16 June 2014

Liberia: Lawmakers Propose U.S.$30.680 Million Amidst Budget Shortfall

Monrovia — With the Legislature finally receiving the 2014/2015-draft budget, the Liberian government is now set for a new financial instrument to fuel its economic agenda.

But with the excesses brought to bear due to the past three successive shortfalls, many Liberians would find it difficult to believe that the Legislature itself would be taking a huge chunk of the 2014/2015 national budget if all factors remain constant after the budget debates.

Though the Legislature did not submit any budget note outlining what it achieved during FY: 2013/2014 and its priorities for the new budget year FY: 2014/2015, the Lawmakers have been allotted 30.680 about eight million, down from what it was allotted in the last fiscal year put at 39.785 Million with a total of 39.608 million disbursed to the Legislature according to the fiscal outturn report.

It remains unclear if the Lawmakers will approve that amount or opt for increment as has been done in the past. The total employees salary for the Legislature is put at 18.754million a little reduction from the US$19.176 million in 2013/2014.

The Legislature gets a total of US$7.694 million for general allowance and US$3.204 million in special allowance if the new budget is passed. The political heads of the Legislature, including the president pro temp, the speaker and deputy speaker, also get large amounts allotted to them.

The President Pro Tempore Gbehzohngar Findley's office gets US$1.341Million; the office of Speaker Alex Tyler gets US$858,518 while the Office of the Deputy Speaker Hans Barchue is allotted US$742,387 in the 2014/2015 budget.

Findley's office

Though Protemp Findley is in an election year and it seems unclear whether he will be reelected because of the kinds of odds pitched against him, he still manages to get huge budget funding of over a million dollars for FY: 2014/2015.

It is unclear whether the folks at the Finance Ministry gave it to him or he's taking it himself as President Ellen Johnson questioned the Lawmakers allotting money unto themselves in 2012 at the Council on Foreign relations in New York when she said: "We didn't give it to them, they took it".

Compensation of employees in Findley's office accounts for US$397,433 in the 2014/2015 of this amount, civil servants account for US$97,133. General allowance takes a chunk of US$228,300, while special allowance amounting to US$72,000. Under use of goods and services the office of Senator Findley is allotted US$386,254.

Office of Speaker Tyler

House Speaker Alex Tyler gets US$858,518 lower than the US$1.174 allotted in 2013/2014 budget. The speaker's office employees' compensation amounts to US$345,664 while civil service employees get US$62,810 of this amount.

General allowance for the speaker amounts to US$210,854 out of this amount US$72,000 is earmarked for special allowance. Goods and services for the office of the speaker amounts to US$497,854 this amount is lower than the US$738,746 allotted in 2013/2014.

The office of Deputy Speaker Hans Barchue is allotted US$742,387; of this amount US$236,297 is allotted for the deputy speaker's employee compensation and of this those who are under the civil service are allotted US$64,740, while use of goods and services amounts to US$499,090 a huge drop from the 973,434 allotted in 2013/2014.

Recently the Legislature and the executive were embroiled in a war of words over persistent budget shortfalls and the recent omission by the executive of the Legislature's specifically the House of Representatives proposed US$73 Million initially advanced by the House for inclusion in the draft FY 2014/2015 budget.

Following more than a week wrangling over the previous budget that was submitted by the executive and the Legislature denying being in possession of the said document due to what sources termed the omission of the proposed US$73 Million, the executive submitted a new budget adding US$18.25M for Direct District Development less than half of what was proposed by the Lawmakers.

Summoned for shortfall

The budget shortfall debate heightened in FY: 2013 /2014 and Finance Minister Amara Konneh was summoned to explain a release his Ministry issued and give reasons for the shortfall.

The House spent more than four hours intermittently keeping the minister standing and recoiled into Executive (closed door) to come to a conclusion on what action to take but not until the Minister gave this response.

"That release was in response to interviews granted by Hon. Tengbeh and also by Hon. Roland; where our performance and otherwise were seriously attacked and distorted," stated Minister Konneh after he had been kept standing for hours and questions thrown at him from all directions by Lawmakers.

Minister Konneh's contention during the hearing and even that of many of his supporters is that he was always open to dialogue and the two Lawmakers who apparently took the fight to his doorstep, simply went looking for trouble. The Minister did not hide his feelings when he told Lawmakers that the standoff was a result of the actions of two members of the Legislature.

"It was in response to that. Under no condition in this honorable body that any statement made by any Lawmaker here, will get a response from anybody, especially me," he told Lawmakers last Tuesday.

Continued Konneh: "Our expectation is that whenever there are confusions or concerns about fiscal policy or economic issues, that we would be cited to provide explanations or to engage. When that issue happened, I reported the matter to some members of the leadership of both houses because it was played repeatedly and published repeatedly questioning our performance; our credentials and what not; we felt that it deserved some kind of a response and so there you have it."

With this position taken by the minister, the House's Plenary had to exercise its power, thereby the subsequent unopposed motion to penalize the minister for the action of his ministry's media team.

"That the minister of finance on a weekly basis, must work with the committee on Ways, Means and Finance, by way of briefing to provide sufficient information to this body through the committee on ways, means and finance on government revenue intake," stated the motion proffered by Rep. George Mulbah (Bong County, National Patriotic Party).

"On the issue of the disrespectful communication which was crafted to be believed as a press release; this body through its presiding instructs the minister of finance to render an apology writing to this body with copies made daily to the office of the presiding and published in seven media for seven days."

But as Sam Jackson, political economist predicted when he told FrontPageAfrica that he expected to see some form of a truce at the end of the day between Konneh and the Legislature it did happen. Konneh did apologize and the matter was laid to rest.

'We all helped'

But, Konneh during his appearance before the Legislature in May told the House's plenary as the debate intensified that everyone involved should at least take some blame for the shortfall, meaning the Legislature should share part of the blame.

"Please permit me to remind all of us, that when we submitted the draft budget on April 30th, 2013, the total estimated revenue was US$553 Million, by the time we negotiated the budget and concluded it, that number increased by US$29Million, to US$582Million," said Minister Konneh something that infuriated the august body.

Continued Konneh: We agreed that we should announce the 582 and then during implementation, we will adjust revenue envelope accordingly. It will interest all of us to note that when the budget was submitted, the exchange rate at the time of submission, was L$75 toUS$1 today the exchange rate is hovering around L$90 to US$1. This means that even if we collected the revenue projected in the budget, there would be a shortfall of approximately, US$7Million."

The minister said all the parties involved in the project process including the Legislature were aware of the US$ 1.5 Million captured as social contribution from offshore oil companies that were expected to operate during this fiscal year was not likely to come through because those estimates were not supported by the production sharing contract because the government had taken a policy position review the oil law.

"My goal here is not to shift blame or accept responsibility here and there, but to give you the facts, so that we can discuss them candidly with the aim of finding solutions to them," he said.

"When we met here on January 21, the total revenue collected, as at January 17, 2014 was US$278.3Million. The total revenue that we have collected as of May 12, 2014 now stands at US$425.8 Million dollars. This is a US$147M increase since our last January meeting right here in this hall."

Economist Jackson also noted that legislative manipulation of the budget process and the subsequent wrangling for who gets what, has led to the harm caused the economy leading to these shortfalls.

"It does cost every government a lot because the compromises are not made in time. You have an issue that the budget is not being executed fast enough; so it slows down growth," he said.

"We look in our own system last year, for example where we had a few months of this wrangling between the executive and the Legislature; where it took time to approve this budget and we only were executing 1/12th at the time."

Jackson said such actions become a constraint to economic growth because the government is the largest spender in the economy and if the government is not spending fast enough and high enough, there would be a reduction in the growth rate and such reduction has an impact revenue thereby impacting output and ultimately the standard of living. But Jackson said at this stage all hope is not lost.

"I'm convinced that we do have challenges with the economy, but the economy is not in a free-fall and there is no imminent collapse," he said. Jackson said another reason for these continuous shortfalls three years in a row is the government introduced Medium term Expenditure Framework, MTEF.

"We went from a single year budget to a medium term expenditure framework budget, which is a multi-year budget. I think the teething problem of the multi year budget also added to our problems in terms of the budget shortfall," he said.

"There was a lot of unplanned spending that went on for example the Public Works-up to $80Million but they say it was budgeted for over the MTEF period, but it seems it was spent very quickly. There were issues with contractors owing the banks, government owing the contractor and so contractors unable to pay the banks."

Structural defects

Jackson maintains that the Liberian economy is what it is because of defects in its structure.

"You don't have domestic resources to grow your economy; so if you don't have domestic resources to grow your economy, you have to depend on what you call foreign direct investment," he said.

"The economy is where it was in terms of its structure like in 1979; where you had a two-commodity country- you have rubber and iron ore. That is, your largest earner of foreign exchange."

Jackson looks forward to a less overly ambitious budget, adding: "We are going to tune down ambition, but in tuning down ambition, bear in mind that public sector investment projects will be minimum and that can hurt us."

"But it is better to be conservative for now. Bear in mind that we've collected between 1.2 to 1.5 Billion dollars in the last three years V.S 1.2 billion for the first five years of this administration and we've invested more in energy and infrastructure than they've done in the last five years."

But as it seems the government is not significantly tuning down its ambitions, as the new budget in its draft form seems to have almost doubled the previous one, even though the government is arguing that it is an embodiment donor funds.

Liberia's real GDP growth in 2013 was estimated at about 8.7% and inflation increased to 8.5%, reflecting the pass through of a 14% depreciation of the Liberian dollar, according to Finance Minister Konneh yet he said there is still light at the end of the tunnel and all is not lost.

"Inflation is expected to moderate somehow 7% in 2014 as international food and fuel prices decline," said Minister Konneh during the hearing at the Legislature in May.

"For this year 2014, our economy is projected to grow at 5.9% from 8.7% as mining production levels off temporarily. However, non-mining GDP, is projected to grow at 6.1%, driven mainly by increased activities in the construction sector.

Our fiscal performance through the end of April of 2014, has been broadly in line with this economic reality and our extended credit facility program with the International Monetary Fund. The overall fiscal deficit is projected to be about 3.8% GDP and for an economy our size and the difficulties we are going through, this is normal."

With these huge projections for the Lawmakers, it is still unclear how the Legislature examines its own spending when it in fact proposes and approves its own spending and it is not mandatory that they explain how monies given it are expended.

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