... The delay of the budget is meant to put pressure on lawmakers to pass it quickly and with as little scrutiny as possible, given that the government would run out of cash for operations in 2023.
President George Weah has requested members of the House of Representatives to grant him 22 more working days so as to finalize the preparation of the draft 2023 budget.
The President's request means his administration, for the second year in a row, is expected to delay the submission of the budget way past its statutory deadline (now October 15). Similar delays happened in 2020 — lasting for more than a month and a half.
Weah, as a result of his request, is now expected to submit next year's budget, which is likely to be around US$1 billion, at the end of November. The billion-dollar mark, if achieved by Weah, would be a record-breaking achievement for his administration as it goes up for re-election next year.
The approved budget for the fiscal year 2022 is US$806.5 million budget; with recurrent expenditure chopping a massive chunk, resulting in limited capital investments toward infrastructure and other assets that are crucial for rapid economic growth and development.
The President, in a letter to the House, blamed the budget submission delay on the ongoing negotiations with the International Money Fund (IMF), regarding the country’s next monetary and fiscal policy goals, which are largely aimed at achieving macroeconomic stability.
“Under the ECF Program, the Executive and partners are concluding negotiations before finalizing the resource envelope for the next fiscal period,” Weah said in his letter.
“It is important to ensure that the country’s resource envelope is realistic and reflects the government's priorities in the wake of the worsening macroeconomic outlook intensified by the lingering impacts of COVID-19, the Russia/Ukraine War, and the increasing expenditure demands on Liberia’s meager resources.”
He added that the preparation will ensure adequate funding for the 2023 General and Presidential Elections, while “addressing extra-budgetary pressures to subsidize the current rice situation in the country, as well as to fund government institutions in order to remain operational without causing disruptions during the elections year.”
According to Weah, an IMF team is already in Liberia to conclude an assessment on the government’s macroeconomic developments and performance, and the fiscal policy outcomes and projections for the ensuing fiscal year.
The IMF team’s presence comes nearly two months after the IMF Executive Board approved the disbursement of US$22.1 million to Liberia under the Extended Credit Facility (ECF), which Liberia entered in 2019 as a result of economic instability. The four-year program was meant to ensure that the Weah government adapted to prudent monetary and fiscal policies so as to reduce inflation to just over 5 percent — a target that was achieved a year ago — as well as to finance all budgets without recourse to central bank credit.
Under the four-year arrangement, with a total access of SDR 155 million (60 percent of quota or about US$214.30 million), the Weah administration has been able to withdraw SDR 85 million (about US$110.7 million) after meeting certain thresholds, which include preserving macroeconomic stability, ensuring a comfortable international reserve position, and maintaining debt sustainability.
And now, negotiating with the IMF, the focus is now being placed on strengthening the growth leg of their reform program, so as to improve the business climate and enable greater access to credit, including by facilitating the resolution of non-performing loans. Improving educational attainment, adapting to climate change, and addressing gender disparities are also critical.
The 2023 budget also comes at a time when the Liberian economy is expected to end with a softening growth of 3.5 percent, according to the African Development Bank. However, 2023 growth is projected to widen to 4.3%, primarily driven by expansion in mining, services, manufacturing, and agriculture. Inflation, according to the Bank, is projected to reduce slightly to 8.1% in 2023, driven by food and energy inflation, while the fiscal deficit is forecast to also slightly reduce to 3.5% in 2023, due to lower grants and higher subsidies.
Also, the country’s account deficit is expected to fall slightly to 17.5% in 2023, since fuel and food account for about half of overall imports, according to the Bank.
However, downside risks of this projection, according to the Bank, include a prolonged Russia-Ukraine conflict; deterioration of the terms of trade on the main exports, especially gold and rubber; and non-adherence to prudent macroeconomic policies
Meanwhile, the delay in the submission of the budget is meant to put pressure on lawmakers to pass it quickly and with as little scrutiny as possible, given that the government would run out of cash for operations in 2023. Less scrutiny means the lawmakers would not have the time to adequately look at the issues of macroeconomic stability and controlled public sector spending – leaving room for wasteful spending.
According to the Amendment and Reinstatement of the Public Financial Management (PFM) Act of 2009, the draft budget should have been submitted to the Legislature by October 15 of this year.
This is consistent with Section 65(1) of the act, which now requires the country budget year to be run from January to December while calling for the following year's budget to be submitted in October — giving the lawmakers ample time to review the requested appropriations.
The delay, then, has led to Senate Pro-tempore Albert Chie ruling out a swift passage of the draft 2023 budget, saying the issue of an enabling environment for public sector spending is crucial at this time. While it is yet to be seen whether the Grand Kru County Senator will hold on to his word, he however vowed that legislative works on the budget as a result of the delay would be finished by January of next year.
“We don’t envisage the passage of the budget before adjourning for the third and final constituency break on December 8, 2022,” Chie said, during the final sitting of the 5th session of the 54th legislature on October 18.
“Since the 2022 Budget is the highest since the birth of our Republic, we will be keen on its performance (especially for the first three quarters). This will determine whether an increment or decrease in the total budget figure for 2023 will be justifiable.”
Chie defended the legislature's proposed delay, citing reports of widespread misuse of duty-free gasoline and diesel (fuel) for government agencies and institutions, causing millions of dollars to be wasted.
Meanwhile, the House of Representatives has acknowledged receipt of the President's communication and noted it. Also yesterday, the Senate granted a request by President Weah seeking the extension of the submission of the 2023 budget by 22 working days — which starts from October 31.