By Festus Poquie
Liberia’s public debt burden has surged in recent years, heightening fiscal risks and prompting a targeted intervention from the African Development Bank (AfDB) to shore up debt management and transparency.
The small low-income country’s public debt climbed from 37.1 percent of GDP in 2018 to 58.8 percent in 2023, driven by higher public investment, weaker commodity prices and global shocks that widened social spending, according to the Bank.
The debt mix has shifted: external debt rose sharply to 41 percent of GDP in 2020 before easing to 29.7 percent in 2023, while domestic debt more than doubled from 10.0 percent of GDP in 2018 to 21.3 percent in 2023.
Much of the domestic stock is held by the Central Bank of Liberia and short-term instruments used for liquidity management, leaving the government exposed to rollover and refinancing risks in a shallow market, the African Development Bank said in a report the Oracle News Daily has consulted.
The 2024 Debt Sustainability Analysis classifies Liberia at moderate risk of external debt distress, but at high overall risk — reflecting limited shock-absorption capacity, volatile cash flows, a narrow domestic bond market, heavy reliance on U.S. dollars and sensitivity to interest-rate movements.
Domestic interest payments already absorb about 5.8 percent of GDP, underscoring the high cost of current borrowing. Although arrears have declined from roughly US$14.9 million in December 2022 to about US$9.9 million by December 2024 their persistence points to governance weaknesses in debt recording, verification and budget execution, the report said.
To address these vulnerabilities, the African Development Bank is supporting a governance and debt-transparency project aimed at strengthening Liberia’s public financial management and curbing illicit financial flows.
The operation’s core objectives are to enhance debt management capacity and to modernize beneficial ownership (BO) disclosure through a digital registration process with improved system interoperability.
According to the project’s design, AfDB assistance will include technical assistance, targeted training and capacity building, process improvements and the provision of tools to key institutions in the debt ecosystem. Specific aims are to: Improve fiscal planning and debt monitoring to reduce the pace of unsustainable borrowing and the build-up of arrears.
Strengthen BO disclosure systems to increase corporate accountability, reduce tax evasion and illicit financial flows, and broaden the domestic tax base. Promote better coordination between fiscal and monetary authorities and support measures to deepen the domestic bond market by extending maturities and expanding issuance beyond short-term bills.
Theory of change and expected impact
The AfDB-backed program is premised on a mutually reinforcing theory of change: by improving debt transparency and management, the government can make more informed borrowing decisions and reduce arrears; by tightening beneficial ownership disclosure, Liberia can plug revenue leakages and expand domestic resource mobilization.
Greater domestic revenues and clearer public liabilities are expected to restore confidence in the financial system, stimulate private-sector activity and reduce reliance on external borrowing.
The intervention aligns with Liberia’s Medium-Term Debt Management Strategy (2024–2026), which emphasizes capacity building, improved inter-agency coordination and market development.
But officials warn that fragmented responsibilities, weak institutional capacity and a shallow domestic market remain major constraints. Addressing those gaps will be essential if AfDB-supported reforms are to translate into sustained fiscal stabilization.
