MONROVIA – With about 40 days already lapsed for the National Budget to be operationalized, public hearings on the 2023 National Budget kicked off yesterday at the Capitol Building under the auspices of the Joint Legislative Budget Committee headed by Representative Thomas Fallah of Electoral District #5, Montserrado County, with anxiety rising whether the lawmakers could this time around deliberate on the financial instrument where critical sectors of the economy that will address the needs of the people will be prioritized, as well as finding out ways to mitigate the imminent budget shortfall occasioned by possible decline in government revenue.
This year’s budget will be the second edition of the country adopting a full calendar fiscal year which starts from the first of January of every year and terminates on the 31st of December of the same year. The delay in submission of the national budget by the executive means it will not be passed on time and may affect a lot of transactions that should have been considered by government and by extension the private sector as well since all economic activities in the country can be influenced by the national budget.
On December 6, 2022, about two months behind time according to the Public Finance Management Law of Liberia, President George Manneh Weah submitted his government proposed budget for fiscal year 2023, amounting to USD777.9m, down by nearly USD29m as compared with the USD806.5m approved budget for year 2022, though with similar characteristics where a large portion of the budget will be spent on recurrent expenditure and also failing to reach the USD1bn mark which was projected by the government to have been the subsequent figure “due to the tremendous achievements with the economy”.
As usual, the government said the main source of its revenue for the budget will be through massive domestic mobilization with tax revenue accounting for the biggest share. Accordingly, it projected a whooping USD667.94m as domestic revenue where USD548.94m will come from tax revenue.
Be as it may, financial experts spoken to by The Analyst are of the opinion that there could be a serious challenge that may result to a huge budget shortfall, speaking from the sources of the government itself which relied on the number of tax waivers that the government has been executing over time which are now posing threats to its revenue drive.
The Liberia Revenue Authority (LRA), sometime ago raised an alarm that government is losing about USD300m annually to tax waiver and to avert the situation, there was a dire need for the government to reconsider the tax incentive policies and monitoring frameworks to safeguard revenues meant for government.
“If according to the LRA, it is projecting that due to “government tax waivers, it stands to lose a little over $300 million in anticipated revenues, are we headed for the biggest budget shortfall in our history?”, Ben Fyneah, a Liberian based in the United States and who aspires the presidency wondered.
Though LRA did not indicate which specific method the government should use to avert the continued loss in revenue, The Analyst is of the view that anything short of closing the leakage will not yield any tangible result, something a pundit believes will be a tall order for the government because of political reason.
“Most of the measures taken by the government are political and did not make any economic sense. The President thought those “populist policies” could land him the support of the people but he needs the money being lost to waiver to carry on development which will have profound impact on the people and could translate to vote generation. But again, this is election year and anything goes for him but may hurt the economy”, Sara Miller-Taye, a female activist told The Analyst last week.
What could even compound the problem more is the fact that to undo some of the waivers, it will require legislative actions that will have to pass through stages in the national legislature before being sent to the President for approval in order to take effect. Unfortunately, the government may not have the luxury of time to achieve that.
Interestingly, the suggestion of LRA may not see the light of the day so soon because the President said in his state of the nation address that he signed Executive Orders to suspend the collection of tariff on a number of goods and services.
“During the year 2022, I issued eight executive orders, as follows: Executive Order #107 Suspending Tariffs on Off-Grid Solar Renewable Energy Products; Executive Order #108 Supporting Integration and Access to Social Services and Safety Nets for Refugees and other Vulnerable Populations in Liberia; Executive Order #109 Extending Executive Order #100 Exempting the Liberia Water and Sewer Corporation (LWSC) from Customs Duties on Selected Items”, he said.
Other Executive Orders issued by the President include Executive Order #110 Extending Executive Order #101 Repositioning the National Food Assistance Agency; Executive Order #111 Exempting the Liberia Electricity Corporation from Customs Duty and GST on Generation, Transmission and Distribution Equipment, Materials & Fuel; Executive Order #112 Establishment of the National Railway Authority; Executive Order #113 Suspending Tariff on Rice, among others.
“Mr. Chairman, as we strive to meet the nation’s increasing demand for domestic revenue, we also need to consider the impact that tax incentives and other generous policy regimes have on our revenue basket. Each year, more than US$300M is lost to tax waivers and incentive programs”, said Gabriel Montgomery, Deputy Commissioner General for Technical Services, when he addressed lawmakers last week.
Pundits who spoke to The Analyst further said that the delay in submitting the national budget from the Executive has invited unnecessary distraction as the lawmakers may not have enough time to properly scrutinize and discuss the budget, thus making it impossible to provide the input needed to make some useful recommendations and inputs on how to make the financial document work for the people.
“We are having a budget hearing process just for the name of it because the delay from the executive affected the time frame within which the budget will be properly examined and discussed by the national legislature, and if possible, to have some sort of budget performance report that will inform us what to do with this budget. Unfortunately, we will now have to compromise on a lot of things just to pass the budget otherwise, the untold hardship it will bring on the people will not be easy”, a lawmaker who pleaded not to be named in the paper said.