DEBT RELIEF: SIERRA LEONE IN 2006, LIBERIA IN 2010
BUT WITH 5% OF THE DIAMOND PROFITS AND $2 PER DAY FOR DIAMOND
DIGGER, POVERTY RUINS SIERRA LEONE.
IS THERE A LESSON FOR LIBERIA?
By : J. YANQUI ZAZA
September 13, 2010
Realizing that the country was unable to pay its debt, on June 23, 2010, the World Bank and its associates cancelled Liberia’s $4.9 billion dollar debt and added her to thirty-five (35) other countries.
FEW OF THE 35 COUNTRIES THAT HAVE BENEFITED FROM DEBT RELIEF.
|COUNTRY||DATE DEBT CANCELLED
||TOTAL DEBT CANCELLED
|SIERRA LEONE||Dec. 2006||1.659||1.6|
Source: C.I.A. Note: There is no information as to why there are external debt balances for countries that received irrevocable debt cancellation, a topic for future article.
We (Liberians) thank President Sirleaf for the debt relief. Yet it is unconscionable that Ma Ellen is not hosting a forum to address Liberia’s scandalous economic inequality as is evidenced by the conditions of citizens residing in WestPoint as compared to the conditions of the friends of President Sirleaf residing in Mamba Point. Or, if not to enhance President Sirleaf’s chances at the 2011 general elections, how can the World Bank declare that Ma Ellen is a “Global Reformer” when she is enriching herself and her advisers are building expensive houses and buying luxurious cars, with taxpayers’ monies? Or how will Liberia finance its infrastructure when the Sirleaf government is awarding sweet heart deals to profiteers in exchange for kickbacks? Most importantly, where is the evidence that the Sirleaf government has reduced poverty when the rate of unemployment is at 85%?
It is too early to determine how well Liberia will benefit from this generous gift. Nonetheless, the uncertainty of the new economic reality should encourage Ma Ellen’s advisers to begin analyzing the advantages and shortfalls of the debt relief as provided by the International Development Association and International Monetary Fund. The study, submitted on September 15, 2009, prior to Liberia’s debt cancellation on June 23, 2010, included such issues as to obtain"…concessional resources in order to maintain debt sustainability and avoid excessive adjustment," to find solutions in order "….to improve debt management capacity and finding solutions to political problems…"
Another study completed on September 10, 2006 found that 11 countries such as Burkina Faso, Benin, Niger, Ethiopia, etc of the 18 countries that had their debts cancelled were falling deeper into debt. (Business News, 2006).
For this article, let us review reasons why Sierra Leone is falling deeper into poverty after the “irrevocable debt cancellation” on December 16, 2006.
Sierra Leone, a neighboring country of Liberia, has a population of about six (6) million, almost about twice the population of Liberia. Both countries share many similarities. Profiteers, pre-civil war and after, have continued to manage both countries’ resources such as iron ore, diamonds, oil, etc. Although many of their citizens (50,000 of Sierra Leoneans and 300,000 of Liberians) were killed during the civil wars, both have now established security and democratic governance. They also are decentralizing and have launched poverty reduction strategies. Further, they have signed up to the Extractive Industries Transparency (EITI), a coalition of government, companies and civil society, which aims to increase transparency of company payments and government revenues from resources.
Sierra Leone economic growth is projected to reach 4% in 2010 and recover further to 5% in 2011, a rate higher than the 2.3% growth rate America is projecting for 2011. Remarkably, it has weathered the global financial and economic crisis well relative to emerging and other-rich countries in Africa and other regions.
Regrettably, none of these positive actions such as Sierra Leone’s monetary transactions supervised by high-paid expatriates and its involvement with EITI has reduced corruption. In fact, the Sierra Leonean Minerals Ministry is still widely believed to be the “most corrupt” in government said an expert who preferred anonymity. (www.irinnes.org/report). And Sierra Leone was ranked at 142 out of 163 countries. (Transparency International’s 2008 perception of corruption index). Another report by the United Nations indicated that two in three Sierra Leoneans live in poverty, and one in five live in extreme poverty. Also. a report by AFROL news stated that youth unemployment has been rising since 2008. (www.afrol.com).
Having achieved such outstanding performances, so why is Sierra Leone falling deeper into poverty? This is because the country is receiving minimal royalty fees, taxes, remittances, etc from profiteers. As I stated in the article called “America’s 13 trillion dollar debt, and lesson for Liberia,” the key to reducing unemployment, constructing roads, railways, providing electricity, safe-drinking water, etc, is receiving a reasonable share of the profits of natural resources.
Both countries receive minimal share of the profits from profiteers. Sierra Leone has granted “extraordinary concessions” to mining companies who pay five (5) percent in royalty fees and can off set 100 percent of their start-up costs against tax, said the National Advocacy Coalition on Extractive (NACEL), a local grouping, according to July 29, 2009 IRIN report. (www.irinnews.org/report.). In the case of Liberia, the government got $35 million from 71 profiteers in 2009 according to EITI.
Additionally, both governments permit investors to pay slaved wages. For example, in Liberia, Firestone pays its tappers $3.19 per day, and in Sierra Leone, the largest diamond mining company pays a digger $2.00 per day. (www.diamonds.net/news/newsItem. Beyond the payment of slave wages, profiteers promote corruption. Why? Profiteers perceive bribery or kickbacks as a necessary evil, because it oils the wheels of businesses.
With such a business practice encouraged by the World Bank, Sierra Leone and Liberia can’t win the war on corruption. Why? This is because as profiteers grease the hands of one or two government bureaucrats in exchange for a sweet heart deals or to pay minimal taxes, other government bureaucrats will obviously search for their opportunities. I guess that is part of the reason why President Sirleaf said her government is losing the war on corruption because it (corruption) is systemic. And as long as the United States, Great Britain and the World Bank (i.e., friends of Ma Ellen) dictate the economic system of both Sierra Leone and Liberia, profiteers will remit minimal royalty income and blackmail, intimidate or bribe government bureaucrats, and poverty will continue to permeate every corner of society.