How an aid gusher helped and hurt Liberia

Two violent civil wars in Liberia killed a quarter million people between 1989 and 2003 and destroyed the West African country’s economy. A massive influx of foreign aid followed that turmoil, ushering in a period of relative peace and stability. Yet Liberia remains among the world’s poorest countries.

In 2017, one democratically elected president stepped down and another took office for the first time in over 70 years. At the same time, Liberian foreign aid subsided. According to the World Bank’s database, total aid fell from an all-time high in 2010 of US$359 per capita to about $130 in 2013, although aid flows did rebound briefly to $243 per capita during the country’s 2014-2015 Ebola crisis.

Having lost so much foreign support, Liberia’s economy is struggling. Reportedly accompanying these economic woes are an uptick in violence and political unrest that’s now hard to ignore. Thousands of demonstrators joined together to protest how the government is handling the economy in June 2019.

We belong to a team of researchers that includes one Liberian, several Americans and people from India, Nigeria and other countries. Our team has been working to reduce political violence in Liberian communities by partnering with local leaders, concerned citizens and police forces for more than five years.

Because we know economic and political tensions often rise as foreign aid agencies withdraw, we are deeply concerned about the long-term prospects for Liberia’s new-found stability. We also believe the situation in Liberia may serve as an example of how foreign aid that can seem to be healing a war-torn country’s wounds may do little to strengthen those nations in the long term.

A short-lived patch

Overseas development assistance, the most common kind of non-military foreign aid, is a mix of money, food and other supplies, plus services that goes to countries that are low-income, enduring a crisis or both. In Liberia’s case, it has included everything from UN peacekeepers to nurses caring for pregnant women and newborns. This assistance was intended to end armed conflicts and human rights violations while reducing poverty rates and fighting illnesses like malaria and Ebola.

The civil wars slashed the size of Liberia’s economy by 90%, causing its gross domestic product, or GDP, to decline to only $54.50 per capita by 1995. In large part due to the foreign aid influx, its gross domestic product ballooned from $748 million in 2003 to $3.3 billion in 2017, with per-capita GDP of about $600.

Relying heavily on foreign cash established a false sense of stability and growth in the economy, as infusions of foreign cash were temporary. The lasting impacts of Liberia’s aid flows are coming into focus now that much of the world has moved on.

The United Nations Mission to Liberia has pulled out altogether. Other major organizations and countries have also reduced their funding too. Sweden, formerly one of its leading donors, has given Liberia no funding at all in some recent years.

Aid from the U.S., whose leaders helped found Liberia in the 19th century as a destination for freed African Americans who either moved there by force or free will, fell sharply as well. It dropped from $228 million in 2011, when assistance began to dry up, to $86 million in 2018.

There were two apparent aftershocks: inflation surged and growth faltered.

After hovering around 8% in recent years, Liberian inflation reached an all-time high of 28.5% in 2018. Following years of growth rates ranging between 5% and 10% per year, the economy contracted in 2016 and growth remained low for the next two years.