Tough Times Ahead – Financial experts say Draft Budget Not Encouraging

MONROVIA: Probably it could be a guess but a clearer understanding of the call for Liberians to manage their expectations ahead of the inauguration of the incoming administration of Ambassador Joseph Nyuma Boakai may have emerged this week when the House of the Representatives received the draft 2024 national budget from officials of the Ministry of Finance and Development Planning in the amount of US$625.57m, a huge USD157.37 difference between that of 2023 which was USD782.94m just as  some financial experts called for serious fiscal discipline to avert the possibility of the country experiencing a budget shortfall.

According to Madam Tanneh Geraldine Brunson, Deputy Minister of Finance for Budget and Development Planning who presented the financial instrument to Speaker Bhofal Chambers on Tuesday, December 19, 2023, out of the proposed budget, a whopping US$623.14m constituting 99.6 percent is projected to come from domestic revenue mobilization while a paltry amount of US$2.43m or 0.39 percent is projected to come from external resources.

By the same token Madam Brunson said the government will spend a very large portion of the budget, US$594.54m or 95 percent on recurrent expenditure, while the total cost of public sector investment projects is projected around US31.03m or 5 percent of the total proposed expenditure.

Speaking further at the brief ceremony at the Capitol Building, Madam Brunson said the first claims on available resources are focused on those obligatory expenditure categories that must be satisfied. In this regard, the total amount of US$ 594.54 million earmarked for recurrent expenditure has been allocated and guided by the following order of priority: Debt Service (Domestic & External), Compensation for Employees, Grants, Goods and Services for Education and Health Sectors among others.

Financial experts react

Financial experts who have analyzed and projected the direction of the economy from the outlook of the things to come said they foresee a gloomy picture and nothing much should be expected in the coming year especially with the imminent advent of the new dispensation. The initial reaction of some of them was that the economy has been on the decline and it is going to affect the revenue collection capacity of the country.

“In the first place the economy has been on the decline for some time now and that can even be proven in the drop from the budget of USD782m in 2023 to US$625m in 2024. Revenue mobilization from which the 2024 budget is expected to be capitalized will be seriously affected as well.

“A lot of businesses have folded up during the period under review and not much is expected from the government to immediately address the reasons why some of these businesses closed down during the period we are considering”, a financial expert who did not want to be named in the papers said.

According to Miss Susan Wluton, a business development expert and an importer said casting doubt on the ability for the government to raise up to 65% of the targeted revenue will be an understatement “because on the average, I worked for about 100 medium level businesses in 2022 with huge revenue haul to the government from taxes but throughout 2023 we didn’t have up to 20 of such entities doing business and you do the math in terms of government losing revenue from the taxes those companies were paying annually”.

She said it would take a long time before some of the folded businesses return to operation because the new administration needs time to find solutions to the causes that led those companies into distress and “that by extension will deny government from raking in taxes”’

Montgomery Geewon, an ex-banker, said he was worried about the government meeting its obligations with respect to the priority areas in spending which include debt servicing, compensation of employees, goods and services in the education and health sectors of the economy.

He said spending on these areas normally put money in the pocket of the people but the capacity to execute such expenditure occasioned by dwindling revenue will affect a lot of people and activities and urged the government to do what it could to step up measures to save the situation.

Some experts who spoke to The Analyst immediately after information of the draft budget was made public said they were worried with the usual lion share of the budget being expended on salaries of government employees “who are not more than 85,000 persons out of the population of about 5 million people”.

“This is a serious distraction to development and it is going to hit home hard during the first years of the next government especially in 2024 when they will be taking seats and inheriting a heavy load of salaries to pay for government employees. But do they even have the money to pay these people, the country is broke and I am afraid we could begin to have some disenchantment from the civil servants”, he said.

The drought from the external sector to support the budget was also an area of serious concern and according to a high profile politician will be playing a meaningful role in the next government said that while he is an apostle of a government being independent and robust enough to fare for its people, it will be out of order not to be concerned and worried with the very minute projected amount of $2.43m coming in as budget support.

“I am inclined to support the independence of any government to cater for its citizens but we must  all be concerned that the incoming government will be looking at just $2.43m coming from outside to support the budget. It is too concerning and I doubt the government could quickly identify sources to close the gap”, he said.

The drop in the support from the international sector could be connected to the end of the IMF program Liberia was enrolled in when the external shocks experienced by the outgoing government in 2019 nearly brought it down. Enrolling in the program is not a quick fix, it is a process that will take time which may not be favorable to the incoming government.

Over the years, the government was receiving not less than $40m annually and said amount was used in critical sectors of the economy including payment of salaries for civil servants.

Just like the outgoing government that has to start from the scratch with the departure of UNMIL and other international organizations that supported the former President Ellen Johnson Sirleaf administration for 12 years, the Unity Party Alliance government under Ambassador Joseph Nyuma Boakai will have to find ways to raise money from her own ingenuity because the international community is not going to come in so soon to provide the much needed support.

Normally there are several stringent conditions that come with the assistance. The outgoing government was forced to implement the harmonization program to put salaries of government workers at par but there was a backlash from the citizens especially the civil servants some of whom saw their salaries being slashed downward.

Possible conditions that the new government could be subjected to are removal of subsidies on importation of rice and petroleum products to be eligible for external support. But it is doubtful if the government could go that route because removing subsidies right now will definitely drive up prices of commodities such as rice, the nation’s staple food and petroleum products.

“This will be the toughest of all conditions to accept by this government and I seriously doubt that we will be in a hurry to pay back our people in the coins that they will reject. We promised a new society and gave hope to the people for a better Liberia that will be affordable for all of our citizens.

“We could be playing around the subsidy thing for some time before fulfilling some of these conditions because take it or leave it, if we are not truthful to ourselves that we must all make the sacrifices, then we will not be able to deliver anything new thing for the people but we will get there”, a top UP partisan told The Analyst last night.

Comments are closed.