Ellen Took US$100m Loan Without Legislative Ratification
In the wake of controversies over a US$100 million provided by the International Monetary Fund (IMF) to the Government of Liberia during the regime of former Liberian President, Ellen Johnson-Sirleaf, which the international body classified as loan to Liberia, the Government of Liberia has strongly argued that the fund to the government was a grant as it was not ratified by the National Legislature of Liberia.
The Ministry of Finance, Development Planning has strongly argued that the National Legislature did not ratify the amount and to classify it as a loan would be a huge violation of the Public Finance Management Regulations (PFM) of Liberia and a major breach of governance under the Sirleaf administration.
A close source to the Finance Ministry told The Monrovia Times late yesterday that its Debt Management Unit does not recognize the US$100 million as a loan.
“The government has always seen this as a grant that will not be repaid and that it does not have documentation to show this is a loan,” our source disclosed.
In recent times, there have been serious discussions ongoing between the administration of President George M. Weah and a team of experts from the International Monetary Fund (IMF) on the status of the US$100 million. The money issue has become a controversial issue as the IMF has classified the US$100 million which came to the country from the IMF between 2014 and 2016 during the regime of former President Ellen Johnson-Sirleaf’s government as a loan rather than a grant to the government.
Whether the US$100 million to the Liberian Government was a loan from the IMF to the Sirleaf’s administration or a grant remains the baffling question, but political observers are wondering as to where the money did go.
That’s the sticky question Weah’s administration officials are said to be running in circles with the IMF team, fearing that a US$100 million loan could increase Liberia’s indebtedness to the international monetary body.
President Weah recently endorsed an IMF-Supported Program for Liberia. The experts have over the past few days been meeting with senior officials and several sectors of the government in a bid to help resuscitate the ailing economy.
Last Friday, the IMF team, as part of its mission to Liberia, met with both Houses standing committees on Budget, Ways, Means and Finance in the national legislature. The meeting was intended to convince the legislative branch of government to buy into the reform process. The crux of the meeting focused on wage bill reform which will see a harmonization of salaries across ministries and agencies of government.
As the government and IMF discuss the terms of the program under review, the US$100 million question continues to linger: If the mystery amount is a loan, then the question is, why did the Legislature not ratify the loan? Were they even in the know of the money? What was the money used for and who authorized it?
The IMF, according to sources privy to the ongoing discussions, has reportedly agreed that the activity would be a major or breach of governance but says its record shows the amount as a loan.
However the IMF does not give grants to countries except in extreme emergencies as it did during the deadly Ebola virus outbreak when it granted Liberia, Guinea and Sierra Leone, the three countries stricken by the deadly virus a debt relief of about US$100m (£65m) as it prevailed on other international lenders to the countries to take similar action as it established a catastrophe containment relief trust to provide grants to countries suffering epidemics and other natural disasters.
According to the report, the trust was aimed at providing the money to the three countries so they could pay off debts to the IMF. The IMF also offered the West African states US$160 million of new interest-free loans at the time.
The IMF’s Catastrophe Containment and Relief (CCR) Trust allows it to provide grants for debt relief for the poorest and most vulnerable countries hit by catastrophic natural disasters or public health disasters. The relief on debt service payments frees up additional resources to meet exceptional balance of payments needs created by the disaster and for containment and recovery. Established in February 2015, the CCR Trust grants complement donor financing and the IMF concessional lending through the Poverty Reduction and Growth Trust.
Assistance through the CCR Trust is available to low-income countries eligible for concessional borrowing through the Poverty Reduction and Growth Trust and which also have either a per capita income below the International Development Association’s (IDA) operational cutoff (currently US$1,165) or, for small states with a population below 1.5 million and a per capita income below twice the IDA cutoff (currently US$2,330).
According to the PFM law, the Debt Management Committee is mandated to participate in the negotiations of government guaranteed loans, together with the minister. “Any proposals for amendments to the loan or guarantee agreement, in the cases of government guarantees already issued, shall be made with the prior approval of the Minister in consultation with the Debt Management Committee; Borrowers under government guaranteed loans shall provide to the Minister, on a monthly basis by the 15th of the month, information on the state and movement of funds under the loan.”
The law stipulates the terms and conditions that projects applying for government guaranteed financing should meet, and the government guarantee issuance procedures shall be determined by the Debt Management Committee with interest and principal payments of government guaranteed debt to be paid by the borrowers.
Section G of the PFM law states that “All sums of money received by way of loans, grants, and donations shall constitute public money and shall be paid into the Consolidated Fund; The Minister shall make provision in the budget estimates for loans, grants and donations receivable in cash; Where the quantum of the loan, grant or donation referred to in sub regulation; is not known a provision shall be included in the estimates and when the quantum becomes known a supplementary estimate shall be raised for the amount involved; Where loans, grants and donations are receivable in kind, the value of such donations shall be determined and included in the estimates and reflected as expenditure in the financial year; moneys received for specified projects which have been paid into the Consolidated accounts.”
The disagreement over the US$100 million comes as the IMF pushes the belief that a credible budget will enable monetary policy to operate and help bring down inflation and rising prices. Addressing the revenue and expenditure gaps, according to the monetary body, will also require a new approach in SOEs contribution to the resource pot. State-Owned Enterprises are operating in a way that does not provide a definitive contribution towards budgetary support. SOEs are also noted for determining their own expenditure, including salaries and other benefits which is way above other ministries and agencies of government.