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The Economies of Guinea, Liberia, and Sierra Leone Have Been Wrecked by Ebola

Experts say the $300 million pledge — the details of which are to be announced in January — is crucial for Liberia, Guinea, and Sierra Leone. But they also warn it could pile further debt on the countries, among Africa's poorest.
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Two months before the Ebola virus crossed over the border from neighboring Guinea, UN Secretary General Ban Ki-Moon described Sierra Leone as "an inspiring experience for international peace-building efforts." The country, ravaged by a civil war that spanned the 1990s and early 2000s, was seemingly on track for economic growth and social stability.

But in the seven months since the deadly hemorrhagic fever took hold there this May — infecting more than 7,800 people in the worst outbreak of the disease since it was discovered more than 40 years ago — the West African country's economy, along with its health system and social framework, has been devastated.


"The shock has basically placed a blockade in the country's journey to prosperity," Sierra Leone's Minister of Finance and Economic Development Kaifala Marah wrote in an October assessment of Ebola's economic and social impact on the country. Marah noted that a United Nations' assistance program, as well as plans from other multilateral partners for 2015, "have been derailed."

Sierra Leone is not unique in the economic impact felt from Ebola — Guinea and Liberia have seen nearly identical effects. Growth projections for 2014 have been lowered across the board in the countries and a total income loss of more than $2 billion is expected between this year and next, according to the most recent projections from the World Bank.

The three governments have been forced to boost spending and cut investments — largely kept above water by the hundreds of millions of dollars in foreign aid funneling through organizations like the World Bank, the World Health Organization, and individual country donations.

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At the November G20 summit in Brisbane, leaders unveiled plans for a $300 million package that the International Monetary Fund (IMF) said it would pledge to the region. This move followed $130 million in loans that the IMF extended to Sierra Leone, Guinea, and Liberia in September. Details of the larger package — a mix of grants, debt relief, and loans — likely won't be announced until at least January.


As the countries prepare their budgets for the coming year, experts say the pending IMF package is crucial to their fiscal viability in the coming years. Unlike money directed through NGOs, the IMF package would be a direct infusion into state coffers and help finance day to day government services.

"We are just making a plea to them, given the effects of Ebola," Moses Sichei, the UN Development Program's senior economic adviser in Sierra Leone, told VICE News when discussing the package. "If the IMF is going to provide that support that would be really good. If we don't get it there are a lot of expenses that are going to get cut."

Though small totals by international standards, the three countries already owe creditors $3.6 billion, including $464 million to the IMF. Despite slashing their own budgets in the face of falling tax revenues, Liberia and Sierra Leone will have paid the IMF more than $14 million for existing loans by the end of 2014 — money that could otherwise have been spent on their public health systems, already in poor shape before they faced the Ebola virus.

US Treasury Secretary Jack Lew has pushed for at least $100 million of the total to consist of debt relief and grants drawn from excess emergency funding left after the 2010 Haitian earthquake.

A Treasury spokesperson told VICE News the debt relief proposal would wipe out payments on IMF loans over the next several years.


"The debt relief will free up resources to enable these countries to cope with the epidemic and to address their longer-term health care and economic recovery needs," the spokesperson said.

Sources close to the talks say it is likely the remainder of the package will be further debt. Though the loans are likely to be "concessional," with interest rates and terms far more generous than what the market would ask for, activists say the three countries — among the poorest in Africa — should not be saddled with any more debt.

"We're happy with any debt relief that's given, but we don't think they should be given more loans," Tim Jones, policy officer at Jubilee Debt Campaign UK, told VICE News. "That will once again restrict the spending they will have, which is one of the problems with this crisis."

Jones pointed out the language used — "aid" — is a misnomer, since the bulk of the package will only pile further debt on the countries.

"Our biggest concern is they will pay them back but it will be at the cost of not funding adequate health care needed," Jones said. "The best chance of getting debt cancelled is now because the countries are in crisis — in two or three years, once the crisis is hopefully over, it will be a lot harder for governments to say that the debt should be cancelled."

Existing IMF loans to the region, while less draconian in their impositions than in decades past, still focus on conservative monetary policy and holding down interest rates — a philosophy than can lead to cuts in public sector spending. The IMF maintains this has not happened in the developed world.


Shortly after the November G20 announcement, the Global Alliance of Mayors and Leaders from Africa and of African Descent (GAMLAAD) — a coalition with members from over 80 countries — requested that the IMF, as well as the World Bank, cancel all debts on their books for Guinea, Liberia and Sierra Leone.

"This humanitarian gesture will sincerely express the world's most committed relief to the people of the worst affected countries,"said Alfred Okoe Vanderpuije, President of GAMLAAD.

It appears, however, that when the new IMF package comes into effect, the three countries will have more debt, not less.

The most recent IMF debt sustainability analysis for all three countries was conducted in 2013, finding risk of debt distress was moderate for Sierra Leone and Guinea, and low for Liberia. That assessment was carried out before the outbreak began, and since then, Sichei said, the situation has changed and needs to be reevaluated.

"If you give it as a loan, you're going to have a problem," Sichei said of the package. The most recent IMF aid and loan package of $14 million for Sierra Leone given during the Ebola outbreak predated the World Bank's most recent projections showing worsening economic impact. Before Ebola hit, Sierra Leone's economy was expected to grow by nearly 9 percent in 2015. The World Bank now says it will contract by 2 percent.

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The IMF loans are not expected to push the countries toward default, but when the bulk of payments begin to come due around 2020, governments may be faced with a choice between loan installments and vital domestic spending — just as they have been during the Ebola crisis.

Mark Thomas, a lead author of the World Bank's report on the economic impact of the 2014 Ebola epidemic, told VICE News that to tackle the outbreak countries have had to increase current spending. Upped outlays can include buying supplies or creating new jobs, and even setting up treatment units — although much of this has been covered through international donors and partnerships.

As a result, governments are seeing a shift from capital spending like infrastructure projects — crucial for growth — and an increase in current spending towards health and social areas. This comes at a time when revenues are declining. Sierra Leone, for example, has seen revenues drop $85 million, while spending is up by $43 million, according to World Bank figures.

Even if Ebola never returns to West Africa, public health systems will be in dire need of funding for decades to come. An estimated 100,000 people still die every year in the region from malaria, a preventable and treatable disease — and experts say that number could quadruple in the coming year as patients shun clinics out of fear of contracting Ebola. In Liberia, diarrhea — caused almost entirely by poorly funded sanitation systems — kills 3,000 annually, or roughly as many as have perished from Ebola in the country.


"Nobody knows how long this outbreak is going to last or how much of an impact it will have," Laura Miller, an Ebola response coordinator with the International Rescue Committee in Sierra Leone, told VICE News. But, she noted, "Ebola will constitute only a small number of overall deaths in the country."

According to Miller a majority of the deaths will be women — during pregnancy, while giving birth, or in post-natal phase — and children, worsening already grim figures. Prior to the outbreak, Sierra Leone was the third worst country for maternal health, and one in six children died before reaching 5 years of age.

As the public health focus has shifted to Ebola and further strained local healthcare systems primary care has seen been hit hard. In Sierra Leone, fatalities for treatable illnesses and childbirth have significantly increased as a result, according to the country's recent report on the social and economic impact of the disease to date.

Further compounding the effects on primary care is public fear in both seeking and treating illnesses, as well as the hit the virus has taken on healthcare workers.

"Losing a healthcare worker has a serious effect because the baseline was really so bad to begin with," she said. There were around 100 doctors in Sierra Leone before the Ebola outbreak, 10 of whom have since died from the virus.

For Sierra Leone, perhaps the most urgent need is covering the $37.2 million uncovered financial gap for the 2015 budget — a shortfall which in itself is likely an underestimate, according to Sichei. The country's budgetary plan for next year was based on the best case scenario outlook for the epidemic, which Sichei said was based on the premise that the outbreak would come to an end before the new year.


"Ebola isn't going to be over at the end of this month," Sichei said, explaining this will further undermine expenditure projections of revenue based on the outbreak burning itself out this year. "That's why the funding from the IMF is very critical, because we have used a very optimistic scenario."

Gaps in Sierra Leone's 2014 budget were addressed on Wednesday, with the World Bank announcing that it had approved a $30 million grant for the country, through an emergency economic and fiscal support operation. According to a statement from the group, the operation will, in part, help the government reduce budgetary finance costs.

"This funding responds to an urgent request from the government for help to finance the 2014 budget, which has had to contend with both falling revenues as a result of Ebola and higher spending needs to respond to the epidemic," Cyrus Talati, the task team leader for the operation, said in the statement.

While Sichei said Sierra Leone really needs the IMF money to make up for its misallocated budget, he added that there needs to be some sort of moratorium on payments. According to him, however, concessions would be enough to ease economic pressure on the countries, even Sierra Leone where next year's budget has greatly underestimated the duration of the Ebola outbreak.

"Repayment would take away funds from other priority public spending," Sichei said. "However, if the loan is on concessional terms it would enable the country to weather the crisis. I am very sure that the economy would recover after the Ebola crisis and the country would be able to repay the debt."

Though by global standards the countries' debt loads are small, every forgone dollar counts, said James Boyce, professor of economics at University of Massachusetts Amherst and co-author of a study of loans to African governments titled "Africa's Odious Debt."

Along with colleague Leonce Ndikumana, Boyce calculated that across the continent, for every dollar spent on debt payments, about 30 cents in public health spending is forgone — a figure that is doubtlessly higher in Ebola hit countries.

According to Boyce, prior loans in West Africa — much of it accrued during dictatorships and some of it wiped out in the 2000s during debt relief campaigns — were misappropriated in the first place. "What's really important is to see how the money is used — many loans have come into the subcontinent and have not been invested productively or have lined the pockets of politically connected individuals."

"Ebola is coming on top of weakened infrastructure from civil wars that were fueled by international relationships and resource extraction," Boyce told VICE News. "I think the international community has real responsibility in doing something about Ebola and the impoverishment more generally in these countries."

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