The Liberian leader, President Ellen Johnson Sirleaf has written the Liberian Senate, seeking ratification for US$80 million loans to stimulate the economy. In two separate communications to the plenary of the Liberian Senate read in plenary Thursday, March 10, 2016, the President seeks ratification of the Financial Agreement signed between the Government of Liberia and the International Development Association in the tune of US$60 million and the US$20 million from the OPEC fund for International Development submitted by the Ministry of Finance and Development Planning.
The President’s letters added that the purpose of the loans is to generate partial financing for the upgrading of the Gbarnga-Salayea road which will contribute to economic and social development. According to the Chief Executive, the government shall pay interest at the rate of one percent per annum on the principle amount of the loans withdrawn and outstanding, and a service charge at the rate of one percent on the principle amount of the loan withdrawn and outstanding. “Interest and service charges shall be paid semi-annually on March 15, and September 15, in each in OFID account,” the letter said.
The letter dated March 4, 2016, further explained that the term of the loan agreement is 20 years, including five years grace period; repayment of the principle amount shall be effected in 30 semi-annual installments in the amounts and on the dates specified in schedule of the loan agreement.
“Mr. Vice President, in view of the important purpose of the loan arrangement and the need to develop, expand and integrate Liberia’s road network thereby reducing travel time, cost and ultimately improving the standard of living of the inhabitants of Bong and Lofa Counties, I ask your ratification of this instrument.”
The Sirleaf administration which currently faces serious financial crisis, is optimistic that the US$60 million loans, if ratified by the Legislature is to generate additional financing for the implementation of the Liberia Accelerated Electricity Expansion project which will increase access to electricity and strength the institutional capacity of the electricity sector.
“The maximum commitment charge rate payable by the government on the withdrawn financial balance is one-half of one percent annum, while the service charge payable on the withdrawn credit balance shall be three fourths of one percent per annum,” the letter said.
The term of the US$60 million agreement is 38 years, including six years grace period. Repayment of the principle amount of the loan shall be made in accordance with the repayment schedule set forth. On September 16, 2010, Liberia reached the Heavily Indebted Poor Country or HIPC, completion point which facilitated the cancellation of 96 percent of the US$4.9 billion external debts that had accumulated, un-service, over two decades. They comprised sixteen loans valued at US$415 million of which US$156 million represented reconciled restructured external debt and US$259.3 million account for validated restructured domestic debt largely owed the Central Bank of Liberia.
President Sirleaffurther stated that as at the end of December 2015, a total of thirty-two loans amounting to US$802 million have been contracted of which 26 represent loan sourced from external creditors with a value of US$792 million and six sourced domestic creditors at a value of US$10 million.
The letter noted that to date, a total of US$315 million of external loans have been disbursed, leaving an undisbursed balance of US$477 million. The US$10 million domestic borrowing has been fully disbursed.