Dialogue Should Activate New Ideas in Action -Finance Minister Says It Should Drive National Inclusion
At the opening of a 3-Day National Economic Dialogue held at the Ministerial Complex, Congo Town yesterday, September 4, 2019, Liberians from various backgrounds gathered to reflect on the difficult economic context the country is facing which the Minister of Finance & Development Planning Samuel D. Tweah, Jr. said is not about show making, but is rather intended to provide the immense opportunities for transformation of the national economy.
The Minister of Finance & Development Planning also advised that the dialogue is NOT about intellectual display of ideas, but is rather more than anything, the path of Liberia’s transformation being well framed in the Pro-Poor Agenda for Prosperity and Development, adding that the dialogue should be about putting new and existing ideas into action.
Minister Tweah spoke Wednesday, at the 3-Day National Economic Dialogue held at the Ministerial Complex, Congo Town -September 4, 2019.
This Dialogue, he emphasized, is about ownership, mastery and appreciation of the difficult challenges Liberians face. But more importantly, Minister Tweah said the dialogue is of the opportunities for change inherent in those challenges, if all stakeholders – The Government, citizens, the private sector, civil society, Non-Government institutions, our Development Partners among others—work concertedly together to place Liberia on the path of national economic transformation.
The Finance & Development Minister indicated that the forging of that momentum and the driving of this national consensus of shared risk and shared ownership can take shape during this Dialogue.
“We open this Dialogue amid challenges to our macro-economy and to our private sector. Exchange rate instability and its pass-through impact on inflation have reduced the income of our vulnerable poor, especially those in rural areas. This instability has been primarily caused by the loss of significant amounts of United States dollar from the Liberian economy over the past several years. The inflows of United States dollar that have supported our exchange rate in the past did not happen because of fundamental domestically driven economic variables,” Finance Minister Tweah said.
. He said the US dollars inflows were not primarily based on exports from our agriculture and manufacturing sectors, but largely on the presence of UN foreign troops, external assistance, and oversees remittance. “To the extent that those USD inflows derived from exports, they were exports from iron ore and rubber, whose prices are highly volatile and whose extraction takes place with NO value Addition,” he told the gathering.
Noting that the period of surplus inflows of United States dollar is over, Finance Minister Tweah accentuated that the reality exposed the Liberian economy to shocks and has compelled the Government and its international partners, including the International Monetary Fund, to work toward a macroeconomic framework that can may shock affect an import-oriented, undiversified economy of Liberia, where nearly everything the nation consumes is imported by spending scarce United states dollar for the import.
Under this new macroeconomic framework, our fiscal policy is expected to be contractionary to better manage our deficit, which also has impact on inflation, especially in a dual currency regime. Our fiscal policies under this new macroeconomic framework will be anchored on minimizing the deficit, controlling the national wage bills which is disproportionately high in the West African region, increasing the effectiveness and efficiency of priority pro-poor development spending, ensuring greater transparency in fiscal data and on stronger governance, and the fight against corruption,” the Minister said.
He said many of these aims were announced by President George Manneh Weah immediately in 2018 when he took office at which time the President ordered the reduction in salary of public officials and mandated that salaries in the public sector had to be anchored to the compensation of Government ministers, cascading downward to Deputy and Assistant ministers.
The President, he also told his audience of experts, also mandate rationalization of public spending and cuts to unnecessary public expenditures, saying that this original Pro-Poor salary cut saved US 8.7 million annually and the rationalization led to a recast of the 2017/18 national budget, which slashed the expected deficit that would have happened without the recast.
The preceding 2018/19 national budget, he explained, faced significant challenges in the last quarter, underscoring the need to increase domestic revenue as the principal means of financing the budget. The shocks to the budget were NOT because domestic revenue was NOT performing, he narrated, saying that evidence shows that domestic revenue levels in last year budget have exceeded levels as far back as three to four years ago.
Tweah, in his minds, indicated that the shock came from the decline in external assistance, which has been a major part of our revenue story over the last 10 or more years, and from the fact that public spending has not adjusted, or cannot easily adjust, downward to these declines in external support.
He conscientized the participants that one key focus in this DIALOGUE is how do we increase domestic revenue from its last six-year average of US$ 453 million, to an average ranging from USD 500 m to 530 million in the next several years. “In the new 2019/2020 Year national budget, the Government aims to moving toward this path in higher domestic revenue performance through a combination of tax policy measures, measures that broaden the tax base, administrative efficiency, use of technology, minimizing exemptions and using tax incentives more reasonably, and stronger financial support for revenue mobilization. So the 2019/20 national budget now under consideration is NOT just about downward adjustment, he asserted.
Tweah said going forward, the Government aims to increase its effort to collect taxes, backed by the strong political will that has been shown by the President to collect the fair share of revenue due the Government.
“All stakeholders and citizens are challenged to participate in this endeavor. People with knowledge of persons and cartels that may be colluding against the state are asked to come forward with such information. All hands should be on deck and this is what this Dialogue is about,” he defined the purpose of the meeting.
Contending that the President has established a business climate working group that has engaged a wide range of stakeholders to address the challenges and costs of doing business in Liberia, Tweah indicated that strong revenue performance is a function of continued growth in the economy, improvements in the business climate, increased flows of investment etc. The Working Group, he said, has engaged stakeholders in the shipping industry with the aim of bringing down the costs of imports, which also have passed through impacts on prices.
He said evidence shows that import costs can come down if the Government, the National Port Authority, shipping lines and other stakeholders remain on their current path of bringing prices down and improving efficiency in that sector.
He also told the gathering that the cost and reliability of electricity is also a challenge to the business environment adding that per kilowatt hour cost of power in Liberia is 35 US cents, while for most countries in West Africa it is less than 15 US cents. The completion of the CLSG transmission lines early next year will enable Liberia to import cheaper power from neighboring countries, helping to improve the business climate, he said.
Additionally, Tweah said contract enforcement and the litigation of business cases in Liberian courts remain areas of concern. The Business Climate Group is working closely with the Chief Justice and leaders of the judiciary as well as key private sector groups such as banks, which are often affected in these types of cases, to situate contract enforcement on a more transformative path, he asserted.
Besides, he noted that job creation is a big theme for this dialogue, saying that the country cannot absorb the number of young people entering the job market yearly and this is serious recipe for crisis and tension. “In this regard the Government, its partners and all stakeholders are challenged to open frontiers for all our young people in the areas of agriculture, viewed as the clearest path to short and medium term job creation.
However he intimated, “There is absolutely no way we transform agriculture if banks do not seriously participate.” Tweah said to begin this transformation, President Weah mandated that his government include US$2 million in the budget as an agriculture guarantee fund.
“We intend to increase this amount every year. This money is to back more flexible lending terms to the agriculture sector. Firms in agriculture production need very flexible terms, such as one to two year grace period and longer loan maturities,” he proposed. He said the Government is ready to put its money where its mouth is by using public resources to relax constraints in transforming the agriculture sector.
“We encourage our Development Partners to adopt this approach and the Government is engaging with major partners on support for de-risking, as a way to stimulate lending across agriculture value chains involving road infrastructure, transport, warehousing, storage, inputs supply etc. In the next three, we are all challenged to put Liberia on a sustainable path of food security and job creation, using agriculture as a conduit,” he said.
Over the next 3 days, Minister Tweah trusts the country will be fully vested in finding paths to transformation, on thinking big, on blaming less and working together more. “There is NO economic progress for Liberia if it remains an undiversified economy, still dependent on the sale of iron ore and rubber with NO value added, and on the raw export of gold and diamond and timber. That model has failed. Looking for strategies within this failed model will also fail,” he said.
“Let an entrepreneur somewhere here say if the Government can increase its agriculture guarantee to 4 million, our Bank Group will provide flexible 10 million financing for agriculture before the end of this year. The Government is working with investors to pour resources in the sector and is prepared to give these agriculture investors very generous incentives if they provide jobs for our young people and grow the food we eat here,” he added.
He then said the government is committed to situating this country on a path to change. “We are tacking difficult challenges and enjoin on all stakeholders on the need to support these changes. We are tackling the beast of bloated wage through a harmonization policy that pays all Government workers equitably,” noted