— And Other Issues of Great Importance
President George M. Weah is paying a rare visit today (Tuesday, May 7) on Capitol Hill to discuss the economy with the Senate including a suggested “salary cut” of members of the Legislature and other issues of great importance.
The Daily Observer has reliably gathered that the President will meet the Leadership and Members of the Senate in their Chambers in a closed-door (secret) meeting, which will mark his first visit to the chamber of either House, apart from his two annual addresses to the Legislature.
The President is expected to discuss similar issues with the House of Representatives, as announced in a communication to the Lower House, on Thursday, May 2.
Some of the issues will include the “rapid depreciation in value of the Liberian dollar and global economic factors” after the economic growth was projected 3.2 percent for 2018 and 4.7 percent for 2019; while the percentage change in general price level (inflation) was projected at 11.7 percent for 2018 and 10.5 percent for 2019.
Also, the decline of the economy resulted to a revise downward of Liberia’s GDP from 3.2 percent to 1.6 percent for 2018 and from 4.7 percent to 0.4 percent for 2019. And because of the downward trend of the economy, inflation at the end of December 2018 stood at 28.5 percent and the inflation is now at 24.5 for 2019.
In the President’s communication, the downward revision of the growth rates has rendered the October 2018 resource envelope projected “unattainable” and the year-end forecast has been downward significantly.
“Given these developments, we have embarked on the process of deriving reasonable and attainable FY2019/2020 revenue estimates based on the current underlying macroeconomic fundamentals. This process requires time and resulting challenges in reaching a credible fiscal position has impacted our ability to have the draft budget submitted on time as per law,” the President said.
“Our revised preliminary estimate for the FY2019/2020 National Budget is a total resource envelope of US$497m. in line with prudent forecasting, the FY2019/2020 revenue forecast driving the budget preparation is based off the forecasted outturn of the US$476m, actual performance for FY 2018/2019 rather than the approved budget of US$570m.”
In a rather poignant tone, the President said that in consideration of the current (bad) economic and policy environment, it is forecast that the tax base will experience a slight increase so that the core domestic revenue forecast for FY2019/2020 is US$458 million, compared to the US$446 million as revised for FY2018/2019. External resources, grants and borrowing for budget support, are projected at US$39.2 million.”
The President added: “The environment has made the formulation of a balanced National Budget for FY2019/2020 exceptionally challenging. In addition to decrease in viable revenue collection, there are increasing expenditure demands. This budget is being prepared under a framework focused on addressing key critical activities necessary to begin the implementation of the PAPD, conduct the National Census and Mid-term Legislative Elections, continue our critical work improving road infrastructure and honor legal obligations of the Government.”
“In response to these challenges in the fiscal space, we have conducted deep, across the board, cuts to goods and services and non-essential grants and subsidies in order to make space available to honor the Road Fund Act and undertake essential Public Sector Investment Programs (PSIP) that are critical to delivery of the PAPD. These austerity measures have resulted in over US$30 million reduction in recurrent costs. Even with those measures in place, we currently have an overall expenditure of US$543 million and a gap of US$46.6 million.”
The President in his communication said in order to close the gap, the Ministry of Finance and Development Planning is analyzing several options on the revenue side, more in-depth engagement are being sought from State Owned Enterprises (SOEs) and ongoing analysis is being done on the key first steps for successful implementation of the Domestic Revenue Mobilization (DRM) strategy in the context of the challenging economic environment.
In addition to the challenges, the President said that a deficit financed budget provides to the overall economic environment, any additional use of Bridge Financing from the Central Bank as was done in the FY2018/2019 budget will result in a strong risk that most of, if not all, the US$39 million predicted in Budget Support will not materialize.
“On the expenditure side, in addition to the deep cuts in recurrent cost to spending entities already embedded in the preliminary draft budget, MFDP along with the Civil Service Agency are hereby directed to begin a wage bill analysis and rationalization exercise. The result of that work will substantially inform the structure of the FY2019/2020 budget,” the President asserted.
“Each of these measures will take time to assess and with few weeks left to present the draft of FY2019/2020 National Budget for Legislative deliberations, it is our considered view that more time is required to ensure the inputs of key stakeholders, including yourselves (members of the Legislature) and completion of the evidence based analysis of the projection.