President Ellen Johnson Sirleaf in her annual address to the nation yesterday said the economy of Liberia is still very much challenged.
She said there is a sharp decline in domestic food production, mining activities, cross border trade, transport services and hospitality.
The Liberian leader said they were all factors that led to a dramatic decline in the economic growth rate of Liberia; from a projected 5.9 percent to an initial negative 0.4 percent.
“Although it was later revised to 1 percent, the future of economic growth is still severely challenged,” said President Ellen Johnson Sirleaf.
“If we are to achieve development goals outlined in the Agenda for Transformation, and reach the long term average growth rate of 8 percent, radical changes will be required in the structure of our economy for increased investments in the productive sector of the economy and in our governance structure and processes.”
According to her, the decline in economic activities resulted in reduction in domestic revenue collection and a sharp increase in Government expenditure.
“Our original revenue was revised downwards by US$86 million (from US$559 million to US$473 million) while expenditure demand increased by US$152 million. We introduced tight fiscal measures with expenditure cuts in discretionary activities thereby reducing the fiscal gap by US$33 million,” she said.
“We also introduced mitigating measures to lessen the impact of the downturn. These included foreign exchange rate stabilization; payment of salaries and wages of civil servants on time; ensuring commercial banks liquidity by settling payments to road contractors and other service providers; and ensuring availability of essential commodities such as rice and petroleum.”
In spite of the numerous challenges revenues of US$517.2 million were collected representing 4 percent increase in Tax Revenue and 14 percent increase in Non-Tax Revenue. This included US$12.8 million from State-owned Enterprises.
She noted that the Liberia Revenue Authority (LRA) commenced work on July 1, 2014. “Our hope is that with better governance, leadership and an incentive structure our tax Administration will significantly improve revenue performance. This will require cooperation and support from government officials and political authorities accepting that just as we pursue ordinary people and businesses to pay their taxes, the same treatment will be extended to officials of Government in all three branches who should commit to bearing their fair share of the tax burden. This is the only sustainable way to finance our national development and improve service delivery to our people.”
Expenditure for the period totalled US$530.7 million, an increase of 10.6 percent over the previous year. Recurrent expenditure totalled U$$363.5 million of which wages and salaries claimed U$$206.8 million or 39 percent and goods and services US$$156.7 million or 30 percent. These two items continue to crowd out the fiscal space required for capital expenditure to expand the economy, she said.
Capital expenditure in the Public Sector Investment Plan (PSIP) include US$230 million for the Mount Coffee Hydroelectric plant and US$$66 million for three HFO plants and an additional US$$200 million was directed to the West Africa Power Pool project between Côte d’Ivoire, Liberia, Sierra Leone and Guinea (CLSG) and settlement to various contractors for road works.
Loans contracted from external sources totalled approximately US$138.26 million and approximately US$19.95 million from domestic sources.
External debt service was US$8.56 million with domestic debt service totalling approximately US$41.17 million, including settlement of the Central Bank of Liberia’s US$11.8 million overdraft facilities and US$29.37 million for other domestic debts.
“We are careful to exercise caution in contracting debt. Working with our key development partners, a Medium Term Debt Strategy (MTDS) was adopted as an essential tool in accounting for and analyzing the costs and risks associated with borrowing and ensuring a balance with funding needs. In this manner, debt sustainability is assured.”
According to her, the total debt stock increased from US$628.45 million to US$759.46 million, of which US$290 million is owed to the Central Bank of Liberia. This represents 22 percent of GDP.
It is considered ironic by our partners, who have granted us significant debt relief that we are unable to convince our own public institutions and private sector entities, who have made significant profits over many years to act similarly by relieving us of the debt incurred many years ago under other administrations.
Our development partners have been good friends not only in the fight against Ebola, but in our overall development progress over the past ten years, the Liberian leader recalled.
Prior to the Ebola outbreak, between January and June 2014, our partners committed a total of US$197.6 million in Official Development Assistance (ODA) to support our Agenda for Transformation. About two-thirds of that amount was invested in the Economic Transformation Pillar to support important infrastructure.
Disbursements were significantly reduced during the second half of the year, due to the outbreak. Although project activities continued sporadically, attention was shifted toward our national response to the epidemic. To date, a total of US$244.2 million has been spent on the Ebola response, by Government and our international partners – 49.4 per cent is being expended by US Government entities, 24.4 per cent by United Nations (UN) entities, 13.3 per cent by NGOs, and 12.9 per cent Government.