Reviving Economic Growth in Liberia

Liberia was decimated by 25 years of gross economic mismanagement and 14 years of brutal civil war. GDP fell by over 90% in less than two decades, one of the largest economic collapses in the world since World War II. This paper explores the challenges in reinvigorating rapid, inclusive, and sustained economic growth in the post-war environment. It stresses the importance of not just re-igniting growth, but rebuilding the economy in a way that avoids the substantial income concentration of the past and creates significant economic opportunities to groups that were marginalized and excluded in the past. It examines the new government’s progress so far, including the major steps it has taken in its first 18 months and the unique way that it has organized government-donor relations. The paper traces the extent of Liberia’s collapse compared to other African countries, and examines the patterns of post-conflict recovery in several other African cases as a basis for examining the potential for renewed growth in Liberia. It suggests that Liberia’s recovery is likely to proceed in three phases (i) an immediate phase driven by donor flows and a rebound in urban services, (ii) the renewal of traditional natural resource-based activities, and (iii) medium-term development of downstream processed products, other manufactures, and services that can compete on global markets. The paper argues that the single highest priority for the economy is rebuilding infrastructure, and especially roads, which are crucial to nearly every aspect of Liberia’s recovery: maintaining security, connecting farmers to markets, creating jobs, opening concession areas, reducing costs for manufacturing, and effectively delivering basic health and education services. Financing road construction is a major challenge, however, since most donors provide relatively little financing for roads compared to other activities. Other key issues are effectively managing natural resource production in order to gain the key benefits and avoid some problems that other countries have faced, improve the business climate, and invest in education and training programs to improve the skills of Liberian workers over time.