Liberia: Ruling Party Sends 25 Names for Employment at RIA as IMF Concerned over Slow Pace of Retrenchment Drive at Central Bank
Monrovia – For weeks now, both the International Monetary Fund (IMF) and the World Bank have been on the backs of the George Weah-led government to make significant fiscal adjustment by mobilizing additional domestic revenue and rationalizing spending, especially in the wage bill, while securing needed fiscal space for social and capital spending.
Report by Rodney D. Sieh, [email protected]
To the contrary, the administration appears to be struggling to enforce the mandate from the IMF due to what sources tell FrontPageAfrica amounts to massive pressure from partisans and ruling party hierarchy as well as lawmakers, who have been sending names of relatives, friends and loved ones for jobs.
In the process, those piling on the pressure are rejecting the efforts being made to slash the wage bill and retrench workers, and instead pressing the CBL to keep scores of partisans brought to the bank by former Governor Nathaniel Patray. The RIA is faced with a similar dilemma.
25 New Hires at RIA
The wage issue is resurrecting amid emerging reports that some 25 new employees were sent to the Roberts International Airport on Monday to begin work with salaries ranging from US$800 to $2,000 adding more burden to the cash-strapped airport.
The 25 new employees were reportedly hired on the news that Air France is expected to resume flights to Liberia in the early part of next year.
Multiple sources confirmed to FPA that the RIA recently retired a few employees in a bid to cut cost. But shortly after, an additional 25 new names were sent for job, on the assumption of the Air France arrival next year.
Airport authorities are being tightlipped on the matter but multiple sources confirmed to FPA that the new hires are putting a strain on the airport which could soon crash is nothing is done to put the brakes on new hires.
The wage bill slash is a key prerequisite to Liberia’s entry into the IMF Extended Facility Program.
While the bank, in recent days has been working the clock with representatives from the IMF in a bid to undertake austerity measures from all sectors, including cuts to annual housing allowances for senior managers and pay cuts; entanglements and pressure from the ruling party, legislators and political interests, is said to be interfering with the process, baffling not just the bank’s hierarchy struggling to clean-up the mess but international stakeholders growing increasingly impatient at the slow pace of the process.
Faced with a decline in grants and external assistance, some economists are concerned that Liberia’s wage bill, which accounts for two-thirds of government spending, may “no longer a tenable situation.”
In April, World Bank Liberia Country’s Economist, Daniel Boakye, declared that the main drivers of inflation in Liberia are fiscal pressures caused by the continuous revenue deficits in its third year running. To address the problems, Mr. Boakye called for robust revenue generation mechanisms to be put in place to close the gap and to reduce the government’s rising wage bill.
Said Boakye: “Government is having fiscal pressures and fiscal deficits in part because revenues have been falling below targets since 2017. In the midst of falling revenues, the government is finding difficult to adjust its expenditure. That is why we say there are fiscal pressures. So, addressing fiscal pressures could be in two ways: find out how best government could mobilize domestic revenue to close the gap. And in the expenditure side, we see a lot of pressures coming because of rising wage bill. So, the government could review its policy framework for containing the wage bill.”
Wage Bill Around US$327M
According to the World Bank, Liberia’s current wage bill stands at around US$327 million, more than 57% of the country’s US$570 million budget for FY2018/19, representing an increase of US$31 million from FY2017/18.
Prior to his departure, former governor Patray struggled to defend massive hires in the midst of a declining economy.
The government committed itself to the process during this year’s Spring Meetings in Washington DC. The IMF-supported program calls for austerity measures in addressing rising inflation, unemployment level and depreciation of the Liberian dollar and fall in global commodity prices.
When the IMF’s Executive Board concluded its Article IV Consultation in October, it also called for further progress in public financial management reforms to improve the quality of spending in a resource-constrained environment, and for improvements in the business environment to attract high-quality, growth expanding investment. The Central Bank of Liberia (CBL) was also urged to significantly tighten monetary policy to reduce the inflation that was eroding the living standards of the poorest Liberians, while taking strong measures to safeguard financial sector stability.
“For the reform to be effective, all branches of government must commit to taking a cut in their salaries and other wages” the Mission noted.
As part of that effort, the IMF team met with both Houses standing committees on Budget, Ways, Means and Finance aimed at generating support and encourage members of the legislative branch of government to buy into the reform process currently being formulated to help restore sanity to the Liberian economy.
While the government has made some headways through its controversial harmonization of salaries across ministries and agencies of government, recalling scores of partisans, lacking experience and qualification from strategic and technical areas have been slow.
“Already at an unsustainable level of growth, the wage bill was expected to continue to rise, due to poor human resource management practices across the government, especially related to employment, and the discretionary management of allowances, which is about 60% of government’s expenditures and is really troubling the economy.”Madam Laurine Wede Johnson, Executive Director, Civil Service Agency
This week, the CBL announced a number of measures aimed at executing the Central Bank’s core mandate of achieving and maintaining price stability and were based on global, regional and domestic economic developments and financial market conditions.
At its first monetary policy meeting since the adoption and approval of the new Monetary Policy Framework, the Board of Governors of the CBL announced an increase to the Standing Deposit Facility (SDF) rate to 30% and set the Standing Credit Facility at 500 basis points above the SDF, Issued shorter tenor instruments (two weeks, one, three, six and twelve months) at 30% per annum and a reduction to the Liberian Dollar Reserve Requirement (RR) to 15% from 25%, and increase the US Dollar RR to 15%, from 10%
The bank also announced the suspension of the 25% Remittance Split Policy for the month of December, 2019.
Among the measures, CBL authorities fell short of explaining what is being done to curb the wage bill which is said to be a primary concern for the IMF.
In July, the head of the Civil Service Agency(CSA) acknowledged that the excessive wage bill implemented by the ruling Coalition for Democratic Change government affected key government projects and development objectives.
Madam Laurine Wede Johnson explained that the government’s wage bill grew from around US$30 Million in 2005/06 to US322 Million in 2018/19. “Already at an unsustainable level of growth, the wage bill was expected to continue to rise, due to poor human resource management practices across the government, especially related to employment, and the discretionary management of allowances, which is about 60% of government’s expenditures and is really troubling the economy.”
A Nerving Dilemma for CBL
The CSA head’s assertions were bolstered by President Weah himself, who pledged in July that his government’s commitment to ensuring that all recruitment, employment and payroll management exercises will revert to the Civil Service Agency and the Ministry of Finance and Development Planning as required by law.
The administration has been under pressure since assuming office last January for overstepping the function of the Civil Service Agency (CSA) and employing people based on partisanship.
In an apparent adherence to the IMF’s advice, President Weah, in a communication accompanying the draft budget for Fiscal Year 2019/2020 [US$ 532.9 million] to the House of Representatives, stated that for sustainability of the wage bill harmonization exercise, his government will now return all recruitment, employment and payroll management to the CSA and MFDP.
Recently, former Auditor General John Morlu alarmed that the IMF had made it a priority for the government to slash 400 jobs at the CBL but the government through the Ministry of Information, Cultural Affairs and Tourism (MICAT) slammed the former AG’s comments as mere propaganda. “This is blatant propaganda! The truth is hiring at the CBL is too high relative to hiring at central banks in other countries,” the government through the Ministry of Information, Cultural Affairs and Tourism, said in a statement.
The MICAT statement said: “Countries are compared on everything in the developing world. If hiring at the central bank in Sierra Leone or in Guinea is not this high, the central bank in Liberia should be expected to do the same. In Liberia, the Central Bank of Liberia has run deficits for a long time, which means they use reserve money to pay salaries or operational costs. Central banks are supposed to run surpluses and give back to Government. But the difficult economic situation in Liberia has made this difficult over the years. So, the Bank has been financed through reserve. If the budgets or salaries are too high, this comes at a cost to reserve.”
For the immediate future, the CBL finds itself in the midst of a nerving dilemma over what to do with the scores of employees brought on by Patray.
Prior to Patray taking over as governor, there were about 350 employees.
Patray, according to sources, brought in an additional 400 employees were, raising the total on staff to around 725.
The added staff, FPA has learned increased the expenditure of the bank, making it difficult to stay afloat.
Things are so bad that a senior official speaking on condition of anonymity because they were not authorized to speak on the matter, said the CBL may not be able to survive in the next six months.
Even more troubling, FPA has learned, the Engineers who constructed the new CBL building are concerned about the number of employees, because the building was constructed for less than 400 employees. It has also become a safety issue.
The reserve of CBL is depleting very fast and if these austerity measures which include the reduction in the workforce that is contributing to the depletion are not implemented, the bank will collapse.
Political observers fear that legislators, CDC leadership and other government officials from The Ministry of State to other government entities may be contributing to the destruction of CBL, neglecting the fact that the CBL is an independent professional entity that should not be influenced by politics.
While the bank, in recent days has been working the clock with representatives from the IMF in a bid to undertake austerity measures from all sectors, including cuts to annual housing allowances for senior managers and pay cuts, entanglements and pressure from the ruling party is said to be interfering with the process, baffling not just the bank’s hierarchy struggling to clean-up the mess but international stakeholders growing increasingly impatient at the slow pace of the process.