Six ways Ebola is reversing development gains in Liberia

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Six ways Ebola is reversing development gains in Liberia

A palm oil processor in Gio Town, Liberia. BIJA GUTOFF/Mercy Corps.

Just as Liberia’s economy was recovering from an ugly civil war, hysteria surrounding the Ebola outbreak triggered an economic slowdown that threatens over 2 million Liberians already struggling below the poverty line. Those who contract Ebola aren't the only ones whose lives are at risk.

The International Monetary Fund (IMF) has already cut the projected growth rate for Liberia in half, to 2.5 percent. World Bank analysts paint an even grimmer picture, predicting that the Liberian economy could contract to as low as minus 4.9 percent.

How does disease beget economic strife? The Ebola virus is transmitted through bodily fluids – the kind of contact that can occur while caring for a sick spouse, or burying a victim. Without medical care, victims typically die. Hysteria over the disease prompts aversion behavior that is toppling Liberia’s economy with a host of examples.

Investors flee. A threat to a country’s stability can be enough to scare investors away. In Liberia, infrastructure investments like new mining enterprises have been suspended. “Don’t leave the country,” Amara Konneh, Liberia’s Minister of Finance, recently implored investors. “Stay with us. Let’s fight this together.”

People and goods can’t move. Closed borders, border screenings and suspended flights have slowed commerce while travel restrictions have shut down the tourism industry. Some of the worst hit areas are under quarantine – bad news for the 78 percent of the labor force that are of vulnerable employment. The services sector, representing nearly half the Liberian economy and labor force, has been hardest hit by aversion behavior, especially in markets serving expatriates.

Key industries suffer. Some workers are fleeing the country, some are under quarantine, and others refuse to venture out to work. A few manufacturers have suspended operations in consideration of employee safety. Sime Darby, the world’s largest producer of palm oil, evacuated personnel, reduced production, and put expansion plans on hold.

Liberia has been trying to revive its mining sector, which accounted for over half its export earnings before the civil war. But ArcelorMittal, the world’s largest steelmaker, had its iron ore mine expansion project disrupted after contractors declared force majeure (superior force, or legally, “an act of God”) and bolted. The second major mining company, China Union, closed its operation this August. As a result, production of iron ore, which is used to make the steel in cars, ships, and machinery, has contracted.

Agriculture takes a huge hit. Farm areas are under quarantine and some farms have simply been abandoned. The export of rubber, Liberia’s most important agricultural commodity used to make goods like tires and balloons, plunged 20 percent.

Dwindling food, higher prices. The supply of both locally grown and imported food has dropped and prices have surged. The cost of the root cassava, the primary source of carbohydrates in the developing world after rice and maize, has skyrocketed 150 percent.  The main harvest season for rice and maize is about to begin, and with labor shortages and quarantines, the outlook is bleak.

Expenses soar as revenues drop. With businesses and individuals out of work, tax revenues have already dropped 20 percent in Liberia, reducing the ability of the government to manage Ebola. To respond to the crisis, Konneh, Liberia’s finance minister, admitted the need to divert or reallocate resources to it, which will hurt aspects of economic development.

We have drawn a strategy to address this problem, which represents 4 percent of our national budget. This means spending in education, security, roads and other sectors could be at risk.

The good news: The IMF is preparing an interest-free $127 million loan package to help Liberia, Guinea and Sierra Leone cope with these economic consequences. Whether it’s enough to keep them afloat may depend as much on how the public responds to Ebola as the impact of the pandemic itself. “We are scrambling for a response to this crisis,” Konneh said. “If it is not quickly contained, it will have serious consequences for our economy.”

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