Liberia’s Debt Crisis: Government Facing Trust Deficit Amid Domestic Economic Obligations

Liberia’s total debt stock has surpassed $2.5 billion, with domestic debt exceeding $1 billion. Finance Minister Augustine Ngafuan attributes this debt increase to excessive borrowing under the current administration, leading to a trust deficit between the government and creditors. The government is working to restore trust while planning for economic growth, infrastructure development, and increased electricity access.

Liberia’s Finance and Development Planning Minister, Augustine Ngafuan, has expressed serious concerns regarding the nation’s escalating debt crisis, with the total debt stock surpassing $2.5 billion. Domestic debt comprises over $1 billion of this figure, a situation he attributes to extensive borrowing practices under the current administration, which heavily relies on loans from commercial banks to sustain government operations. As a result, unpaid obligations to contractors and service providers continue to accumulate, further exacerbating the domestic debt burden.

Ngafuan further indicated that a widespread trust deficit has emerged between the government and creditors due to previous administrations’ persistent defaults on payments. This lack of trust has made it increasingly challenging for vendors and contractors to engage in business with the government. “The debt stock of Liberia is over $2.5 billion—both external and domestic. Domestic debt alone is above $1 billion. The Liberian government owes a lot,” he stated during an interview.

In an effort to rebuild financial credibility, Ngafuan mentioned that an $80 million loan from the Central Bank of Liberia was utilized to ensure timely salary payments for civil servants. By honoring financial commitments, he reports that commercial banks are beginning to regain trust in the government. Additionally, the General Auditing Commission has been tasked with verifying debts owed to vendors to eliminate fraudulent claims, uncovering over $400 million in false claims. “We are reversing the situation, and confidence is returning,” he asserted.

Despite the issues at hand, Ngafuan exuded optimism regarding Liberia’s economic prospects, forecasting a 6% growth rate. He emphasized a commitment to broadening the tax base and enhancing revenue collection to decrease loan reliance. “Our goal is to gradually reduce reliance on aid while enhancing domestic resource mobilization,” he articulated, noting the exploration of new revenue channels, particularly from the extractive sector.

Furthermore, he announced that Liberia was chosen by the World Bank and African Development Bank to develop an energy compact aimed at increasing electricity access from 30% to between 75% and 80% by 2030. Plans for a new hydroelectric facility, St. Paul Two, along with advancements in solar energy, require a total investment of approximately $1.3 billion, with funding commitments already in place. “High electricity costs remain a major constraint to growth and job creation in Liberia,” Ngafuan remarked.

On the topic of infrastructure, Ngafuan noted the significance of improving roads to facilitate economic activities. Enhanced connectivity would enable farmers to transport goods more efficiently, minimizing spoilage and losses. Ongoing collaborations with the National Port Authority are aimed at easing operational barriers, including extending port hours and transitioning to online transactions.

Ngafuan wrapped up his remarks by reiterating the government’s dedication to stabilizing Liberia’s economy and rebuilding trust with both creditors and investors, recognizing the significant role that infrastructure development and business support play in achieving these goals.

The article highlights the critical financial challenges faced by Liberia as Minister Augustine Ngafuan reveals the escalating debt crisis, now exceeding $2.5 billion. Measures to restore trust with creditors and improve financial credibility are underway, alongside projections for robust economic growth and strategic plans for energy development. Overall, the government’s commitment to infrastructure enhancements and business support indicates a focused approach to stabilizing the economy and fostering sustainable development in Liberia.

Original Source: frontpageafricaonline.com