Liberia: Government to Make Major Overhaul in FY2019/2020 National Budget
MONROVIA – Finance and Economic Planning Minister, Samuel Tweah, has disclosed he would delay the submission of the FY 2019-2020 National Draft Budget to House, stating that Executive is considering some significant shakeups in the Budget.
Report by Lennart Dodoo, [email protected]
He made the disclosure Thursday during a press briefing the Ministry of Information, Culture and Tourism.
“Our budget process has been such a way that the revenue that we collect and the expenditure we do every budget year are misaligned. In other words, our spending is a little bit higher than what our true revenue potential is and that could lead deficit financing, borrowing. So, we are working to bring down that expenditure in line with what the true revenue potential is.”
Admitting to complaints from developmental partners about the country’s wage structure, the Finance Minister said the government has recognized the need to harmonize the payroll in order to have a rationalized wage regime. In addition to that, he said, the Technical Economic Management Team and the Ministry of Finance is working around the budget to achieve expenditure rationalization.
Salary Cut Imminent?
The Finance Minister didn’t come clear on rumors of pending 25% salary slash for civil servants. However, he lamented that the George Weah-led administration inherited a salary structure that came in two folds – basic salary and general allowance.
According to him, there is no logic to having two payrolls which has been the case for the last 12 years.
“All the [international] partners have been complaining. The IMF has been complaining that there is no discretionary budget, the budget doesn’t have rule, people can arbitrary assign stuff; you’re wasting budget support money; you’re misusing partners money – this is the complaint,” he said.
According to him, President Weah has mustered the political will to solve the budget constraints to ensure that there is logic, equity and fairness in the way people are paid across the country. “A president has to be strong the National Legislature has to be courageous to make that decision, our partners have said that we have not demonstrated that courage.”
It said it’s irrational to have a revenue of US$400 million and pass a Budget of US$570 million. “So there has to be some adjustment. Adjustment means rationalization in the whole space – that’s the exercise that’s going on. In that rationalization, there may be consequences, there will be,” he said.
Min. Tweah said the economy is in shock because the government owes commercial banks huge debts that it has not been able to settle – a situation he said has also affected the ability of the banks to give out more money in loans for the development of various sectors like agriculture and others. As a result, the upcoming fiscal budget would consider capturing those debts so that the commercial banks would flexibly dish out more money to citizens who are actively involved in the development of various sectors.
These adjustments are coming at the time when exchange rate has depreciated by 26 percent over the year, and inflation accelerated to 28 percent at end-December 2018. This has been detrimental to the living standards of the most vulnerable Liberians who earn and spend primarily in Liberian dollars and threatens the success of the pro-poor agenda. Growth for 2018 was 1.2 percent, while the forecast for 2019 on current policies has been revised down to 0.4 percent from 4.7 percent.”
IMF Being Adhered To
But it seems the Government is heeding to recommendations of the International Monetary Fund team that carried out an assessment and released their report in March this year.
mission recommended that the budget for fiscal year 2020 be based on realistic
estimates of the resource envelope giving Ministries and Agencies a reliable
estimate of the actual resources that will be available to them is critical to
improving the quality of public services, even if this represents less than the
amount budgeted in the past. “Without central bank borrowing, financing a
sufficient level of public service provision will require policies to
prioritize and improve the composition of expenditure, enhance its efficiency,
and expand the resource envelope.”
The mission noted that productive spending is being crowded out by a wage bill, including discretionary allowances, that totals about two-thirds of government-funded expenditure. “This is not a new issue—it has been a characteristic of the Liberian economy for a number of years. However, as grants and other external assistance decline, this is no longer a tenable situation. Freeing up resources in an equitable manner for pro-poor development will likely require effective actions to reduce the share of government resources devoted to this budget item.”
The mission said improving the efficiency of government spending will be key and stressed that policies should aim at improving the monitoring, accountability, and transparency of spending. “Intensifying actions to improve governance and fight corruption, including through rigorous adherence to existing procurement rules, would also be effective.”
Also speaking at the press conference, the Commissioner General of the Liberia Revenue Authority (LRA), Mr. Thomas Doe Nah, said achieving the pro-poor agenda would require an improved revenue mobilization regime.
He said there are strong possibilities that Liberia’s Budget can be improved from US$500 million. He, however, said there’s the need for “some strategic interventions” to change the Budget narratives. As part of these interventions, Commissioner Nah said, the LRA has introduced the domestic resource mobilization strategy. This, according to him, would be the blue print that would be used for the transformation of the revenue system.
Mr. Nah said the LRA is revolutionizing the tax payment system where in tax payers would not have to go through constraints in paying their taxes. This, he said is being done through the digital system like using mobile money for tax payment.
He added that the LRA is taking the domestic resource mobilization seriously and its agents would vigorously enforce collection of taxes that can be locally generated.
Mr. Nah’s plan fall in line with the IMF recommendation that the authorities pursue reforms, including excise tax, tax exemptions, and compliance.
“Revenue reforms have considerable potential to directly expand the resource envelope and facilitate a needed increase in social spending. The mission notes the recent finalization of the Domestic Revenue Mobilization Strategy,” the IMF had said. Meanwhile, the Governor of the Central Bank emphasized the need for policies that would stabilize prices of local commodities.