07/05/2010
Source: http://www.frontpageafrica.com/newsmanager/anmviewer.asp?a=11097&z=3
BLAME GAME: While many have been laying the bulk of the blame on President Ellen Johnson-Sirleaf, research by FrontPageAfrica suggests that there were other players-other than Sirleaf involved at the highest level of the process during the period the loans forgiven last week, were acquired. Besides Sirleaf, Stephen Tolbert - brother of the president also served in the capacity as Minister as did Edwin Williams and James T. Phillips. Sirleaf did serve as the principal minister (Deputy minister of expenditure and debt services) under these minister before she was elevated to the position as minister.
Monrovia - An old ghost from Liberia’s pre-war past is slowly making its way into the debate of the 2011 political discourse. When the World Bank and the International Monetary Fund announced last week its full support for US$4.6 billion debt relief for Liberia, the post-war government seized the moment as a major accoplishment of its five-year reign. While supporters have been trumpeting the achievement as a key ammunition heading into the 2011 presidential and legislative elections, at least one opposition party appears to have found a potential loophole. Looking to score political points, Charles Brumskine’s Liberty Party, In a statement last week, laid much of the blame on the incumbent president when it said, it was constrained to implore President Sirleaf and her government to consider mistakes of the past, during which she was Minister of Finance and a senior policy and decision maker of government, that resulted in such enormous debt of which the people of Liberia, their children, and grandchildren have been saddled for so long.”
So where did all the billions go? Depending on who you ask, there are a lot of blame to go around surrounding the billions of dollars in debt forgiven by the World Bank and the International Monetary Fund last week.
For years, conflict and mismanagement left Liberia with a large debt burden of $3.4 billion, owed to multilateral development banks, bilateral creditors, and commercial creditors. In April 2009, most commercial creditors agreed to accept three cents on the dollar for $1.2 billion in outstanding debt. Liberia has made strides to improve public financial management which led to fulfillment of the Heavily Indebted Poor Countries (HIPC) Initiative last week.
Months after he ended decades of Americo-Liberian rule, Master Sargeant Samuel K. Doe refused to pay the debt but later spearheaded a campaign requiring government employees to pay one dollar each from their paychecks toward paying off the debt. Dr. Togbah Nah Tipoteh, who was Minister of Planning and Economics Affairs at the time, says Doe’s initiative was partly successful. Says Tipoteh: “After election. Doe said Liberians should pay one dollar each to pay off the debt – and many Liberians did.”
In September 1981, Doe seeking to silence his critics and reassure foreign investors or Liberian businessmen of stability, appointed Colonel Harrison Pennue, a former corporal and Doe loyalist as head of a People’s Redemption Council(P.R.C) committee charged with collecting $36 million owed by private debtors to the defunct Bank of Liberia. Doe came under severe criticism when his government was taken to task for failing to turn over a cent of the funds collected to the central bank.
Time Magazine reported that year that at the same time of Pennue’s committee issues, Doe met with Western diplomats and businessmen to inform them that shakedowns would stop, Pennue ordered his bodyguards to hold down the manager of the government-controlled radio station while the colonel flogged him with a belt. The man's crime: passing Pennue's car. which was stopped along Monrovia's main street. Doe finally jailed Pennue for four days as a "warning" to other P.R.C. members.
But despite the P.R.C.'s excesses, the U.S. Government remained supportive of the regime. While total foreign aid was drastically slashed by the Reagan Administration, U.S. annual assistance to Liberia leapt from $8 million during the last year of Tolbert's presidency to $68.3 million in 1981, an increase, at a time of general retrenchment. Washington, according to Time Magazine, explained at the time that there was "no visible alternative" to the Doe regime.
Dr. Tipoteh recalls that Sirleaf, minister at the time also served as Deputy Minister prior to becoming Minister. “Even she has admitted that a lot of the aid came under her watch,” Tipoteh explained.
From Tolbert to Sirleaf
While many are laying the bulk of the blame on Sirleaf, research by FrontPageAfrica suggests that there were other players-other than Sirleaf involved at the highest level of the process during the period the loans were acquired.
Besides Sirleaf, Stephen Tolbert - brother of the president also served in the capacity as Minister as did Edwin Williams and James T. Phillips. Sirleaf did serve as the principal minister (Deputy minister of expenditure and debt services) under these minister before she was elevated to the position as minister.
But prior to the OAU 1979 summit, President Tolbert lobbied at an OAU conference for Liberia to host the OAU Summit in Liberia so that he would be its Chairman. This was approved hence the OAU summit of Heads of States and Government was held in Liberia. Among the projects undertaken for the summit were: New terminal built at RIA together with a VIP Lounge and a Hotel; Road paved from RIA to OAU center via Monrovia and Gardnerville; New bridge constructed (Johnson street bridge); New ministry of foreign affairs constructed; New conference center constructed in Virginia; 50 new villas constructed in Virginia for the 50 heads of states attending the conference; Hotel constructed at the center in Virginia for guests; New road constructed and paved from Monrovia to Bensonville - the president home; 50 Mercedes Benz purchased from Germany for the 50 heads of states. a ship; chartered from Germany to transport these vehicles to Monrovia; To accommodate additional guests, two floating ships were leased from abroad and used as hotels for about a month.
Doe Govt approached Paris Club on Debts
A former Finance Minister who preferred anonymity for this report informed FPA that all of the projects were financed from loans obtained from foreign governments, World Bank, ADB and IMF and mainly Commercial Banks with high interest rates.
According to the minister, when Sirleaf became minister, the government of Liberia leased the Penthouse at the top of the Ministry of Education - Broad Street for her and the lease was paid for up lease up to the time of the coup. When the coup occurred GOL loan obligations to creditor nations and banks was about US $2.5B - Dr. Tipoteh was made Minister of Planning while Perry Zulu was minister of Finance.
When Doe became Head of State, a freeze was placed on loans on the government - both banks and government. The Doe government had to approach the PARIS Club - Creditor nation debts for rescheduling as well as the LONDON Club for the rescheduling of Banks debts. “Several times GOL was in Paris and London to do this,” said the former minister.
But while many have laid the blame on Sirleaf, Doe was not completely shut out. During his reign, Doe received GRANTS for the United States Government to build the police and AFL barracks; The US Government also gave GOL through USAID - annual grants known as ESF (Economic Support Fund) to assist reducing some its debts. These funds were reportedly handled by the US Embassy and USAID.
Psychologically, a plus
Emmanuel Gardner, a former Minister of Planning and Economics Affairs says most of the funds borrowed went toward infrastructure development: “During the Tubman and Tolbert eras there were no roads as a result those monies went toward building infrastructures. Most of the money went into infrastructure development largely. But the mere fact that the debt is not on our head again, psychologically, it is a plus.”
The debate over where the monies went resurfaced last week when the opposition Liberty Party cautioned the ruling Unity Party government against making similar mistakes which put Liberian in the position to accumulate millions of dollars in debt. The party went on to note that much of the debt forgiven was accumulated during the period when the current President Sirleaf was Minister of Finance. In fact, critics say, those debts were acquired particularly during the summit of the Organization of African Unity(OAU) and Sirleaf was the principal technician in acquiring those debts.
Sirleaf Admits on Kuwait Loan
Welcoming the IMF and World Bank announcement of debt relief last week, President Sirleaf took responsibility only for one of the debts, when she said during her recent visit to Kuwait, she and the Kuwaiti government spoke about a loan signed 32 years ago for road construction, and how to clear up that debt.
Said Sirleaf: “Back in 1978, I personally went to Kuwait and signed that loan myself, for US$6.7 million. We built the Cape Mount road from that money, and that road is still good today. But because we didn’t pay back the loan, the debt has grown to US$12 million. The Kuwaitis want to come back to help us with other roads, once we settle this matter.”
Ironically, critics of the post-war government point out that much of the debts incurred by Liberia have been described as commercial and was accumulated during the hosting of the 1979 summit of the Organization of African Unity(OAU) during which time, infrastructures like Hotel Africa, the Ministry of Foreign Affairs and multiple villas were constructed to host African heads of states during the period because there were not sufficient hotels. The Government of Liberia went as far during the time to acquire a floating boat which it rented and used as lodging for some of the international guests.
The irony, critics say is that after the Tolbert years, Liberia received very little in terms of loans in the administrations which followed. During the Samuel Doe, Charles Taylor eras there were no loans and Liberia had to shift attention to the Paris Club.
Prior to the OAU conference, much of the road and infrastructural developments were stagnant, thus, the OAU conference prompted the Tolbert government to build roads throughout greater Monrovia – from Bushrod Island to western Liberia. From New Georgia, Gardnersville, and Barnesville to Paynesville.
Now years later, critics are pointing to the era where much of the debt Liberia has now been forgiven to suggest that the ruling post-war government should not take credit for something it created in the first place.
UP vs. LP: Differences on waivers
Taking exception to the Liberty Party’s position, the Unity Party, in a statement Sunday said while it welcomed the commendation of President Ellen Johnson Sirleaf and her government by Executive Committee of Liberty Party for her leadership in clearing Liberia’s US$4.6 billion external debt, it was important to note that the Liberty Party was not supportive of the Sirleaf Administration when it embarked on its economic program in 2006, and is therefore most gratified that a policy consensus across party lines appears to be emerging. We therefore gratefully thank its Executive Committee for the commendation of the Sirleaf Administration for reaching the completion point under the HIPC initiative; retiring a $1,300 debt burden for each and every Liberian citizen.”
The ruling party also took issue with the opposition party’s call on the government to the fact that debt waivers obligate the assisted government to devote the waived debt proceeds to capacity development, institution building, and infrastructural development. “Unless these are begun urgently, debt waiver will not positively impact Liberia and its future,” the Liberty Party said.
Countering the Liberty Party, supporters of the post-war government explain that there is no such thing as waived debt proceeds that can be used for any purpose since this debt which consist of huge accrued interest and penalties as a result of past administrations not servicing the debt, is simply forgiven. Administration officials are quick to not that there is only a little fiscal space to promote accelerated development.
Relief key to recovery
Amid the internal wrangling over the waiver of post-war Liberia’s debt of yesteryears, the ruling party is enjoying a swarm of praise over the achievement. The U.S Department of the Treasury last week, declared that reaching "completion point" under the Enhanced Heavily-Indebted Poor Countries Initiative (HIPC) recognizes Liberia's performance under its International Monetary Fund (IMF) program and its excellent progress on adopting and implementing economic reforms in the face of a challenging economic environment both domestically and internationally. "Today's decision marks a major achievement in Liberia's progress towards economic sustainability and the international community's recognition of that progress. This is a great milestone for Liberia," said Under Secretary for International Affairs Lael Brainard.
Relief of Liberia's debt burden is crucial to Liberia's recovery after years of violence and civil war. To allow Liberia to move forward in rebuilding its economy and in light of its achievement under the Enhanced HIPC Initiative, the United States intends to cancel 100 percent of its remaining claims after the September meeting of the Paris Club of international creditors, bringing the total amount of U.S. debt relief for Liberia under HIPC to more than $400 million. The U.S. has meanwhile urged Liberia's other bilateral creditors to be equally generous."
Since 2008, Treasury technical advisors have been working closely with Liberia's Ministry of Finance to implement a Code of Ethics, strengthen internal controls to deter and detect corruption, and improve tax collection procedures.
In accordance with the Enhanced HIPC Initiative and the Multilateral Debt Relief Initiative, "completion point" will bring cancellation of an estimated $2.7 billion in debt from the Paris Club, the IMF, World Bank, African Development Bank and other creditors. The cancellation marks the culmination of a process that will ultimately result in a greater than 90 percent reduction of the debt inherited by Liberia's government, which has been estimated at $3 billion in 2007 (in net present value terms).
With the IMF and World Bank agreeing to support cancellation of Liberia’s debt, attention will now be shifted to the Paris Club where Liberia still faces a daunting task to press for relief of debts from countries under the club’s umbrella.
In the foreseeable future though, the issue appears to be emerging as a hot bottom topic for an incumbent government heralding it as an achievement and the political opposition looking to score countering points. For now, many Liberians are basking in the glory.
Amid the debate, Tipoteh who was Planning Minister after the coup of 1980, says Liberians should at least feel good that the government has put the post-war nation in the position to burrow again. Regardless of what happens with Liberia in the aftermath of the achievement of the HIPC completion point, the road to 2011 appears to have a lot of interesting twists and turn. The latest, regarding the debt relief issue appears to be generating some traction. How the end justifies the means remains to be seen. For now though, the ruling party is hopeful that the cancellation of debts marks the beginning of the end of the post-war nation’s economic blues. For those on the outside looking in the debate over whose responsible may be in play for some time as the post-war nation prepares for perhaps the most crucial elections in the history of Africa’s oldest republic.
