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Liberia: Challenges to Expand Fiscal Space Remain

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photo: © UNHCR/Roland Tuley

The World Bank has today launched the Second Edition of the annual Liberia Economic Update, “Finding Fiscal Space”.  According to the report, economic growth is expected to recover to 3.6 percent in 2021, before rising gradually to an average of 5.2 percent over 2022–2025. In the near term, growth will be driven by the expected recovery in the mining sector underpinned by the recent uptick in commodity prices.

Having reached a peak of 31.3% in 2019, inflation declined significantly in 2020 and 2021, and is now down to single digit, largely because of strong macroeconomic policies. The drop in world oil prices in 2020 allowed some easing in Liberian fuel prices, a frequent driver of inflationary pressures, although their decline was moderated by the introduction of an excise tax early in the year. But it was macroeconomic policy that was at the center of the action, with tighter monetary and fiscal policies, and the ensuing lower aggregate demand pressures, helping to ease the self-reinforcing cycle of depreciation-inflation observed in late 2018 through 2019.

The Government must be commended for making tough policy choices that have resulted in this positive turnaround in macroeconomic fundamentals, especially under a challenging COVID-19 environment,” said Dr. Khwima Nthara, World Bank Country Manager for Liberia. “The focus now should be on complementing the improved macroeconomic environment with critical structural and governance reforms that will help boost domestic and foreign private investment to create more jobs,” he added.  

After successfully stabilizing the macroeconomy, the government needs to create enough fiscal space to finance the country’s massive investment needs in physical infrastructure (power/energy, roads, rails, ports, and airports). In addition, Liberia needs to invest in its people and institutions, and create an educated, skilled, and healthy labor force, in both the public or private sectors, and protect its economy and vulnerable population against repeated exogenous shocks, the Liberia Economic Update emphasized.

According to this new economic report, the government also needs first and foremost to reduce the very high level of recurrent spending and strengthen domestic revenue mobilization to generate savings for public investment financing. Between 2012 and 2020, government operating expenses exceeded the domestic revenue it collected by 4 percent of GDP. This means that the external resources mobilized in the period financed a significant part of the government’s operating expenditure instead of financing public investment in infrastructure.

The recent efforts to reduce duty waivers and the successful implementation of the pay and payroll reform are steps in the right direction and need to be complemented by actions to improve the efficiency in the consumption of goods and services by the Government” said Mamadou Ndione, Senior Country Economist and main author of the report.  

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Europe accuses US of ‘profiting from war’

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Top European officials are furious with Joe Biden’s administration and now accuse the Americans of making a fortune from the war, while EU countries suffer. “The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO.

Washington announced a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act that Brussels went into full-blown panic mode. “The Inflation Reduction Act has changed everything,” one EU diplomat said. “Is Washington still our ally or not?”

“We are really at a historic juncture,” the senior EU official said, arguing that the double hit of trade disruption from U.S. subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic alliance. “America needs to realize that public opinion is shifting in many EU countries.”

The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes that Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down.

As they attempt to reduce their reliance on Russian energy, EU countries are turning to gas from the U.S. instead — but the price Europeans pay is almost four times as high as the same fuel costs in America. Then there’s the likely surge in orders for American-made military kit as European armies run short after sending weapons to Ukraine.

Officials on both sides of the Atlantic recognize the risks that the increasingly toxic atmosphere will have for the Western alliance.

“The U.S. is following a domestic agenda, which is regrettably protectionist and discriminates against U.S. allies,” said Tonino Picula, the European Parliament’s lead person on the transatlantic relationship.

Cheaper energy has quickly become a huge competitive advantage for American companies, too. Businesses are planning new investments in the U.S. or even relocating their existing businesses away from Europe to American factories. Just this week, chemical multinational Solvay announced t is choosing the U.S. over Europe for new investments, in the latest of a series of similar announcements from key EU industrial giants.

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American view: ‘Putting an end to Volodymyr Zelensky’s follies!’

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“Zelensky comes out of the process smelling really bad as he has worked assiduously at blaming Russia, which clearly is not true,” – writes Philip Giraldi from Ron Paul Institute.

One week ago, he reminds, the Ukrainian government may have deliberately attacked neighbor Poland in an attempt to draw the NATO alliance into its war with Russia. The incident involved a missile that hit a grain processing site inside Poland and killed two farmers.

Ukrainian President Volodymyr Zelensky immediately blamed Russia for the incident even though he surely must have known that the missile had been fired from Ukraine, meaning that he may have been using a so-called “false flag” to create a false narrative of what had occurred.

Given the fact that Zelensky has been saying and doing everything possible to draw the US and NATO into fighting Russia on his behalf, I believe that the missile strike was quite plausibly a deliberate “false flag” attempt to start a much broader war.

That such a war could easily turn nuclear reveals just how reckless Zelensky can be. One NATO country foreign diplomat based in Kiev told “The Financial Times”, that “This is getting ridiculous. The Ukrainians are destroying [our] confidence in them. Nobody is blaming Ukraine and they are openly lying. This is more destructive than the missile.”

There has been considerable speculation that the unregulated and unmonitored flow of billions of dollars of US taxpayer provided money through Ukraine’s notoriously corrupt government provided a perfect mechanism for large scale money laundering.

Even assuming that the Ukrainian missile strike on Poland was due to some malfunction, Zelensky comes out of the process smelling really bad as he has worked assiduously at blaming Russia, which clearly is not true.

He is using his contrived narrative to dramatically expand the war by creating a situation which would bring NATO directly into the conflict and which could easily go nuclear.

Indeed, he is attempting to compel NATO participation.

Beyond that, the US and NATO, burdened with such an “ally,” should take immediate steps to disengage from supporting the fighting and call for a negotiated settlement of the conflict.

To be sure, Zelensky is capable of anything and no lie is too mendacious for the former comedy actor who is now basking in the glow of his celebrity, writes Philip Giraldi.

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Iran’s Parliament approves bill on accession to SCO

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Iran’s Parliament has approved by a majority vote a bill on the Islamic republic’s accession to the Shanghai Cooperation Organization (SCO), according TASS information.

205 parliamentarians voted for the bill, 3 voted against and 4 abstained.

On September 30, Iranian President Ebrahim Raisi signed a bill on the country’s accession to the Shanghai Cooperation Organization. According to the Young Journalists Club news agency, Raisi sent the bill to the country’s parliament for consideration.

Iran signed a memorandum on liabilities for joining the Organization.

The Organization’s summit in Uzbekistan on September 15-16 launched the procedure of admitting Belarus as a full-fledged member.

Egypt and Qatar were granted a dialogue partner status, while Bahrain, Kuwait, the Maldives, Myanmar, and Saudi Arabia began the procedure for obtaining this status.

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