Think Tank Berates Budget 2022 -Says Recurrent Expenditure undermines critical sectors

A Liberian Think Tank group, the Center for Policy Action and Research(CePAR) has stated that the draft Budget 2022 is largely focused on recurrent expenditure will undermine the expansion in key and critical sectors like agriculture, tourism, energy among several others, suggesting that there seems no planning aimed at adequately investing in other growth sectors that could sustain the apparent boom of 2022 and citing the 1.1% of the national envelope committed to agriculture as example of the spending priorities of the government.

CePAR, a policy Think Tank that engages in the development of policies through evidence-based research, data collection and interpretation made the submission when it published its findings on the proposed Budget 2022 titled, “Liberia’s2022 Draft Budget: Key Findings and CePAR’s Opinions: What is Really in the Budget”, in which the institution analysed the document and came up with its opinions on every sector that was placed under consideration.

According to the document the budget review was conducted to provide end users and stakeholders including Liberian citizens, development partners and the legislature with a complete picture of the current spending and revenue generation plan of the country for 2022.

“Its intent is to assist with easy interpretation of the budget and inform ordinary Liberians on how public funds are being generated and how the government intends to spend what it is generating on behalf of the country. The review provokes policy debates along proposed spending objectives by identifying pointed spending plans. Likewise, this appraisal of the budget through the citation of the opinions of  Center for Policy Action and Research Center for Policy Action and Research (CePAR) is chiefly intended to espouse a national dialogue where the representatives of the people can civilly engage the president’s budget with the intent of adequately appropriating funds for the welfare of their constituents”, the document said.

The Think Tank said unlike previous reviews that provided detailed queries, this year’s edition is laser focused on the legislature, basic findings on key budgetary items and CePAR’s opinions on the spending and allotment decisions by the Government of Liberia.

CePAR began the analysis of the budget by focusing on allotment to the national legislature and stated that the proposed 2022 proposed budget confirms that the Legislature will benefit more than key segments of the population – like students, teachers, and school administrators, stressing that the amount allocated to purchase and service new cars for legislators is 101% more than the amount allocated for the operations of all Community Colleges, 285% higher than total budget spending for Training Institutes, and 11% more than funds budgeted for the operations of the Monrovia Consolidated School System (MCSS). It said further comparison of total spending allocated for vehicles and maintenance funds for legislators to funding for key educational institutions show the extent to which key subsections under education are being viewed from the policy side.

“When a segment of total spending for the legislature is pitched against the health sector, allocation for lawmakers’ cars and services is 213% and 29% higher than total government allocations for Jackson F Doe Hospital and John F. Kennedy Hospital, respectively – the two primary referral hospitals in the country. Moreover, total proposed spending for cars and services is 16% higher than government proposed earmarked funding allocations for healthcare in all counties, and 21% more than Ministry of Health’s subsidies and grants to be provided to all clinics and hospitals in Liberia”, CePAR stated.

The group noted that furthermore, despite moans over the last few years about the excessive compensation for lawmakers and the need to reduce said compensation, the draft budget proposes an increase in lawmakers’ compensation, providing information that members of the House of Representatives are expected to get a 9% increase in basic salaries but civil servants who staffed the House of Representatives will see a 3% reduction in their basic salaries in 2022.

Besides basic salaries, the draft budget is proposing increases in the compensation packages of the President Pro Tempore, Speaker, Deputy Speaker, and members of the House of Representatives. Basic salaries comparison between the leadership of the Liberian Legislature and the US Congress shows a disproportionate difference – given the sizes of both country Gross Domestic products and level of development. The President Pro Tempore of the Liberian Senate is proposed to earn 30% more than his counterpart in the US Senate.

The budgeting priority of the government, vis-à-vis, funding allocation to key education institutions, referral hospitals, clinics and county health centers, and funds for legislators’ cars, undermine strategic education and healthcare objectives.

Turning to the key findings in the budget and its opinions given against each of them, CePAR said at  US$785.6M the total revenue envelope represents 46.7% compared to Fiscal Year 2020/21 and it is the biggest projection ever with the single largest contributor being the tax revenue, that is revenue collected from taxes on income and profits, amounting to $492.2M and 46% or $227.1M is expected to come from taxes on international trade(import and export duties, profits of export or import monopolies among others

Giving its opinion, CePAR said this is a consumer red flag because it has a tendency for inflation, noting that because inflation is a measure of the rate of increase in prices of goods and services in an economy, Liberians should anticipate a substantial increase in prices and that transaction costs are expected to increase where the final costs are transferred to the consumers.

On the projected revenue from the mining Sector for FY 22 which has experienced an increase of 44.93million or 63 percent when compared to the last fiscal period, the institution said from the perspective that minerals do not last forever, it implies that proceeds of MDAs should benefit every Liberian (meaning present and future generations). “This means such revenue proceeds should be directed toward tangible investment with long term returns, and not expansion in recurrent expenditure as seen in the budget. We are simply consuming all that we are raising even as we know this leap is only temporary”, the report said

The finding also shows that there is no change in tax policy for FY 2022 except for proposals made during the previous fiscal period like increase in goods and services tax to 11%, an airport departure tax of US$25.00/passenger among several others. In its opinion, CePAR advised the legislature to query the proposal for GST as the cost of living in Liberia is already very high. It maintained that ordinary Liberians are too taxed with almost nothing they get in return and imposing a US$25 airport tax for departing passengers also affects Liberians who run SMEs.

“Because the final consumers are to pay for the tax increases, it is expedient that the legislature seek from the Ministry of Finance and Development Planning the specific projects that will be considered for such increments and potential returns on each project. While tax policy also remains the same, the Legislature should mandate the Minister of Finance and Development Planning to fully adhere to provisions of Section 8 of the Revenue Code (requiring the Minister to make an inflation adjustment to the Liberian Dollar amounts when the average exchange rate between the USD and LD changes by 10 basis points from the average prevailing rate. As it is, Liberians are losing their hard-earned funds to the government’s refusal to adjust the personal income tax table”, the report said.

Looking deeper in the projections from external revenue which is US$145m or a US$107m increase from FY 2021, the report said funds are anticipated to come from two (2) sources, namely the IMF Rapid Credit Facility (RCF) US$80m and the World Bank-IDA of US$65M.

CePAR said it is her opinion that this demonstrates commitment and partnership from the international institutions stressing that RCF provides rapid concessional financial assistance to low-income countries (LICs) facing an urgent balance of payments need. It however said, RCF is a loan that must be repaid. “Because the budget, however, did not provide a clear picture of what the World Bank-IDA of US$65m is specifically is, CePAR advises the legislature to probe the terms and conditions of the IDA funding. A clear repayment schedule should be provided when it is established that both monies are loans. It is advised to also seek from the Minister what projects/programs will be financed by both commitments and Return on Investments. The budget is also expected to service a debt of US$120m. CePAR advises the legislature to mandate the Minister to provide the list of debts that will be serviced for the fiscal year”, the report said.

CePAR graded the government poor for budgeting a mere $8.5M or 1.1% out of the total revenue envelope which also includes compensation for employees in the sector. It said the spending plan as espoused in the draft budget makes no viable attempt to utilize the enormous opportunities agriculture production presents. It said this is significantly below the 10% investment threshold agreed by African Union countries under the Moputu Declaration whereas several developing countries are currently experiencing excellent results in addressing productivity gap and delivering general rise in living standards through agriculture investment.

“Enormous opportunities exist along the value chain for agriculture products— opportunities for entrepreneurship, business growth and employment for young people. Government’s current spending proposal, as communicated in the draft budget, fails to heed this call of targeted investment. Like tourism, agriculture is a high job growth and labor-intensive sector. The agriculture sector, more than any others, has the most potential to create sustainable jobs for the vast reserve of unemployed youths in the country”, the report said adding that the greatest scope for job creation lies in agriculture and related manufacturing activities

Turning to the health sector where $83.2m including $650,000.00 for drugs and medical consumables at the John F. Kennedy Hospital and Jackson F. Doe Hospital, CePAR said while this may seem very good, the critical point to assess is whether resources have been properly allocated to increase access to health care and improve service delivery to all Liberians It said a health sector that is fit-for purpose and resilient to future outbreaks can only be achieved through very smart investments in the core area of the sector.

“This is by adequately financing primary health centers and hospitals to improve service delivery. This includes reducing stock-out of essential drugs and medical supplies, proper staffing of health center and effective routine staff monitoring and training. A health budget should place frontline service delivery institutions like hospitals and health centers at the core of its operations. This draft budget puts more money to personnel and other administrative programs at the expense of funding programmatic areas like maternal health among others”, the report said.

The group lauded the anticipated increase of revenue from Motor Vehicle registration which is projected at $7.39M and said it demonstrates improved performance in domestic tax revenue but that the government needs to enforce compliance mechanisms to fulfill its full potential. In a similar vein, CePAR saw the projection of $11m to come from the Maritime industry as a manifestation that the sector has demonstrated another strong performance over the last five years. It said estimates of container shipping profitability alone through 2022 reveals no slowdown in the immense earnings being raked by carriers and that this is a platform to fully exploit as well as strengthening the Maritime Authority to improve on its capacity to maximize its potentials.

The Think Tank also raised the issue of the high cost of governance where out of the recurrent expenditure of US$639m or about 80% of total revenue, compensation payment alone accounts for US$291.6m or about 46% of total expenditure. It lamented that with this rate, Liberia is far from reaching any credible milestone in attaining the required infrastructure to incentivize growth. “A World Bank report (2019) finds 10 Center for Policy Action and Research that investments of 4.5 percent of GDP will allow developing countries achieve their infrastructure-related goals. With hundreds of thousands living without electricity, safe drinking water, improved sanitation facilities and road access, the need to close the infrastructure gap is wanting”, the group said

On the $5.5m budgeted for the renovation of the Executive Mansion and the Tourism Centennial celebration, CePAR said a detailed expenditure report on every previous expenditure on the renovation of the Mansion should be provided and a projected amount be provided for the total cost of renovation, adding that by so doing, taxpayers are apprised on what they are paying for and how much they are paying for and how much they are paying against. It said it believes that the Centennial celebration is a good initiative and advances prospects for revenue generation through tourism and that the government should then provide specific projections on revenue it intends to get from the public administration sector spending.

Among other things, CePAR concluded with how Liberia’s infrastructure deficit is overwhelming and is ranked in the bottom quintile of African countries on an infrastructure index comparing all countries on the continent (AFDB, 2013).” The quality of the infrastructure is also very poor, and it is ranked 103rd out of 148 countries globally. Most estimates put the country’s road system with a total length of 10,600 km with less than 700KM explaining the extent of the country’s woeful road infrastructure. The budget should focus on addressing the infrastructure deficit than placing laser focus on recurrent expenditure”, the report ended.

Comments are closed.