The Central Bank of Liberia is once again under the spotlight. A member of the House of Representatives has requested the appearance of the Executive Governor to provide explanations for what he described as a violation of the Public Procurement Management Law (PFM Law) by extending US$83.05 million loan to the George Weah administration last December for the purpose of paying civil servants’ salary without legislative approval.
The Public Financial Management (PFM) Act of 2019 governs the management of Liberia’s public finances. The act was amended in 2019 to improve the country’s decentralization program, which aims to share revenues with local governments.
According to Rep. Richard Koon, in a communication to the Speaker informed members of the House that the Central Bank of Liberia in November 2023 lent US$50.2 million to the past administration which was then in transition. Again, in December, according to Rep. Koon, another 32.85 million was lent to the same administration by the Central Bank through a resolution adopted by the Board of Governors of the Bank in its regular meeting on December 14, 2023.
The Montserrado County District 11 Representative contended that in line with Section 36 count 3 of the amended restatement of the PFM Act of 2009 states that “With the exception of the of any loan raised for the purpose of paragraph (b) of the sub section 36(2), the terms and conditions of any loan shall be laid before the legislature and shall not come in operation unless they have been approved by a resolution of the legislature.”
Rep. Koon firmly asserted in his February 5, 2024 communication, “Mr. Acting Speaker [speakership election was yet to be held then] and fellow Colleagues, it will interest you to note that said borrowing was not in compliance with the above stated PFM Law. And on many occasions, the Former Minister of MFDP, Hon. Samuel D. Tweah, Jr. has told this August Body during his appearances that the IMF standing rules do not allow them to credit from the Central Bank of Liberia and at no time. With the action by the CBL, it does not only violate the PFM Law, but also the IMF standing rules normally stated by the Hon. Tweah.”
Section 36 of the PFM Act delineates the procedure for government borrowing, explicitly vesting the authority solely in the Minister of Finance and Development Planning. Any loan contracted must have its terms and conditions negotiated by the Minister and submitted for legislative approval. However, the CBL Act, particularly section 46(1), grants the CBL the authority to extend credit to the government under exceptional circumstances, subject to the decision of its Board of Governors.
Section 36 of the PFM Law which is titled Power of Government to Borrow states:
“1. Subject to the provisions of the Constitution, the authority to raise money by loan, to issue guarantees and to accept grants for and on behalf of the Government shall vest solely in the Minister [of Finance and Development Planning] and no other person, entity or public organization shall, without the prior approval of the Minister, raise any loan or issue any guarantee, or take any other action which may in any way either directly or indirectly result in a liability being incurred by the Government.
2. Loans may be raised upon such terms and conditions as to interest, repayment or otherwise as may be negotiated by the Minister or his/her representative but, only for the purpose of-
- financing budget deficits;
- treasury and monetary policy management purposes;
- obtaining foreign currency;
- on-lending to an approved institution; or
- otherwise defraying expenditure which may lawfully be defrayed.
3. With the exception of any loans raised for the purpose of paragraph (b) of sub-section 36(2), the terms and conditions of any loan shall be laid before the Legislature and shall not come into operation unless they have been approved by a resolution of the Legislature.
4. All money raised under this section shall be paid into the Consolidated Fund and shall form part of it and be available in the manner in which that fund is available.
At the same time, Section 46(1) of the Central Bank Act under the title Credit to Government of Liberia states: “Subject to the overall limits specified by this Act, the Central Bank, by decision of the Board of Governors, may extend credit to the Government of Liberia with maturities not exceeding six (6) months only under exceptional circumstances such as war, famine or other natural disasters…”
The Conflict
The interpretation of these legal provisions reveals a conflict between the PFM Act and the CBL Act. While the PFM Act emphasizes the Minister’s exclusive authority over government borrowing, the CBL Act empowers the CBL to extend credit to the government under specific circumstances, such as national emergencies. Section 60 of the CBL Act stipulates that in case of conflict with other laws, the provisions of the CBL Act regarding the authority and functions of the CBL shall prevail.
Section 60(1) of the Central Bank Act states: In the event that the provisions of this Act conflict with those of other laws, then the provisions of this Act relating to the authority and functions of the Central Bank and/or matters of monetary policies shall prevail.
