economy. Have they been successful or do they still need more effort?
Who are the main players in the implementation of the policy and what roles do they play? These are some of the issues to be addressed in the memo before coming up with recommendations that the current government can make use of to recover as well as advance the economy of Liberia. In this memo, the high potential for development is recognized and as suggested, what the Liberian government needs to do is to tap this potential to foster economic growth and enhance the distribution of income.
Liberia just like any other developing country is faced with many problems more so high levels of poverty, unemployment and inequality. The problems currently being faced by this country can be traced to the volatile history that the country has endured in the past. The civil war experienced between 1948 and 2003 shattered the Liberian economy to a great extent and the country is still trying to pick up the pieces together under the current government (Anderman, 12).
The war had the effect of discouraging foreign investment and those who had already invested in the country left during this time (Smith, 39; Heritage Foindation, 1). This was a big blow to the residents who relied heavily on these investments for their income. Iron ore production stopped and this deprived Liberia of a huge amount of income given that in the past iron ore accounted for more than half of the country’s income (Anderman, 14).
At the same time, the United Nations banned the export of timber and diamond due to the illegal exploitation that took place during the war. Most significant was the country’s diamond wealth exploitation and participating in the trade of blood diamonds (Smith, 46). These among other problems led to a sharp decline in the country’s economy which can explain the high levels of poverty that are evident in Liberia.
Imports are too many as compared to exports hence the exhaustion of the country’s financial reserves. Liberia currently imports goods in terms of food provision, materials and tools for $4.839 billion while the country exports are a mere $910 million (Smith, 45). This shows a negative balance of trade which is not healthy for any economy since the country is spending more than it is earning through trade. If we were to look back, the foreign investments and other local investments that were destroyed could have contributed a great deal of income for the country by now through exports and income taxes. Their closure has similarly led to high levels of unemployment in the country leading to escalated poverty.
It was during the 14-year civil war period that the worst levels of corruption and mismanagement of government funds were witnessed in the country. Government officers conveniently used the government funds and debt funds for non-state functions and openly engaged in corrupt acts (Anderman, 22).
Illicit exports organized by war Lords were an all time high while people continued to loot and profit from the country’s infrastructure destroying almost everything (Anderman, 26). These actions played a considerable role in the economic decline as government resources were diverted from economic development. The country is now faced with a $3.5 billion external debt which needs to be cleared and is depends heavily on foreign aid.
Illiteracy is very high in Liberia and estimates still remain at over 70 percent (Smith, 27). Many economic analysts will note that the level of education in a country largely determines the development of that country. When a country’s citizens are educated, there is significant development due to better business ideas.
Literate members can also easily get jobs in companies both in the country and outside. At the moment, only 15 percent of Liberians are employed in the formal sector (Smith, 30). Most work in the Agricultural sector (70%) as this sector does not require educational skills. The farm workers may not get enough pay to meet their needs and hence have to live under unbearable poverty. Illiteracy has therefore been a major contributor to the poverty and unemployment levels witnessed in the country.
Liberia’s current government is keen on the economic recovery and to do so it has come up with an economic recovery policy aided by international partners (Dwan, 1). The country intends to improve the economy through reviving key industries and encouraging innovation. Liberia also intends to repair the infrastructure that was left in a destitute state after the civil unrest (Smith, 65).
To do this, Liberia needs finances which will be obtained mostly from borrowing externally. The country is lobbying for funds from the European Union, United States, International Monetary Fund and the World Bank (Smith, 68).
Among the major parties that Liberia has sought assistance from and who have also been the key players in the economic policy include the International Monetary Fund, European Commission, United Nations, the African union, World Bank, United States, Nigeria and Ghana. The international bodies are more interested in forging a way forward for Liberia to be self-dependent (Smith, 69). The countries on the other hand such as Nigeria and Ghana hope to establish trade relations with the country once the economy stabilizes. Together with these partners, Liberia signed a Governance and Economic Management Assistance Program (GEMAP) in 2005 (Dwan, 1).
GEMAP is a wide scope program and is given the role of responding to the mismanagement likely to be going on after the conflict; government procurement; revenue collection; concession practices; expenditure control and accountability in general (Dwan, 6). GEMAP is intended to ensure that corruption in government is completely abolished through requiring accountability and setting up an anti-corruption commission (Dwan, 1). The program sends out experts in the various ministries to investigate corruption and oversee the income and expenditure planning.
Another strategy that Liberia has incorporated in their economic policy is the Liberia Poverty Reduction Strategy (LPRS), meant to be implemented between 2008 and 2011. LPRS aims at enhancing peace and security; strengthening the government; revitalizing the economy and undertaking the revitalization of the infrastructure and other utilities in the country. These constitute of the four pillars that the government is using to lay a foundation for sustained growth and development. The program has
As much as the involved parties recognize Liberia’s need for an urgent solution to their problems, different views have emerged more so concerning the possibility of Liberia to maintain the current peaceful state. These to a certain extent have shaped the outcomes of the policies. For example, the US Inter-agency made a review of interventions performed in Sierra Leone, Angola and Chad and suggested that Liberia needed a mix of interventions; one to avoid any more future civil conflicts and second to help revive the economy and ensure continuous growth (Dwan, 6).
A discussion held in Washington concluded that international intervention would do well for Liberia which was facing severe economic hardship. The international support has made it easier for Liberia and so far various projects have already taken off. For example, the reconstruction of Monrovia whose infrastructure including electricity and water had been extensively damaged is at an advanced stage (Smith, 156).
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