Monrovia – Liberia’s economy is in recession and chances of salvaging it in the short term is far-fetched, Finance and Development Planning Boima Kamara told a news conference in Monrovia Wednesday.
Report by Willie N. Tokpah – [email protected]
“Slow economic performance owing to lowering global prices for Liberia’s key export commodities, especially iron ore, rubber has triggered downward adjustment of real growth from 2.5% to -0.5%.
This implies difficulties in realizing the full-approved revenue envelope, especially the full tax revenue component.” Minister Boima Kamara.
Kamara said National Budget has experienced a critical breakdown – declining from 6.7% in Fiscal Year 2015/2016 to 3.6% in Fiscal Year 2016/2017.
Kamara added that the National Budget dropped from US$622 million in FY 2015/2016 to US$600 million for FY 2016/2017.
The Finance Minister disclosed that the Ministry is unable to raise the projected budget for FY 2016/2017, due to changes in economic conditions which underpinned the draft budget during early May 2016.
“Slow economic performance owing to lowering global prices for Liberia’s key export commodities, especially iron ore, rubber has triggered downward adjustment of real growth from 2.5% to -0.5%.
This implies difficulties in realizing the full-approved revenue envelope, especially the full tax revenue component,” Minister Kamara asserted.
According to Kamara, there was also limited support to the National Budget which was triggered by the frontloading of donors’ commitment in 2014 to respond to the outbreak of the Ebola Virus Disease.
The Finance Minister maintained that government had taken a decision to reduce by five percent its spending cost, while foreign travels have been cut down.
Minister Kamara further expressed the need for a shift to be made in Liberia’s economy order to increase better revenue generation and job creation for citizens.
He called for more focus on agriculture and manufacturing as possible ways forward in alleviating the economy from recession.
The Chief Treasurer said building a resilient economy would depend on the good performance of the private sector and improved road connectivity to regions involved in agriculture.
He said Liberia could no longer wholly depend on the extractive sector which is now failing the economy; instead there is a strong need to focus on the agriculture sector as a means of strengthening economic sustenance.
He named the need industrialization and turning raw materials extracted from Liberia to finished products for the Liberian market and subsequent exportation.
Minister Kamara noted that with promising growth trend in the agriculture sector, especially rice, cassava production and fisheries, there are prospects for a bright future beginning 2017, when the economy is expected to grow by 4.7%.
Despite the decline in total resource envelope, Minister Kamara said the government remains committed to its delivery of critical services, especially in education and health, in addition to funding development driven articulated in the Agenda for Transformation (AfT) and Economic Stabilization and Revitalization (ESRP).
The total resource envelope comprise of:
- US$524.96 million in revenue raised domestic sources (taxes and non-tax revenue) representing 87.46% of the total resource envelope;
- US$50.26 million in core grants and loans from external sources representing 8.37%;
- US$22.97 million in contingent revenue from both domestic and external sources representing 3.82% of total envelope;
- US$2.00 million as carry-forward from unspent revenue FY2015/16 budget representing 0.3% of total envelope.
Total domestic revenue of US$526.9 million accounts for 87.8% of the total resource envelope of US$600.2 million
Total tax revenue of US$429.2 million is projected to grow by 4.1 per cent against the FY2015/16 approved budget as well as increased by 6.8 percent against the FY2016/16 actual outturn of US$401.9 million. This lower growth reflects the challenges the domestic economy faces.
Total non-tax revenue of US$95.8 million is expected to increase by 55.2 percent against the approved FY2015/16 budget and will increase by 88.2 percent against the FY2015/16 actual outturn.
Total contingent revenue of US$4.9 million will have to be sourced from domestic revenue streams, driven by increment in tax rates on tobacco, alcoholic beverages and GSM excise on outbound calls.
Total core grants and loans are projected at a total of US$50.2 million in FY2016/17, expected to come from European Union under State Building Contract, USAID-FARA Agreement, International Monetary Fund and the Norwegian G=government.
These figures represent decrease of 52.2 percent against the FY2016/16 actual disbursements.
Total contingent loan is projected at US$18.0 million in FY2016/17, with the expectation that the Liberian Government will have to meet certain IMF benchmarks within the fiscal year. This figure represents 80.0 percent against the FY2015/16 approved projections.
The total expenditure on the FY2016/17 Budget comprises recurrent expenditures of US$520.5 million or 86.7 percent, and the public sector plan (PSIP) expenditures of US$79.7 million or 13.3 percent.