13 January 2014

Liberia: U.S.$47 Million in the Red - Another Budget Shortfall in Liberia

Monrovia — The Liberian economy is in the red for the third time, thanks to yet another budget shortfall, this time, US$47 million. The Ministry of Finance has notified the heads of government ministries and agencies to tighten their belts for the long haul.

According to a copy of a communication submitted to the various heads of government, and signed by Finance Minister Amara Konneh, in possession of FrontPageAfrica, the ministry pointed to a number of factors responsible for the shortfall.

"We have successfully completed the first half of the budget execution in Fiscal Year (FY) 2013/2014, despite the many challenges facing the sector due to the late passage of the budget; late preparation and approval of procurement and cash plans by spending entities and constrained overall to execute the budget consistent with the public financial management and Public Procurement Laws."

The Ministry says it will shortly publish a more detailed mid-year budget outturn.

The Budget Act Section 8(a, b, c, d) lists certain requirements that must be implemented by all government ministries and agencies, including the personnel monitoring, consistency spending, deficit financing and roads.

"To execute these, we must work together and reposition the Government of Liberia (GoL) to continue financing priority programs in the Agenda for Transformation (AfT), in order to meet counterpart funding requirements by the GoL."

While commending ministries and agencies for operating within an overrun that was six percent of the realized revenue, which allows the ministry to meet financing obligations to key investment programs expected to transform the economy, the MoF cautioned that current fiscal realities demand even harder, spending decisions from the various government agencies over the next six months, in order to meet the goals set out in the AfT.

"These decisions are very painful and will take away from discretionary lines and add to LEGACY economic investments such as energy, roads, ports, agriculture, WASH, education and healthcare, security and the rule of law.

The MoF says the uncollectable or unrealized revenues to date pose a significant contracting pressure on expenditure.

"In FY12/13, we spent US$136 million, representing 57 percent of investment appropriation and 23 percent of the budget for recurrent, representing 79 percent of the budget."

The MoF explains that public investments intended to transform the economy are, however, threatened in the FY13/14 budget.

"Only US29.6 million has been disbursed against US$456. 1 million, representing 46 percent of the budget. A 23 percent versus 46 percent execution rate raises an alarm for all of us. The productive economic expansion will not occur if this trend persists and continues for the next half of the fiscal year."

In this light, the MoF says there is still much to be desired in terms of revenue performance to meet the continued deficit, despite the recalibration and reconfiguration of the budget.

"You will notice that there will be a significant reduction in goods and services on the recurrent side of the budget, to allow the GoL to finance debt and deficit incurred in FY2012/2013 and public investments in FY2013/14.

The MoF explained that policy measures are already being employed to address compensation inequities within the public sector, beginning in January with political appointees, followed by director-level civil servants in February.

"These policy measures require resources, which must be sourced. Therefore, I ask for your support in upholding the Cabinet decision to freeze all hiring with the exception of healthcare and education workers that are being regularized on the Civil Service Agency's(CSA) payroll and for which appropriation exists in the budget."

Ministries are being warned that they will shortly be receiving the MoF's risked ceiling to allow government ministries and agencies to reconfigure their respective budgets, so that it fits this year's four percent deficit financing relative to revenue projections and continued support for the key AfT priorities classified as LEGACY projects and approved by the Cabinet.

The economic performance under Konneh is a far cry from his predecessors Dr. Antoinette Sayeh and Augustine Ngafuan who recorded budget surpluses during their tenure as Finance Ministers.

In 2010, the Ngafuan-led Finance Minister reported a bank balance at US$38.9 million, despite declaring a shortfall earlier that year.

As of May 28, 2010, the country's consolidated account (state revenue with respect to fiscal budget) had a US$38,976,649 (thirty eight million, nine hundred seventy six thousand, six hundred forty nine dollar) bank balance at the Central Bank of Liberia.

In March 2011, the International Monetary Fund heaped praise on the MoF declaring overall inflows well above budgeted levels, even after accounting for the delay of US$22 million in budgetary grants to FY2012.2.

Said the IMF: "Tax revenue was boosted by a petroleum sector payment not anticipated in the budget, a postponement of income tax cuts to January 2011 and higher customs revenues.

With significant difficulties experienced in executing the investment program (Box 1), the fiscal surplus reached an estimated 2½ percent of annual GDP at end-March 2011."

The shortfall in the budget is already threatening to disrupt this year's Mid Term elections.

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