Liberia’s Desperate Cry for Growth and Employment and

Liberia’s Desperate Cry for
Growth and Employment and
How to Fix the Problem
A Comparative Analysis between Liberia’s Post-War Recovery and that of Sierra Leone and other African Countries Hit by Conflict
By: Chu-Chu “Alex” Jones
A Research Paper on the Cause of Hyper-Unemployment and Slow Growth in Liberia.
A Growth and Employment Exchange Working Paper
July, 2013
Under normal circumstances, an average growth rate of 7.5% over six consecutive years would
be adequate to achieve sustainable employment and economic growth in Liberia. However, due
to Liberia’s paltry Gross Domestic Product (GDP) of US$2.6 billion, its recovery has lagged behind that of similar countries that also suffered brutal and prolonged civil conflicts such as Sierra
Leone with a GDP of US$8.3 billion and Rwanda with a GDP of US$14.9 billion. With such a
tiny GDP, the Liberian Government has had to choose between spending today or investing for
tomorrow leaving no realistic option but the former. Hence the resulting lack of investment by
the government in its local industries over the last six years has led to inadequate growth and
hyper-unemployment. This is now beginning to fuel public outcry and trepidation among its
This research paper examines some of the flaws in the Liberian government’s economic and financial policies and the slow recovery that exists today even as its neighbor, Sierra Leone continues to experience a more rapid economic expansion and development. With time running out
and international support dwindling, this paper identifies the main culprits causing the slow
growth and lack of job creation; that is, government failure to provide enough capital investments for its citizens, industries and banks.
This essay makes three recommendations to solve this problem: (1) Establish a growth and employment commission (2) Reduce the Central Bank of Liberia’s interest rates and (3) Begin financing Liberian owned and managed banks and enterprises which will help protect against the
proliferation and control of foreign owned banks and the mass expatriation of capital from Liberia. This essay also analyses how these measures, if taken in a timely manner, will not only help
stabilize and grow Liberia’s economy and create jobs but also enable Liberia’s GDP to catch up
and possibly surpass that of its peers.
Author’s Contact Information:
C. Alex Jones, Founder & CEO
The Growth and Employment Exchange for Africa (GEE)
[email protected]
*The Author would like to thank Mr. Joseph Gbonoi for useful comments, fact checks and suggestions, Dr Bola
Jones for publication services and Mr. Paul Kennedy for his constructive feedback. Numerous dialogues with Dr
Joseph Verdier over the years have also help formulate some of these ideas.
I. Introduction ........................................................................................................4
II. Sierra Leone’s recovery versus Liberia’s .......................................................4
III. Policy Mishaps ..................................…...........................................................6
IV. The Importance of GDP growth ……………………………………………...8
V. Growth and Security……………………………………………………….....11
VI. Recommendations …………………………………………………………...14
VI. Conclusions......................................................................................................16
After enjoying much international press and support over the last few years, the nation of
Liberia once again faces its two main nemeses – slow growth and hyper-unemployment. This is
what some believed caused its long and brutal civil war which left hundreds of thousands dead
between 1990 and 2003. The government continues to experience huge budgetary, trade and
revenue shortfalls and rising expenses in excess of tens of millions of dollars each year as unemployment remains extremely high (around 75% by some estimates). A combination of government cost-cutting in key sectors in order to meet their obligations in other areas combined with
the lack of adequate capital investment in local enterprises has led to a shabby post-war recovery
and renewed frustration among many Liberians, particularly young people, who are now expressing public outrage and threatening mass demonstrations.
Investments by the government of Liberia in local industries that could have created new
jobs have been virtually absent. Since the end of the civil war in 2003, Liberia has received billions of dollars in financial aid, debt relief and humanitarian assistance primarily from the United
States, European Union (EU) and The Economic Community of West Africa States (ECOWAS)
who contributed much of the peacekeeping troops during the earlier stages of the civil war. To
this day, much of the security including the military is still paid for and provided by the United
Nations Missions in Liberia (UNMIL), one of the largest peacekeeping operations in the world.
Over the last five years, Liberia has also entered into or modified dozens of mineral
agreements estimated to be worth over US$10 billion primarily from its oil and iron ore deposits.
With the country not having to pay for much of its own security, healthcare and most of its rebuilding efforts, many are now beginning to wonder where the hundreds of millions the country
received from tax revenue, natural resource royalties and direct monetary donations from other
countries have gone.
Liberia’s gross domestic product (GDP) has only grown to US$2.7 billion (one of the
smallest in the world)1. With a GDP this tiny and the unemployment rate way above 50%, it will
be difficult to achieve any tangible and sustainable economic development, unless real efforts are
made in a timely manner to reverse this troubling trend.
Sierra Leone’s Recovery vs. Liberia
By comparison, Sierra Leone, a geographically smaller country which borders Liberia
has the opposite experience with much better growth and economic transformation following its
protracted civil war. A combination of better domestic management and effective national poli1
cies that place greater emphasis on local participation has made this nation the world’s second
fastest growing economy in 2012, according to the World Bank and CIA World Factbook. Sierra
Leone’s economy, once smaller and weaker than Liberia only a few years ago, is now more than
three times larger and stronger than Liberia’s.
Sierra Leone’s GDP grew 21% in 2012 and is on track to post another double digit
growth this year2. Unemployment has also fallen. Sierra Leone's nominal GDP has reached
US$8.3 billion compared to Liberia’s paltry US$2.6 billion. In recent years, Sierra Leone has
been spending US$134 million a year on infrastructure.
About 70 percent of total infrastructure spending has been investment, and more than half has
gone to the transport sector, according to a recent World Bank Report. With Liberia’s current
growth rate below 9% and nominal GDP of US$2.6 billion, it would take Liberia about 14 years
to reach Sierra Leone's current GDP. This is of course if Liberia’s inflation rate (the rise in prices
of goods and services over a period of time) remains below 7% and it continues to receive unprecedented financial assistance and budget supplements from the US, EU and China.
Liberia’s projected compounded 9% growth over 14 years
Source: | Employment and Growth Exchange
Meanwhile, even if Sierra Leone experiences a 50% decline in growth from its current
growth rate of 21%, its economy (nominal GDP) could reach US$31 billion by 2030. Should
Sierra Leone keep its growth rate at or near its current levels of 21%, its economy will reach
nearly US$100 billion by 2030 (about the current size of New Zealand and significantly larger
than the current economies of Bulgaria, Ghana, Botswana and Luxembourg).
Burkina Faso, Rwanda and Mali’s GDP will each also reach US$20-US$30 billion by
2030 based on their current GDP and growth rate. Conversely, Liberia must grow significantly
higher, perhaps at a growth rate of 15%-20%, to have a fighting chance of growing its GDP to
US$10 billion by 2030. This is not impossible. Case in point; Libya grew at a rate of 125% in
2012, a year after it experienced civil war and was the world’s fastest growing nation in 2012. A
post conflict season presents one of the best opportunities for a country to reach double or even
triple digit GDP growth rates: Afghanistan, Iraq, and many others are some great examples of
incredible postwar growth.
Liberia’s Policy Missteps
Liberia may have already missed most of its post-war growth opportunities. This is due
in part to excessive preoccupation with debt relief, which almost every developing country received and which was expected to sequentially grow the economy. Combined with this is Liberia’s high dependency on mineral contracts with foreign companies which were seen as a catalyst
for job creation and the widespread practice of downsizing in lieu of government investment in
state and local enterprises. These policy missteps by both current and past finance officials have
resulted in very little growth being achieved. In addition, very little or no investment went into
repatriation of Liberia’s brightest citizens living in the diaspora who could have significantly
contributed to the country’s economic growth and management.
Furthermore, the government has spent too much time deliberating on trivial issues such
as whether to allow its citizens living in the United States and elsewhere to hold dual citizenships
instead of addressing the real problems of mass poverty, inequity and unemployment. To make
matters worse, rather than investing in manufacturing plants and supporting local businesses, a
significant portion of all revenue received from taxes and natural resources is spent on inconsequential and expensive international travel by government officials. This is particularly wasteful
at a time when digital communication and real-time free video teleconferencing tools like Skype,
real-time chat and electronic mail are commonplace. The Liberian civil war which ended over a
decade ago still remains the standard excuse for the country not being able to accomplish even
the most basic tasks such as organizing a national employment identification database or producing basic products such as table salt, milk and sugar, etc.
The resounding hope and aspirations that emanated from the elections at the end of the civil war
have dissipated as a result of renewed economic turbulence and unrelenting hardships faced by
the majority of Liberia’s populace. Having grown its real GDP to 9.4% in 2007 following the
2006 presidential elections, Liberia’s GDP quickly declined over the next five consecutive years,
and at one point in 2010, it fell to as low as 4.6%. With an average GDP growth below 7.5% and
massive unemployment, Liberia’s economic future is treading on very thin ice; especially since it
has not managed to break into double digit growth like Sierra Leone and other post-war countries. Additionally, the falling prices of commodities, which Liberia depends upon for much of
its revenue, will continue to create a headwind for growth and employment.
Rather than focusing on these real declines, the current debate is centered around the issues of dual citizenships and the miniscule US$400-US$500 million annual budget of which
every member of the Liberian government (executive and legislative) vies for a piece in order to
meet their own political and personal agenda (salary, vehicles, and personal allowances, etc.).
By contrast, Rwanda and Burkina Faso both recently passed a US$1.7 billion and U$2.6
billion annual budget (they are able to pass much larger annual budgets due to the sheer size of
their respective GDPs). Had Liberia focused more on economic growth and less on political
wrangling over the last five years, it too, perhaps could have passed budgets in excess of a billion
dollars by now which would have meant more money for education, health, job creation and reconstruction. Empirical data over the last five years suggests that revenue is usually around 20%
to 25% of GDP with means a US$5 billion GDP in Liberia would likely result in a $1.2 billion
budget annual budget.
Importance of GDP Growth
The size and growth rate of a nation’s GDP is a direct reflection of its strength and capability. Argentina, Brazil, China, Indonesia, Mexico and Turkey, to name a few, were once poor
developing nations just a few decades ago. By growing their GDPs to or near a trillion dollars
each, these countries have made themselves bona fide members of the group of 20 finance ministers and central bank governors or G20 which together with the western powers and China account for 80% of the world’s product, trade and nominal GDP.
A country’s economic strength is expressed in its GDP and not its geographical size,
creed or political system (Democratic, autocracy, etc). This is what also gives a country prominence at the world’s most influential organizations: World bank, International Monetary Fund,
World Trade Organization, and believe it or not, even at the International Federation of Association Football (FIFA). A country could be as large as China or as small as Liberia; the single most
significant data is its GDP. GDP and security have the most significant impact on human living
standards including education, job creation and mortality rate, especially for the infant and elderly, according to most economic experts.
There is also a direct correlation between a country’s tax revenue, infrastructure development and its GDP. For example, the US$8 billion plus nominal GDP of Sierra Leone, South
Sudan, Rwanda and Mali (i.e. nations that have experienced or are experiencing protracted civil
war) allows these countries a greater tax revenue receipt which gives them much more ability to
build infrastructure and pay for public services like water, sanitation and education than countries like Liberia and Eritrea which have significantly smaller GDP. Despite receiving much
more technical, financial and security assistance, Liberia’s GDP remains undersized at US$2.6
billion and is inadequate for generating enough tax revenue to address most of Liberia’s socioeconomic and development challenges. With very little growth momentum (falling commodity
prices, etc.) alongside increasing expenditures (rising cost of food, fuel, equipment, labor, etc.),
the country could end up in an economic downward spiral in the coming years if this trend is not
addressed sooner rather than later.
The failure on the part of the Government (particularly its financial and economic policy
makers) to adequately plan and prepare for these eventualities is now causing panic with ensuing
ripple effects throughout the nation according to recent reports. With no clues on how to reverse
the country’s current economic predicament, particularly mass unemployment, Liberians are becoming more uncertain about their future, fueling increasing discontent and disillusion both at
home and abroad. The cry for leadership, especially in the area of financial planning and management is thus ever increasing.
Plan after plan followed by carefully crafted speeches over the last decade (poverty reduction strategy, development plans, vision 2030 etc.) have yielded little or no real positive benefits towards job growth and better living standards in Liberia. The recent decline in government’s revenue and the lack of investment in job creation will only accelerate if a viable economic plan is not put in place sooner rather than later; as Sierra Leone and other recovering African nations did when confronted with a similar crisis. Liberia will also face a much harder time
if and when international support (financial and security assistance) dwindles in the coming
years if it does not prepare now.
African Conflicts, Despotism and GDPs
Conflict Period
# of
GDP (nominal)
GDP Growth
12 mil.
16 mil.
$14.9 Bil
$17.3 Bil
Sierra Leone
1 mil +
5.6 mil.
24 mil.
$8.3 Bil.
$26.2 Bil.
1982-2002 *
1.4 +
93 mil
35 Mil
6.2 Mil.
$103 Bil
$50 Bil.
$4.4 Bil.
Southern Sudan
34.8 Mil
11 Mil.
$80 Bil.
$9.6 Bil.
10 Mil
11.1 Mil.
34.7 Mil.
$5.8 Bil.
$21.3 Bil
$20.4 Bil.
2.1 Mil.
10.8 Mil.
$17 Bil.
$5.5 Bil.
17.8 Mil.
18.5 Mil.
$24.3 Bil.
$126 Bil.
5.1 Mil.
$3.1 Bil
6 Mil.
$87.9 Bil.
75.5 Mil.
27.5 Bil.
Burkina Faso
1974, 1985
Central Africa Republic
DRC (Zaire)**
1960-1966, 19962009
2.5 Mil.
500k +
5.4+ mil
Cote d'ivore
22.4 Mil
39.6 Bil.
1990- 2003
13 200k +
3.9 Mil
2.6 Bil.
* not including war with Tanzania ** Not including several previous civil wars, *** brief period of peace
1967 to 1996 **** not including war b/w Somalia and Ethiopia
Source: data from CIA world Fact book and Wikipedia
The above data details some startling revelations about African conflicts and recoveries.
It shows how African countries with some of the longest and most relentless civil wars have
maintained some of the largest GDPs and in some cases are among the fastest growing economies on the continent today. Ethiopia, Sudan, Rwanda, DRC, Mali, Uganda, Namibia and Chad
have all endured civil conflict much more severe, both in terms of duration, casualties and magnitude than Liberia. Most of these countries first experienced hostilities as early as 1960 while
some are still experiencing conflict in one form or other to this day, yet most have managed to
still produce and grow their economies to a substantially higher level than Liberia. Rwanda, after a series of unrests and one of the worst genocides in modern history, is today a model of
growth, good governance and better standards of living.
A recent report by the United Nations Development Program (UNDP) highlighted the
remarkable transformation of Rwanda by its government noting its 12% reduction in poverty and
how the government empowers every citizen to take the lead in their own community’s development. In 2011, its industry sector was one of the best performers in Africa, generating 15%
growth in total, with 22.3% growth in the construction sector, 15% growth in the mining sector,
and 6.8% in manufacturing. The agricultural sector was also noted among the best performers in
2011, with 9.5% growth during the last three years. The services sector grew 7.2% boosted by a
gradually favorable business environment: finance and insurance grew 10.3%; transport and
communications grew 5.6%; and wholesale and retail trade grew 4.9%, according to the report.
Most notable, this growth was spearheaded not by foreign firms and companies, but by businesses mostly owned and managed by Rwandans3.
Rwanda is significantly smaller than Liberia and is landlocked. With a population of 12
million, it is one of the most densely populated countries in Africa, and by some estimates the
world. Unlike Liberia, Rwanda is also endowed with very little natural resources which have
helped it become one of Africa’s largest exporters of processed tea, coffee and hides. Remarkably, and against these odds, this country’s leadership has implemented sound economic policies
over a decade that has made it a development model for Africa.
The hopes and aspirations of Liberians to not only participate but also take a lead role in
managing their economy is growing. Many Liberians overwhelmingly subscribe to Liberians
managing their own economy. Like the Ghanaians, Rwandans, Botswanans, Namibians and now
Sierra Leoneans, they too want to spearhead their own recovery and development, however, the
government remains sold to the idea of more UN, Western and Chinese control and headship.
Dreadfully, banking, finance, mining, and construction are still mostly controlled and supervised
by non-Liberian firms. The government’s seeming preference for contracting Chinese, Lebanese, Europeans and other foreign based companies over Liberian ones is counterproductive to the
growth and empowerment of its people and in sharp contrast to what is taking place in that of its
neighbors Rwanda, Burkina Faso, Ghana, Botswana and most notably Sierra Leone.
Growth and Security
As Banking and other sensitive areas of the Liberian economy are overwhelmingly controlled and managed by outsiders, this often results in profit expatriation which further weakens
the economy and currency. Rwanda, Burkina Faso, South Sudan, Namibia and more recently
Sierra Leone have all taken steps to shield their economies from this kind of foreign control, as is
done in America, Europe and China. This is precisely the reason why by law, no foreign firm or
individual can own more than 5% stake or manage a major US or European bank or financial
institution. Similarly, the Chinese government and people own and manage most of their banks
and financial institutions, not outsiders. Today, eight out of nine banks in Liberia are owned and
managed by foreign nationals, the only known country in the world to allow this. The government appears to believe in aiding and supporting foreign firms over local Liberian ventures. It
provides smoother passage for foreign banks and businesses while subjecting Liberian owned
banks and businesses to undue bureaucracies and red tape, often taking several months and in
some cases requesting bribes ( to speed up the process) for starting a bank or business.
Nigeria, Ghana and European banks and insurance companies are attracting huge capital
and expropriating tens of millions of dollars from Liberia and other less financially insulated
countries. Union Bank of Nigeria attracted $750 million in investment from the African Capital
Alliance Consortium (a group of businesses around Africa) in one single transaction in 20114. A
good place for Liberia to start to improve its economy is for the government through the Central
Bank to begin providing financing to Liberian owned and managed banks and businesses.
One great example of this kind of financing would be for the government to fund businesses like
Korto Momolu International (a highly successful Liberian designer, featured on US Bravo TV
Project Runway and whose apparel is now being sold in the United States at Dillard’s Department Stores 5). If the Liberian government were to secure funding and begin manufacturing this
and other goods in Liberia, such investment will not only generate jobs for many Liberians but
will also reduce Liberia’s dependency on apparel and other goods imported from China and
abroad. More importantly, it will create a new sense of pride fashioned in the renaissance of
goods "designed and made in Liberia".
Following the examples of the US and the UK Central Banks, the Nigerian Central Bank
continues to pump hundreds of millions into its private banks and businesses. In 2009, The Ni4
gerian Central Bank under the leadership of Central Bank Governor Sanusi Lamido Sonusi, provided over N400 billion Naira or US$2.5 billion dollars to four of Nigeria’s largest private banks.
In a similar move, a recent press statement by the current Nigerian Central Bank Governor reads
" To improve access to finance SMEs, the Central Bank of Nigeria has approved the investment
of the sum of N500 billion or US$3.6 billion debenture stock by the bank of industry”, a Nigerian government finance institution setup to support and fund Nigeria’s banks and industries6.
Government programs like these are what give western and more recently Nigerian banks and
businesses a competitive edge over Liberian banks and businesses. In order to substantially
grow Liberia's economy and reduce high unemployment, its Central Bank too must start providing funding (for the creation and expansion) of Liberian owned banks and industries as central
banks in other countries do.
One must wonder why the Government of Liberia relies on advice that is indifferent to its
economics’. Why does it continue to pay tens of thousands of dollars to foreign consultants like
Steve Radalet (The economic adviser to President Ellen John-Sirleaf’s and the Liberian Ministry
of Finance, who spends only a few days at a time in Liberia) despite poor economic results?
Filled with irrational exuberance and a lack of personal touch with the Liberian people, Radalet
wrote the following in the opinion section of the New York Times in 2007 titled The End of An
African Nightmare7 : "I am witnessing a truly remarkable turnaround. I am in Monrovia, Liberia, in the midst of what until recently was a horrible war zone, but is now a place of hope led by
the indomitable President Ellen Johnson Sirleaf". Radalet even went on to suggest that Liberia’s
economy was growing…” when in fact the economic had started to decline. It would be interesting to find out what Radalet has to say now, five years later; with unemployment still remarkably
high, poverty still pervasive and over 68% of Liberians still live on less than a US$1 a day, according to recent World Bank and IMF reports8?
Was the advice given by these “foreign experts” to mortgage and concentrate all of Liberia’s
natural resources in the hands of a few foreign companies as opposed to dismantling the gross
inequalities and disenfranchisement that exist between the handful of Liberia’s elites and the rest
of the population effective? Probably not. Were the sales of Liberia’s oil and mineral resources
to foreign bidders for what amounted to pennies-on-the-dollar and which most observers believe
was premature considering Liberia’s lack of expertise and readiness at the time, a good idea?
Obviously not. The Global Witness, a reputable international watch group questioned and criticized those mineral deals in Liberia as a shabby arrangement that left the country worse off9.
A World Bank policy research paper titled “Investing Mineral Wealth in Development
Assets - Ghana, Liberia and Sierra Leone” made the following conclusion about Liberia: “A recent assessment of the mining sector showed that there are still gaps with respect to the government’s readiness to harness the full potential of the prospective mineral boom in Liberia. The legal, regulatory and fiscal framework of the mining sector suffer from several shortcomings…”.
This Paper also stated that the government of Liberia had signed Mining Development Agreements (MDAs) with four key companies: China Union, Arcelor Mittal, BHP Billiton and Putu,
which are at various stages of readiness to start production over the period 2011-2015. MDAs
foresee that the four companies will invest a total of US$8.0 billion over the period of exploration and create about 10,000 jobs, a drop in the ocean for a workforce of over a million people.
According to the report, about 90 percent of the mining sector’s payments were upfront payments. The report cited one such lump sum of US$38 million in 2010, negligible compared to
the billions Arcelor Mittal and BHP Biliton will make from these minerals when converted to
steel. Botswana, which has one of the higher per capita and living standards in Africa, owns
50% in all concessions in their country, a startling contrast with the deals made by the Liberian
government 10.
I met President Sirleaf in 2007 at a town hall meeting in Harlem, New York City and cautioned
that strengthening Liberian-owned enterprises and industries was the best way to reduce unemployment and poverty; although gracious in her response, she was confident at the time that their
economic plan, potentially those proposed by Radalet and other western advisors was adequate.
Unfortunately, six years later, Liberia is at a dead-end and those experts are nowhere to be found
or heard as more and more Liberians, especially young people, protest of deplorable living standards and lack of job opportunities.
When owners of businesses catering to Liberians in the US were seeking a small form of financial assistance in order to relocate their businesses back to Liberia, the then commerce minister
of Liberia Dr. Olubanke King Akerele, reportedly directed them to seek financing from the US
government and banks, which of course was not feasible. Besides, why would the US government and banks finance the repatriation of businesses and jobs out of its own economy? If the
Liberian government is truly serious about attracting Liberian entrepreneurs back home, then it
must provide the necessary support and assistance to make such a transition successful. It is
clear that Liberians both at home and abroad are eager to and capable of growing and managing
their national economy as have citizens of other post-war countries but the government must believe and invest in its own people. While the resolve of the Liberian people is overwhelming, this
resolve needs to be met with encouragement and a plan of action by the government. The Liberian government must not only hope for the best, it must determine what is in their country’s best
interest. Here are a few things we can do to take more control of the growth and direction of our
1. Establish a public-private commission for growth and employment. This commission or
Taskforce should be a non-governmental think-tank (endorsed and supported by the government and people of Liberia) and comprised of a team of Liberian professionals from
different disciplines and studies: engineering, healthcare, banking, technology, finance,
academia and ordinary citizens. Together, they should hold regular meetings (town hall,
teleconferences, etc.) with the public to discuss, identify and find ways to address job
creation, manufacturing and access to capital for Liberian businesses and banks. Personally, it would be an honor to help identify and work with other Liberian professionals on
such an initiative.
The commission or taskforce should also help set up and manage a trust that will help
finance and facilitate capital investments in Liberia for small, medium and large enterprises (SMLEs). This trust could be funded by contributions made from every working
Liberian living at home and abroad. Imagine if every working Liberian contributes $1
each month to this trust and the Liberian government, central bank and businesses match
those contributions; enough money will be available to provide initial financing for Liberian owned and managed SMLEs. This will also help lower unemployment by providing
jobs, training and nationwide development.
2. Lower the Central Bank of Liberia interest rate. Reducing the leading rate at the Central
Bank will lower borrowing cost, especially for Liberian businesses in the areas of housing, construction, manufacturing and agriculture. With Liberia’s Inflation rate (CPI) at
5.1%, the commercial banks prime lending rate should be falling instead of rising (up
from 13.7% to 16% in 2012)11 . Lowering of the Central Bank interest rate to single digit
will boost lending which could help facilitate higher employment. The economic conditions are now right to do so.
3. The Liberian legislature should mandate that the Central Bank of Liberia and Ministry of
Finance begin providing capital loan guarantees and other financing to small, medium and large Liberian enterprises, especially those with the potential to create jobs. One
way of doing this is to put aside about 2% of the national budget (approximately US$10
million) each year to fund this and other job creation programs. This could potentially
lead to tens of thousands of jobs and the creation of new businesses in the agriculture,
manufacturing and retail sectors. The benefits of such a program far outweighs the cost
since for every $1 the central bank makes available in loan guarantees can leads to $10 in
new loans from the private banks (the process of Fictional Reserve Banking which means
a commercial bank can lend up to ten times what it borrows from the central bank).
Similar capital infusion actions are being used around the world (America, Rwanda,
China, Ghana, etc.) to boost growth and reduce high unemployment. This policy is appropriate at this time in Liberia because the country is facing more deflationary pressures
and inflation is contained at around 5.1% - lower than Ghana, Nigeria, Rwanda, Sierra
Leone, Venezuela and Argentina. With inflation this low and unemployment this severe,
the Liberian Central Bank, which has limited its role to weekly currency auctions, needs
to fulfill its full potential. After all, according to The Central Bank of Liberia’s website,
its job among other things is to “facilitate the emergence of financial and capital markets
that are capable of responding to the needs of the national economy, and foster monetary,
credit and financial conditions conducive to orderly, balanced and sustained economic
growth and development..”12 . Our Central Bank will need to carry out its own stated objective in order to help our people lift themselves out of extreme poverty.
To say the government of Liberia has not made any progress would be incorrect. It has made
remarkable strides in many areas including education, women’s rights, freedom of press and to
some extent, financial transparency. Why these are all essential steps for national recovery, equal
emphasis must also be placed on economic growth, income equality and job opportunities for
every Liberian. This can only be done if and when Liberia’s economy (GDP) is sizable enough
to absorb such demands. This is why it is essential that Liberia grows its GDP in the coming
months and years in order to keep up with the rising cost of goods and services, and population
growth. A bigger GDP will mean more tax revenue which will be a source of increased funding
for Liberian enterprises and job creation programs effectively reducing extreme poverty. The
best way to grow Liberia’s GDP is for the government and Central Bank of Liberia to direct its
time and resources towards creating a strong and sustainable banking, agriculture and manufacturing sector that is mostly owned and controlled by Liberians. As in Rwanda and Sierra Leone,
the government must encourage and provide financial support for these sectors in order to bring
about the rebuilding and economic development the country desperately needs. I believe we as a
country are ready to take on these tasks.
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About the Author:
Chu-Chu Alex Jones’ Profile
Alex Jones is a financial analyst. He is also an independent Wall Street currency, commodity and
derivatives trader. He is the CEO of The Growth and Employment Exchange (GEE), an economic development and management group that advocates and help provide sound banking and
financial policy advice to local and International leaders. Alex is the author of