The World Bank has advised Liberian authorities to pursue institutional and policy reforms to bolster economic growth that will ease poverty and transition the West Africa nation of 5.5 million people into middle income economy.
Liberia, a West African nation rich in natural resources, faces the formidable challenge of escaping a resource trap that has perpetuated cycles of economic stagnation and underdevelopment, the global lender said in a fresh report released Tuesday in Monrovia.
Titled “Escaping the Natural Resource Trap: Pathways to Sustainable Growth and Economic Diversification in Liberia,” the Bank outlines a comprehensive strategy aimed at guiding the country toward middle-income status by 2030.
The nation’s heavy reliance on mineral wealth has left it vulnerable to commodity price fluctuations and external shocks, inhibiting its ability to establish a stable and prosperous economy, it said.
The World Bank warns that without transformative changes, Liberia’s GDP growth is projected to remain at about 5.5% annually—far too low to raise per capita incomes to the critical middle-income threshold of $1,000 by the 2030 target date.
The country remains vulnerable to shocks due to weak drivers of long-term prosperity, such as human capital, wealth accumulation, and productivity, which has undermined the country’s economic growth potential.
The study finds that a “business-as-usual” scenario would yield modest growth, insufficient for achieving middle-income status by 2030 and substantially reducing poverty.
Real per capita GDP will grow modestly, and Liberia will not reach the middle-income threshold of US$1,000 until around 2050.
“Institutional and policy reforms are essential to modernize the public sector and provide Liberia with the institutions needed to lead the transformation,” Georgia Wallen, World Bank Liberia Country Manager said.
“These reforms would entail a systemic overhaul of the business climate to promote private investment, innovation and job creation; delivery of higher quality, more efficient core public services to raise the level of human capital, notably in education and health; and increasing the efficiency and scale of public investments in power, roads and telecoms/digitalization.”
The report suggests that Liberia should undergo five significant transformations to create the necessary conditions for long-term development that can foster economic expansion, employment creation, and poverty alleviation for Liberians.
These transformations involve fundamentally reshaping Liberia’s macro-economy; shifting away from over-reliance on the mining sector towards activities better aligned with the labor demands and employment needs of an expanding urban population; transitioning from a state-centric mindset to recognizing the private sector as the primary driver of economic expansion and job creation; and implementing deep-seated policy and institutional reforms to modernize the public sector.
The report further highlights Liberia’s potential for better performance and outcomes over the medium to long-term provided ambitious and credible reforms are implemented now to begin transforming the economy, modernizing the public sector, and improving governance.
A high-ambition reform program could double annual productivity growth in the non-mining sector. These reforms involve improvements in education and health metrics by extending the expected years of schooling from 4 to 10 years, enhancing education quality, reducing stunting, and increasing adult survival rates.
It also entails efficiency of public services. Additionally, reforms that support increases in private and public investments, reaching 18 percent and 12 percent of GDP respectively, could drive real GDP growth up by approximately one percentage point. As a result, Liberia could attain lower middle-income status before 2040, create jobs, and real per capita GDP potentially reaching US$2,000 by 2050.
Liberia is one of the poorest countries, ranking 180th out of the 190 countries in the World Bank’s development database.
Based on the national poverty line, 59 percent of Liberians were poor in 2016, the latest year for which household survey data is available.
According to World Bank estimations, about 6 out of 10 Liberians continue to live in poverty. Broader welfare measures tell a similar story: Liberia ranked 177th out of 193 countries on the UN Human Development Index and the UN Gender Inequality Index in 2022.
Low human development is exemplified by Liberia’s score of 0.32 on the World Bank’s measure of human capital, suggesting that a newborn child will only reach 32 percent of their potential productivity as an adult under current conditions of healthcare and education.
Poverty is more prevalent in rural areas, and its incidence increases with distance from the capital, Monrovia, highlighting Liberia’s severe spatial challenges.
Rapid population growth, deforestation, and the accelerating impacts of climate change are degrading the country’s abundant natural capital, a dynamic which, in turn, is increasingly tied to the persistence of poverty.
Pervasive food insecurity contributes to the high rate of child stunting and to malnutrition more generally. Inadequate sanitation heightens the risk of communicable disease.
