The Business Desk of the Daily Observer has credibly learned that President Ellen Johnson Sirleaf will veto the National Budget Law for fiscal year 2014/15 approved last week by the National Legislature. According to Executive Mansion sources, President Sirleaf will do a line veto of the budget which many economists consider a huge departure from the actual reality of the economy. The lawmakers passed the budget increasing their salaries and benefits amidst the economic challenges in the face of the Ebola crisis.
“The segment of the fiscal budget passed by the legislature is not realizable,” said a Liberian public budget analyst, who feels that the lawmakers’ decision to increase the budget above US$500 million is unthinkable at this time.
The National Legislature passed the budget last week increasing its re-adjusted revenue envelop from over US$473 million to US$660 million contradicting the actual numbers highlighting declining revenue and huge government deficit.
The economy has receded by over 6 percent projected with real gross domestic product (GDP) growth dipping further downward to 0.4 percent due to the ongoing Ebola crisis.
Investment and export as well as government spending as functions of the economy have all been hit due to the crisis.
Investments have dwindled as contractors and companies declared force majeure and left the country, but this does not stop the government from paying workers and ensuring that public institutions function—-which ultimately creates extra spending pressure on the government as the Ebola virus disease (EVD) outbreak rages.
A revenue expert explained how the government would have collapsed had the World Bank and other multilateral institutions and bilateral governments not given direct budgetary support to pay health workers’ salaries and settle other costs.
“The best we can do is to operate on core revenue only,” said this expert who preferred anonymity.
Tax revenue is the government’s single largest resilience for funding, but with most of the businesses hit hardest by the EVD, revenue projections from them could be contingent upon how fast they recover from the impact of the virus, analysts have said.
Apart from the initial draft budget envelop of US$473.2 million, members of the legislature included US$7.047 million as additional revenue from the budget hearing.
In addition to this amount, they also made the following adjustments US$24 million core grant, US$50.3 million contingent (grant) revenue and US$70.6 million (core) borrowing as well as US$10 million borrowing (contingent) and US$25 million signature bonuses for oil blocks 6, 7, 16 and 17, respectively.
By increasing the revenue envelop of the budget by US$186.9 million and increasing their own allowances and other benefits, many economists are wondering where the government will raise additional revenue from to complete the financing of the budget when deficit is already above US$305 million.
Responding to our reporter’s inquest at the Ministry of Information Cultural Affairs and Tourism (MICAT) press briefing on Thursday, Finance Minister Amara M. Konneh announced that the economy is in trouble.
“The economy is undergoing serious stress as a result of the Ebola crisis and the need to intervene in further stabilizing the country’s already fragile economy cannot be overemphasized. The government is challenged in dealing with deficit financing. We have a very huge task in dealing with deficit financing because we [government] don’t want to sink our country into another huge debt,” said Minister Konneh. He called for strong fiscal discipline in government as the economy struggles to recover.