Despite the announcement of the upward review of the recast budget for the calendar year 2022 from around US$785m to about US$806.5m which should be seen as a boost to the economy, The Analyst can authoritatively report that the economy might tank downward as there are strong indications that the recast budget will experience a shortfall of $25m due to the delay by the government to ratify and sign the new Mineral Development Agreement with ArcelorMittal Liberia, the leading concessionaire in the country.
President George Manneh Weah had earlier written the national legislature seeking the approval of the budget which was necessitated by the extra fiscal space that yielded through internal reprioritization of existing programs, identifying additional resources, as well as a World Bank Loan of US$15 million, and the remaining US$5 million that would come from the mining sector.
“The restatement is necessitated by the need to address urgent and unforeseen national expenditure demands through reprioritization of the country spending plan,” the President’s Communication said.
However, according to a thorough background check of the recast budget and conversations with legislative insiders, it is now clear that that the additional $5m being stated by the President was the difference between what the executive branch of government negotiated with HPX, a Guinean company intending to export its iron ore products from Guinea through the Port of Buchanan, in case ArcelorMittal will not be remitting the US$25 million to the government because of the delay in ratifying and signing the Mineral Development Agreement (MDA).
With regards to the referenced HPX transaction, the government without legislative reliance is said to have reached an agreement with the Guinean company to provide a whopping US$30m with respect to the utilization of the Liberia’s port, a situation that has become a sticky issue between the government and AML as the HPX deal reportedly contravenes part of the AML MDA. Since the government did not see the projected $25m from AML coming through, it ran to HPX, which agreed to pump $30m in government’s direction to cushion the effect of the hold on the $25m expected from AML.
The Analyst also reports that the economic outlook with respect to the gamble the government is taking will look even darker if the national legislature decides to properly scrutinize the budget and raise issues with the government that it will not honor signing the document if the $30m is not expunged from the recast budget since the Executive did not follow the laid down procedure for the HPX deal to be accepted as part of the revenue being generated. What it will amount to will be a zero revenue under the budget line it was placed because neither will AML be committing its planned $25m nor will HPX commit to advancing the government the US$30 million in case the legislature stalls in approving its concession agreement.
Already, some legislative mavericks are starting to sound alarm bells over the HPX deal and the expected advance that could cushion the recast budget.
According to Montserrado County senator Abraham Darius Dillon, the government’s attempt to have HPX advance US$30 million without legislative hearing is a risky business.
“I am questioning the HPX deal. When you are doing an investment like that, we want to know the volume of the investment, and whether it meets the benchmark for legislative action for ratification. If it meets the benchmark for legislative action for ratification and the legislature has not done so, then to take their money is troubling. What if you take the money now and legalize it through the budget, and when the time comes and you bring their agreement, we don’t ratify it? Then the people will complain that we are the same ones who took the people’s money and placed it in the budget. I am sounding the alarm now that it was wrong to do so,” Senator Dillon cautioned.
Some economists and financial experts spoken to over the weekend are in unison that the unfolding situation could spell doom for the economy, noting that there must be a concerted effort by the government to address the AML MDA deal once for all instead of taking decisions that will further cripple the economy.
“There is always turbulence in the financial system when the state actors, especially the government, are not decisive and consistent in formulating and enforcing economic decisions. In our own case, the government can spare us this pending quagmire we are about to find ourselves in. Go back to the drawing board, call ArcelorMittal and start the review of the contract you talked about, and sign the contract after the review and renegotiation so that we are done with this thing. The other companies you are discussing with have little or no capacity to match with what AML has brought in and wants to bring in again”, Watson Bellah Taye, a financial expert in Monrovia, said when asked about his own take on the MDA.
Concerns over galloping recurrent expenditure
Since the approval of the initial budget of over $785m, making it the largest since the foundation of Liberia, there has been a number of concerns raised by a cross section of Liberians as it relates to how did the government come up with such a huge budget in the midst of the decline of sources of revenue and the prevailing economic situation in the country.
One of the areas of concerns has been the astronomical increase in the recurrent budget of $292.4m, accounting for 37.5% of the total budgeted expenditure as was approved in February of 2022. But what is curious about the proposed recast is the amazing increase of the recurrent expenditure to $648,552,000.00, amounting to 79% of the total proposed expenditure after it was increased by only $20m.
“This is seriously doubtful and I am wondering why the sudden increase in the recurrent expenditure from some $292m when the budget was $785m to now be at around $648.5m when the recast is about $806m, a more than 100% increase? Where will they be spending the money? On additional salaries when there is no evidence of salary increment anywhere in the public sector or there has not been any form of mass employment? What are they taking us to be? This is just wrong”, Mrs. Sophie Wonasue-Stevens, a furious retired civil servant said last week.
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