Liberia: Budget Under Strain - Liberia's Cash-Based Revenue Outlook and Policy Imperatives

THERE ARE MANY REASONS for concerns in view of the current economic climate in Liberia. Internally, there growing size of the government, misguided allocations of public funds in the National Budget that give rise to wasteful spending, poor foreign travel expenses, increasing number of alleged corruption and malfeasance is a cancer from within. Externally, geopolitical shifts affecting the global economy doesn't make matters any less dire. Growing hardship across the country is not only telling on the ordinary citizens, but Is also giving rise to increase in the crime rate across the country, the commercial capital Monrovia and it's environs being the hardest hit with multiple crimes and unexplained deaths reported.

IT IS FROM THIS BACKDROP that my attention is drawn to the revenew performance of the country. For a country with a National Budget below $1 billion, and considering the competing priorities, it becomes operative to keep are eye on revenue performance to inform short and long tern planning and policy decisions.

LIBERIA REVENUE AUTHORITY (LRA) Q2 Outlook if Q1 Trend Persists

BASED ON ANALYSIS of Liberia's revenue performance report shows that in Q1 FY 2025, Liberia collected US $179.63 million against the US $201.66 million quarterly target--resulting in a shortfall of US $22.03 million, or approximately 11% below expectations. If the current Q1 revenue shortfall trend continues through all four quarters, Liberia will face a total revenue deficit of approximately US $88.12 million by the end of FY2025. This would represent a 10.34% shortfall against the annual budget revenue target of US $852 million.

THE FY2025 TARGET (~US $852 million total budget) already appears challenging to meet. It is important to note that Q1 underperformance is due in part to lost support from USAID and other revenue sources including the much-anticipated Millennium Challenge Compact (MCC), which would have relieved the government of some funding responsibilities and expand the fiscal space. It is important to also note that despite other multilateral and IMF inputs, should this trend persist, deficits could force the government to rely on domestic debt or central bank financing--intensifying inflation and crowding out private investment.

WORSE CASE SCENARIO in terms of expectations:

· Continued shortfalls in performance-based and property income

· Rising inflation, driven by maintained deficits and Lofa fluctuations (~L$196-199/USD)

· Shrinking FX reserves and pressure on exchange rate integrity

IT IS IMPERATIVE that the government takes the following recommended measures:

A. Expenditure Discipline

1. Prioritize Spending: Reassess and temporarily postpone lower-impact or off-budget projects to reallocate funds to essential social services and debt obligations.

2. Transparent Controls: Implement real-time audit and procurement reviews to reduce corruption and leakages, reinforced by LACC quarterly enforcement transparency measures as a preventive rather than corrective measure.

3. Public Sector Restraint: Temporarily freeze hiring, restrict travel, and cap allowances--especially across bloated administrative ministries and state enterprises.

B. Revenue Enhancement Measures

1. Tax Policy Reform

· Cautiously broaden VAT and excise taxes, especially on imported fuels, to reflect rising import demand.

· Review tax incentives and close loopholes benefiting major concession companies, large corporations and informal networks.

2. Improve Compliance & Digitalization

· Accelerate e-filing and e-payment systems to capture rogue informal economy activities especially in rural communities and state enterprises.

· Strengthen customs via risk-based targeting and inter-agency data exchange.

3. Public Asset Monetization

· Leverage commercial assets (mining rights, state farms) through transparent public-private partnerships to generate non-tax revenues.

4. Donor Engagement Strategy

· Negotiate with MCC and USAID for prorated funding allowance for critical services or bridging arrangements, aligning with domestic policy reforms to maintain conditional financing.

· Engage multilateral banks (IMF/World Bank/AfDB) for concessional balance-of-payments support or budget support facilities with the intent to make large public-private partnership investments in critical sectors, prioritizing Liberian entrepreneurship.

WITHOUT CRITICAL REVIEW AND ANALYSIS of Q1 and Q2 outlook, and without a renewed Q1-to-Q2 revenue momentum boost going forward, Liberia faces rising fiscal deficits, inflation risk, and weakening public service delivery. An urgent pivot toward stricter expenditure management--coupled with revenue-enhancing reforms, direct investment in the economy, and renewed donor engagement--is critical. These actions can stabilize public finances, restore confidence, and protect macroeconomic integrity. Whilst it is a good thing to conduct performance audits, forward planning and thinking in addition to preventive counter correction measures are essential for progressive national leadership.

Read the original article on FrontPageAfrica.

Liberia: Budget Under Strain - Liberia's Cash-Based Revenue Outlook and Policy Imperatives

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