The Public Accounts and Audits Committee of the Liberian Senate has released its comprehensive analysis of the budget performance for the first quarter of Fiscal Year 2024, covering the period from January 1 to March 31.
The report provides a detailed overview of the nation's financial health, with a focus on revenue collection, expenditure patterns, and the implications for Liberia's economy.
The report highlights an encouraging start to the fiscal year with tax revenue outperforming projections by 11%, amounting to US$163.4 million compared to the projected US$151.4 million.
This achievement represents 26% of the full-year projection of US$540.2 million. Historically, the first quarter is not a peak period for revenue collection, suggesting that the fiscal year might be off to a strong start.
However, the committee noted areas of concern, particularly regarding the General Sales Tax (GST) and Taxes on Residents, which both fell short of projections by approximately US$4 million each, leading to a combined shortfall of US$8 million. Additionally, the GST performance compared to the previous fiscal year is down by US$2.37 million.
The Ministry of Finance and Development Planning (MFDP) and the Liberia Revenue Authority (LRA) have been urged to monitor tax expenditures closely, especially those arising from concessionary rates to certain manufacturers and underreporting by taxpayers.
Non-tax revenue underperformed by 8% against projections, attributed to a slow start at several revenue-generating entities, including the Liberia Immigration Service (LIS), Liberia Business Registry (LBR), and the Ministry of Foreign Affairs (MOFA), which faced confusion around passport issuance.
Overall, total revenue exceeded projections by 8%, achieving 25% of the full-year projection. However, the report expressed concern over the lack of contributions from State Owned Enterprises (SOEs), despite a projected US$2.1 million in revenue.
The report revealed that MFDP allocated US$144.97 million for the first quarter but disbursed only US$77.1 million, representing 53% of the allocation and just 10% of the full-year appropriation. This slow disbursement is particularly concerning given the strong revenue performance.
Liberia's economy, being heavily reliant on service and merchandising sectors, depends on government spending to stimulate economic activity, protect jobs, and support disadvantaged communities. The low spending in Q1 could have a contractionary impact on the economy, particularly at a time when economic activities are expected to peak around the July 26 holiday.
The slow formation of the government, which extended into the end of the first quarter, was cited as a key factor for the low spending. However, the committee deemed it unacceptable for funds to remain unspent in the bank.
Notably, disbursement on infrastructure activities for Q1 exceeded the allotted amount. However, the report raised concerns about off-budget expenditures, particularly the Ministry of Public Works' use of pre-appropriated funds for contracts amounting to $8 million.
The report also highlighted spending related to the ARREST agenda, which includes Agriculture, Roads, and Tourism. These key components of the President's agenda received only 1%, 8%, and 1% of the disbursements, respectively, during Q1.
The MFDP allotted US$78.7 million for employee compensation but disbursed only 54% (US$42.5 million). Domestic liabilities received 29% (US$4.9 million) of the US$17.2 million allotment, and foreign liabilities received 30% (US$5 million) of the US$16.6 million allotment.
This suggests delays in salary payments and low servicing of domestic and foreign debts. Goods and services received 37% (US$3.8 million) of the US$10.35 million allotment for Q1, which negatively impacts businesses.
Disbursement on social benefits was 49% (US$1.8 million) of the allotment, indicating that disadvantaged individuals might have missed out on crucial services. Overall, the government disbursed only 12% of the US$643 million recurrent expenditures for the year, which could lead to economic contraction and higher costs, weakening the job market.
The report indicated that the MFDP allotted and disbursed only US$259,000 for Q1, suggesting a low prioritization of public sector investment activities, which are vital to the ARREST agenda.
The committee provided several recommendations to enhance budget performance and economic stability. The Ministry of Finance should execute the budget as approved by the Legislature, ensuring timely disbursements to stimulate the economy.
Aligning ARREST with sectors and classifications would allow for easier analysis of spending impacts, the Committee believes. Clear explanations for variances and gaps in budget execution should be provided, and SOE debts should be broken out or shown as contingent liabilities.
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The 100-day action plan in the Q1 report needs clarity, with detailed activities and associated costs. Sectoral highlights should be updated with accurate numbers and clear construction for better clarity.
Additionally, more analytical data should be included to support revenue activities and expenditures, such as the tax-to-GDP ratio, the impact of tax incentive activities, and comparative data to show trends between Q1 2024 and Q1 2023.
The report, finalized in the committee room on July 10, 2024, provides a critical analysis of Liberia's fiscal performance and outlines necessary steps to ensure the effective use of public funds and economic stability.
The report was signed by Senator Amara M. Konneh (Chairman), Senator Gbehzonger M. Findley (Co-Chairman), Senator Dabah M. Varpilah (Member), Senator Darius Dillon (Member), Senator Edwin M. Snowe (Member), Senator Nathaniel F. McGill (Member), Senator Francis Dopoh (Member), Senator Gbleh-bo Brown (Member), Senator Momo Cyrus (Member), Senator Johnny Kpehe (Member), Senator James Binney (Member), and Senator Johnathan Sogbe (Member).
