-President Weah submits US$426m EBOMAF loan agreement to Lawmakers
By Frank Sainworla, Jr. fsainworla@yahoo.com
Within record time, the just over four-month-old CDC government will have added nearly US$1 billion to Liberia’s debt burden, if two commercial loan agreements before the Legislature are ratified.
As lawmakers scrutinize the US$536 million financing agreement between the Eton Private Company in Singapore for the construction of a coastal highway, President George Manneh Weah last week submitted a new Pre-Financing Loan Agreement in the tone of US$426 Million between the Liberian Government and Group EBOMAF to the National Legislature for ratification.
Mohammadou Bongonkou, owner of the EBOMAF, is the millionaire businessman in Burkina Faso who President Weah recently said gave him a private jet to use on international trips free of charge. One of his line of businesses is construction.
Already, Liberia is in debt to its throat, with total borrowing amounting to US$1,460.41 billion by end of June 2017, according to Annual Debt Report of 2016/2017. It was at that level after almost 12 years of the regime of former President Ellen Johnson Sirleaf.
President Weah has repeatedly said the Liberian government is broke,
According to the Debt Report of 2016/2017 at the Ministry of Finance and Development Planning, total borrowing are disbursed outstanding debt and undisbursed signed and ratified loans.
The over half a billion US dollars Eton financing agreement says the loan shall be ”for a period payable for a period in fifteen (15) years by level payment with a seven (7) year interest and principal free grace period.”
As for the second loan of EBOMAF, it will be “financed by EuroBond, redeemable after 15 years with a 5-year grace period and a 10-year interest only on payment,” an Executive Mansion press release said at the weekend.
But the Executive Mansion statement did not say how much the interest is on this loan.
It said the loan, when ratified will be used for the construction of 256.2 kilometres of paved roads and bridges in Monrovia and major corridors of the interior of the country. Group EBOMAF will begin pre-financing the road project within three months after the agreement is ratified.
The roads to be constructed upon ratification through this agreement are as follows: The Sinkor to Kesselley Boulevard elevated Road, Zwedru to Greenville, Toe’s Town to Ivorian Border, and Tappita to Zwedru.
Liberia’s debt portfolio
According to Liberia’s Annual Debt Report, the share of undisbursed loans accounted for US$611.42 million and outstanding disbursed loans including post HIPC disbursed loans and restructured debt amounted to US$848.99 million.
The debt stock includes pre-HIPC restructured debt of US$331.41 million and post-HIPC debt of US$517.58 million.
HIPC is the Heavily Indebted Poor Countries Initiative under which almost four billion US dollars debt Liberia owed were waived by the World Bank and other multilateral financial institutions..
In the Recast budget for Fiscal Year 2017/2018 passed by lawmakers some time agao, US$16.498 million was originally appropriated for servicing the country’s foreign debt. But US$15.068 is now proposed for payment in the recast budget.
The amount of US$9.434 million was originally appropriated in the 2017/2018 budget to service domestic liabilities, but it is sliced to US$3,846 million in the recast budget.
Liberia’s total debt stock includes external debt and domestic debt.
And of the total US$848.9 million debt stock, the share of external debt accounted for US$581.91 million, while domestic debt amounted to US$267.08 million at end of the fiscal year 2016/2017.
The Annual Debt Report of 2016/2017 said domestic debt comprises of Central Bank of Liberia (CBL) loans, Commercial Banks loans and other court debt, while external debt includes multilateral and bilateral debt.
According to the report, at end June 2016, the outstanding public debt increased by 16.07 percent.
This places Liberia’s debt-to-GDP ratio at about 40 percent, which is 20 percent below the ceiling.
External debt service amounted to US$2.81million at the end of June 2017 compared to US$0.53million at end of the third quarter, which is an increase of 431.09 percent.
The recast budget submitted to the 54th Legislature by the Executive Mansion is US$536,200,130 million from US$563,563,432 originally appropriated for this budget year which ends on June 30.
Paying back the mounting loans
Liberia, which extensively rely on the extractive industry such as iron ore, gold, diamond, has experience a serious drop in its foreign exchange earning in recent years due to the fall in commodity prices.
Economic experts say in the absence of massive investment in Agriculture and with meagre income from exports to back the value of the Liberian dollar, paying back rising commercial debt level will be a huge task in the next few years.
Meanwhile, the Executive Mansion has said with the acquisition of this pre-financed agreement, coupled with the agreement to pave 503 kilometres of roads connecting the coastal cities as well as parts of Western Liberia; President Weah’s administration is poised to construct more kilometres of paved roads within his first term as President than the entire kilometres of paved roads that have been constructed by all previous administrations combined; within the over 170 years of Liberia’s existence as a sovereign nation.
The presidency said this decision has been fully endorsed by the Cabinet and by virtue of this agreement, Liberia stands to gain a great deal of economic growth through the creation of jobs as well as a significant increase to Liberia’s GDP.