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Liberia: Budget shortfall Imminent as Government faces Major Revenue Shortfall

MONROVIA, Liberia – The government of Liberia is poised to face a grave budget shortfall and deficit as the Liberia Revenue Authority (LRA) and the Ministry of Finance struggle to meet the fiscal quota for the current fiscal 2019-2020 fiscal year.

The annual budget of Liberia is estimated at US$500 million dollars.  So far, the government has collected less than half of that amount (US$210 million dollars) while already in the middle, if not the end of the fiscal year.

The largest revenue source for the Liberian government has weakened over time, especially a few months after President George Manneh Weah, a former international soccer star, took office in January 2017. 

Based on the analysis, from both political commentators and economists, the Liberian government generally obtains the largest portion of tax revenues from property taxes and sales and gross receipts taxes. Another large source of revenue for the government is individual income taxes as well as corporate taxes, including charges and fees.  Taxes account for about half of all general revenue. 

“These are weakened because the government’s action to sustain them is troubling,” according to one former Liberian professor of economics at the University of Liberia who chose to remain anonymous for fear of reprisal.

The government also receives non-tax revenues. Non-Tax Revenue is money that the government takes in by means other than taxation. Examples of non-tax revenue include bond issues and profits from state-owned companies such as the National Port Authority, Liberia Petroleum Refinery Company, the National Oil Company of Liberia, the National Social Security and Welfare Corporation, the Bureau of Maritime amongst others.

A number of prominent Liberian and western economists and social activists attribute the poor revenue generation problems of the Liberian government to the serious signs and acts of economic mismanagement, corruption, and disgruntled policy implementation by government functionaries, and political unrests by opposition elements.

To maximize tax collection, the LRA has embarked on a new campaign that leaves out fighting corruption but instead forces businesses and Liberians to pay taxes

Some Liberians believe the government is weak on private-sector job creation, and economic growth, and persistent news of bad governance and corruption as well as insecurity, including armed robbery drive foreign investors away, hamper local business confidence and subjugate innovation and entrepreneurship among Liberians in general.  

With the imminent budget deficit, it would appear that civil servants in the country will go without pay for a long time, and the government will be unable to meet its external and internal obligations on time, especially when the actual amount of expenditures does not correspond with budgeted revenue and expenditures.

This is not the first time that the Liberian government will experience such budget shortfall and deficit.  For the most part of former President Ellen Johnson Sirleaf’s administration, the government experienced budget shortfalls and deficits, especially after the departures of respected Liberian World Bank and IMF’s economist Dr. Antoinette Sayeh and her successor Augustine K. Ngafuan as ministers of finance, respectively.

Both Dr. Sayeh and Ngafuan are said to have had balanced budgets throughout their tenures as ministers of finance. 

Dr. Sayeh was the first minister of finance when President Sirleaf became president of Liberia in 2006 and was succeeded by Ngafuan two years later for the remainder of President Sirleaf’s first term before he (Ngafuan) became minister of foreign affairs.

However, these shortfalls were not felt much during the Sirleaf administration because of the broad international support her administration received, the vast presence of the United Nations, and the activities of several internationally-funded projects.

In addition, there appears to have been a reasonable degree of law and order in the country at the time, as well as the profound credibility associated with the government in terms of policy development and implementation, leadership and program governance, and the competence of institutional heads, and more.

Numerous businesses are said to be shutting down or reducing their operations and workforce currently in the country.  Local businesses and traders are struggling to remain afloat because consumer purchasing power has drastically reduced, and the government’s Economic Management Team has not set forth a realistic framework in dealing with the economic disaster.

Moreover, the imposed mandate of the International Monetary Fund (IMF) is significantly starting to have an adverse negative impact on the country.

To turn the economy around, President Weah needs to carry out a sober reflection and consider reconsolidating his administration.  Something most opposition members, including the leadership of the Council of Patriots (COP), say will never happen because the President does not seem to have the awakening and insights to motivate him to do so.

NOTE: Until press time, Globe Afrique was unable to reach the leadership of the Liberia Revenue Authority and the Ministry of Finance for clarifications because they were unavailable. Their response, if any, will be published if it is made available as a press release.

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Dave Okonjie

Dave Okonjie is a public affairs analyst, researcher and senior issues correspondent.
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