25 March 2014

Liberia: Konneh Raps On Economy

The Liberian economy did not experience a stable performance this year as compared to last year, recording 8.1% of growth, which is 8.3 percent lower than growth recorded in 2012.

With the rather sluggish performance of the economy for 2013, according to Finance Minister Amara Konneh who delivered the report in a special statement is due to several factors including the reluctance of tax payers to settle tax obligations to the Government.

He said the growth in 2013 was driven largely by increased activities in the mining sector, and this is expected to continue in the medium-term, particularly with the start of iron ore exports by China Union and the ramping up of production by Arcelor Mittal.

According to the Minister, the increase in exports in the extractive sector is a result of Liberia's stable macroeconomy, which attracts the foreign direct investment needed to generate foreign exchange and create jobs. "As you know, however, our economy experienced some difficulties in the second quarter of this fiscal year partly due to the depreciation of the Liberian Dollar against the United States Dollar. While the price of the US$ to the Liberian Dollar has stabilized, which is due in no small measure to the efforts of the Central Bank of Liberia, this decline in the value of our currency is a testament to the need to increase exports and diversify our economy and attract more foreign exchange," he said.

Minister Konneh said Liberia will remain dependent on the large aid and security related inflows "we currently receive, which are likely to fall over time; and continue to be subject to global demand and prices, because our productive base is mostly characterized by the export of primary commodities like rubber and iron ore." "While our service sector has been another driving force of economic growth, it is expected to take a hit as the United Nations Mission in Liberia (UNMIL) draws down its presence in the country, and as NGO activity reaches arguably lower levels, causing a slowdown in domestic demand for services such as food, entertainment, domestic support, etc. This will, of course, have a corresponding impact on employment and a secondary effect on economic activity." On the other side, Minister Konneh said there is a mitigating factor to the increase in exports in the mining sector, noting that the Government has worked hard to ensure by removing infrastructure and bureaucratic bottlenecks that hindered our concessionaires from rolling out their operations and begin producing and exporting according to set timelines.

"Through our efforts along with concessionaires, we project a boost in tax revenue collection by approximately US$400million per annum; and we expect an increase in employment of Liberians by approximately 80,000-90,000 jobs in the next 5-10 years. So, while we are working to diversify our economy and reduce our reliance on the extractive sector for revenue, we are making good use of our natural resources to support our development efforts," the minister told the nation. At the same time, he said the Ministry of Finance has embarked on tough and stringent measures to go after those who are willfully evading the tax payment process, thereby denying it (government) huge revenues.

The measures are intended to improve Government's revenue generation base.

"In the face of these revenue shortfalls, the MoF has put in place stringent technical, administrative and legal measures to recover tax revenues for the remainder of the fiscal year," the Minikster said.,

Among the measures also is the setup of a revenue mobilization task force and the increase of tax awareness coupled with the reorganization of tax administration personnel to ensure the most effective distribution of talent and responsibility in order to meet our revenue targets going forward.

"We have identified and met with delinquent taxpayers to give them time to settle their tax obligations to the GoL and we are working with the Ministry of Justice and the Board of Tax Appeals to prepare litigation against those who fail to pay their taxes. These are short-term measures intended to improve revenue collection, with specific emphasis on the following," he said.

Other significant measures the MoF has considered in its taz payment improvement scheme is what the Minister terms "Spot verification of taxpayers to validate their payments."

The MoF has announced a major crackdown on delinquent taxpayers, including publishing the list of persons, businesses and public institutions with outstanding tax obligations; and initiating legal proceedings against them to recover taxes.

Minister said they have enforced internal controls at the systems level and stronger coordination within our team to mitigate risks and undertaking an anti-smuggling operation on the customs side, by monitoring of transshipment through the border, and conducting rigorous post clearance audits to close revenue leakages resulting from dishonesty among some tax payers.

He said "We are also working with our colleagues in the Inter-Ministerial Concessions Commission to remove the infrastructure and bureaucratic bottlenecks in the forestry sector."

"We are also working with our colleagues in the public sector by providing support to enable them perform. So far, this intervention has reversed the declining trend in motor vehicle revenue since August 2013, resulting in improved performance in quarter three. We have also seen improvement in the forestry sector where, for the first time, we have doubled forestry revenue from US$700,000 - US$1.4m between February and March 2014."

With these measures, he said revenue generation looks promising for the remainder of the fiscal year. "Moreover, despite challenges with the execution of our budget given the pressure of competing investment priorities and recurrent demand, we have seen an improvement in our budget performance comparing allotment and disbursement records for the twelve month period ending February 2013 to the same period ending February 2014," the Finance Minister noted.

"This analysis is relevant because it tells the rate at which allotted funds are being disbursed to spending entities. The difference between allotment and disbursement was much higher in FY 2012/13. Conversely, we have seen this gap significantly narrowed in FY 2013/2014."

"This is a significant progress and demonstrates that spending entities are now given allotments for which they have absorptive capacity and which are in line with the trend in revenue generation and cash forecasting."

He noted that by February 2013, government had allotted US$394 million and disbursed US$308 million during the same period.

"This fiscal year as at February 2014, we had allotted less than US $371 million, but had disbursed more US$322 million, pointing to a contraction in the gap between allotment and disbursement." Minister Konneh noted.

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