In the face of the ongoing Ebola crisis, the Liberian economy is being dealt huge blows, receding by over 6 percent in less than six months. The gross domestic product (GDP) was projected to have grown by 5.9 percent in the first quarter of 2014, but it is now revised downward to 0.4 percent due to the health crisis in the country. In 2013, projected gross domestic product (GDP) growth was 8.0 percent, but it was later revised downward to 5.9 percent prior to the Ebola outbreak.
GDP growth was further projected downward to 2.5 percent after the Ebola outbreak and has now shrunk into negative growth. With the increasing threats the Ebola outbreak poses to the economy, the Liberian Government also revised its draft fiscal budget downward reducing revenue projections from over US$540 million to about US$470 million. This is happening in the face of increasing government spending.
The Minister of Finance and Development Planning (MFDP), Mr. Amara M. Konneh told reporters at the Ministry of Information, Cultural Affairs and Tourism (MICAT) regular press briefing yesterday that 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 don’t want to sink our country into another huge debt,” said Minister Konneh.
With the numbers in fiscal deficit lingering around US$305 million, Konneh declared that the government’s Economic Management Team (EMT) has taken several stringent measures towards ensuring strong fiscal discipline in government to create savings, while it is looking for new external sources of funding mainly grants money, to finance the deficit.
“We as a nation and people are going through a very difficult period when our efforts to recover from past trials, consolidate the dividends of peace and build a strong and diverse economy still titter on the brink of instability as a result of the prolonged presence of the EVD on our shores,” he said.
This massive decline in economic activities can be attributed, in part, to external factors, as the country’s chief export commodity rubber price dipped by 41.2 percent per ton on the world market.
Rubber price on the world market has reduced from US$126.8 per ton in 2013 to US$74.6 per ton as of September 2014. This decline is further exacerbated by a 39.2 percent decline in the price of iron ore from US$135.4 per metric ton in 2013 to US$82.3 per metric ton as of September 2014.
Minister Konneh explained that the declines in the prices of the country’s chief export commodities is a consequence of the economic slowdown in China as well as an appreciation of the US dollar, which is up 2.5 percent.
The massive decrease in the prices of the country’s primary commodities has meanwhile resulted in a 31 percent and 81 percent decrease in export earnings from rubber and iron ore, respectively. Average inflation rate has been projected at 11.4 percent for 2014, up from 7.6 percent for 2013, while the end-of-period inflation rate for 2014 is projected at 14.7 percent, up from 8.5 per cent in 2013.
This is far beyond the single digit inflation requirement by the West African Monetary Zone and other monetary unions, of which Liberia is a part. The domestic causes of the economic decline are even more demanding, as total government revenue and grants are projected at 27.4 percent of GDP for fiscal year 2014/15, down from 29.9 percent of GDP for fiscal year 2013/14.
Total expenditure plus net lending for fiscal year 2014/15, on the other hand, is projected at 28.6 percent of GDP, down from 31.4 percent of GDP for fiscal year 2013/14. The overall fiscal balance including grants for 2014/15, registers a projected deficit of 1.2 percent of GDP, as compared to a deficit of 1.6 percent for 2013/14. But the overall fiscal balance, excluding grants for 2014/15, reflects a projected deficit of 4.9 percent of GDP as compared to a deficit of 4.0 percent for 2013/14.
“Owing to this widening fiscal deficit,” said Minister Konneh, “the public external debt for 2014/15 is projected at 14.3 percent of GDP, as compared to 11.6 percent of GDP for 2013/14; while the central government’s domestic debt for 2014/15 is projected at 15.0 percent of GDP, as compared to 16.6 percent of GDP for 2013/14.”
Despite these numbers showing looming threat, Minister Konneh assured the public that the government cannot afford to lose sight of its responsibility to effectively govern and remain fully accountable to the people.
“The successes we have seen in the field owing largely to our health care workers and the resilience of our communities, must invoke a renewed sense of national urgency to deal with the governance issues that all but exposed our country during these trying times,” he said.
The Minister released three very important documents to the public including the first quarter fiscal outturn covering the period July 1st to September 30th 2014 and the First Quarter Consolidated Fund Account and the Ebola National Financing Report, reflecting contributions and expenditure on core Ebola response activities, in line with the National Ebola Response Plan.
He challenged ministries and agencies including security agencies that received the Ebola fund to compile and submit their reports to the Ministry of Finance and the General Auditing Commission (GAC) for audit purpose.