Political and Security Update
The administration of President George M. Weah will clock two years in office in January 2020 and will be taking stock of its deliverables in terms of social services and fulfilling campaign promises to the people of Liberia and what to achieve for the remaining four years. The government put into place its Pro-Poor Agenda for Prosperity and Development (PAPD) at the latter part of the first year. The PAPD is guided by four pillars focusing on empowering Liberians through education, health, youth development and social protection, enabling private sector-led economic growth, supporting a peaceful society, and creating an inclusive and accountable public sector.
During the period under review, the country’s economy was challenged with rising inflation as a result of significant depreciation of the Liberian dollar against the United States dollar and other factors. This hampered the Government’s ability to fully deliver services and meet other obligations. Consequently, the Government is working with its development partners to help it tackle the economic glitches, while instituting measures to promote growth and development, critical for sustaining peace and stability.
Following the highly contested 2017 Presidential and Legislative Elections that ushered in the George Weah-led administration into office, Liberia is bracing itself for the Senatorial Mid-Term Elections in 2020. The tenure of 15 out of 30 senators will be expiring and those seeking re-election will have to face the electorates. The Legislature has passed a bill for a national referendum to reduce the tenure of the President and members of the House of Representatives from six to five years and senators from nine to seven years. Dual citizenship is also included for the referendum.
Liberia’s economy is projected to contract by 1.4% in 2019, following the modest growth of 1.2% in 2018. Inflation reached 31.3% by August 2019, up from 26.1% the previous year. The non-mining sector is expected to contract by 3.4 per-cent in 2019, on the back of contraction in services and manufacturing and weak performance in agriculture, while mining sector is expected to grow by 7.8% due to increased production of gold and ore.
The overall fiscal deficit of the central government widened from 4.1% of GDP in FY2017 to 4.8% of GDP in FY2018 and further to an estimated 6.2% in FY2019, reflecting low domestic revenue mobilization and high public spending. Tax revenues accounted for 12.1% of GDP in FY2019, which is low by regional standards. The wage bill increased to 10.1% of GDP or over two-thirds of total expenditures in FY2019, crowding out other recurrent expenditures, particularly the provision of goods and services in the social sectors and infrastructure spending. The larger fiscal deficit led to a rapid increase in public debt from 40.2% of GDP in FY2018 to 54.5% of GDP in FY2019.The Government is currently implementing wage bill reforms intended to reduce the size of the wage bill, going forward.
Liberia’s current account deficit narrowed to 21.1% in 2019 from 23.4% of GDP in 2018. This was largely due to a decline in imports following the complete UNMIL drawdown, while exports of gold and iron ore rose. However, these improvements were offset by a fall in net income and decline in Foreign Direct Investment (FDI) and donor transfers, and consequently gross official reserves declined from USD 333 million (2.5 months of import coverage) at end- 2018 to an estimated $280 million (2.1 months of import coverage) at end-2019.
Liberia’s medium-term growth prospects are expected to improve as macroeconomic stabilization and structural reforms get implemented. Following the expected contraction in 2019, GDP growth is projected to recover to 1.4% in 2020 and further to 3.4% in 2021, driven by the recovery in the non-mining sector and a moderate expansion in the mining sector.
Last Updated: Oct 16, 2019