Remarks by Finance Minister Samuel D. Tweah, Jr, at the Opening of the 2019 National Economic Dialogue

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September 4, 2019 (as delivered)

Let me begin by extending thanks and appreciation to his Excellency, Dr. George Manneh Weah, President of the Republic of Liberia, for convening this 3-day National Economic Dialogue. Mr. President, it is a remarkable show of leadership to always bring our people together around the difficult issues that confront us. Across this room, we see a broad swathe of Liberians from disparate backgrounds and professional hues. Thank you, Mr. President.

Special thanks also go to our Development Partners– the United Nations Development Fund, USAID, ECOWAS, and the European Union and other partners — for supporting the Dialogue. We thank Dr. Toga Gayewea McIntosh and the Organizing Secretariat for making this happen. Big thanks to our various international guests who have traveled from afar to mediate our Dialogue, distinguished among them, Hon. Seth Terkpeh, former Finance Minister of Ghana.   We stand ready to benefit from their broad international experience and expertise.

The Dialogue convenes Liberians from various backgrounds to reflect on the difficult economic context we face today but also on the immense opportunities for transformation. This Dialogue is NOT about the intellectual display of ideas. More than anything, the path of Liberia’s transformation is well framed in the Pro-Poor Agenda for Prosperity and Development. This Dialogue should be about putting new and existing ideas into action.

This Dialogue is about driving national inclusion, ownership, mastery and appreciation of the difficult challenges we face but more importantly of the opportunities for change inherent in those challenges if all stakeholders – The Government, citizens, the private sector, civil society, Non-Government institutions, our Development Partners among others—work concertedly together to place Liberia on the path of national economic transformation.

The forging of that momentum and the driving of this national consensus of shared risk and shared ownership can take shape during this Dialogue.

We open this Dialogue amid challenges to our macroeconomy and to our private sector. Exchange rate instability and its passthrough impact on inflation have reduced the income of our vulnerable poor, especially those in rural areas. This instability has been primarily caused by the loss of significant amounts of the United States dollar from the Liberian economy over the past several years. The inflows of United States dollar that have supported our exchange rate in the past did not happen because of fundamental domestically driven economic variables. These US dollars inflows were not primarily based on exports from our agriculture and manufacturing sectors, but largely on the presence of UN foreign troops, external assistance, and overseas remittance. To the extent that those USD inflows derived from exports, they were exports from iron ore and rubber, whose prices are highly volatile and whose extraction takes place with NO value Addition.

Today, this period of surplus inflows of United States dollar is over, exposing our economy to shocks and compelling the Government and its international partners such as the International Monetary Fund, to work toward a macroeconomic framework that can whether shocks affecting an import-oriented, undiversified economy such as ours, where nearly everything we eat is imported and where we have to spend our scarce United states dollar for this import.

Under this new macroeconomic framework, our fiscal policy is expected to be contractionary to better manage our deficit, which also has an impact on inflation, especially in a dual currency regime. Our fiscal policies under this new macroeconomic framework will be anchored on minimizing the deficit, on controlling our wage bills which is disproportionately high in the West African region, on increasing the effectiveness and efficiency of priority pro-poor development spending, on ensuring greater transparency in fiscal data and on stronger governance and the fight against corruption.

Many of these aims were announced by President George Manneh Weah when he immediately took office in 2018. The President ordered the reduction in salary of public officials and mandated that salaries in the public sector had to be anchored to the compensation of Government ministers, cascading downward to Deputy and Assistant ministers. The President also mandate rationalization of public spending and cuts to unnecessary public expenditures.

This original Pro-Poor salary cut saved US 8.7 million annually and the rationalization led to a recast of the 2017/18 national budget, which slashed the expected deficit that would have happened without the recast.

The preceding 2018/19 national budget faced significant challenges in the last quarter, underscoring the need to increase domestic revenue as the principal means of financing the budget. The shocks to the budget were NOT because domestic revenue was NOT performing. Evidence shows that domestic revenue levels in last year budget have exceeded levels as far back as three to four years ago. The shock came from the decline in external assistance, which has been a major part of our revenue story over the last 10 or more years, and from the fact that public spending has not adjusted, or cannot easily adjust, downward to these declines in external support.

One key focus in this DIALOGUE is how do we increase domestic revenue from its last six-year average of US$ 453 million, to an average ranging from USD 500 m to 530 million in the next several years.

In the new 2019/2020 Year national budget, the Government aims to move toward this path in higher domestic revenue performance through a combination of tax policy measures, measures that broaden the tax base, administrative efficiency, use of technology, minimizing exemptions and using tax incentives more reasonably, and stronger financial support for revenue mobilization. So the 2019/20 national budget now under consideration is NOT just about downward adjustment. Going forward, the Government aims to increase its effort to collect taxes, backed by the strong political will shown by the President to collect the fare share of revenue due to the Government. All stakeholders and citizens are challenged to participate in this endeavor. People with knowledge of persons and cartels that may be colluding against the state are asked to come forward with such information. All hands should be on deck and this is what this Dialogue is about.

The reality is that strong revenue performance is a function of continued growth in the economy, improvements in the business climate, increased flows of investment, etc. The President has established a business climate working group that has engaged a wide range of stakeholders to address the challenges and costs of doing business in Liberia. The Working Group has engaged stakeholders in the shipping industry with the aim of bringing down the costs of imports, which also have passthrough impacts on prices. Evidence shows that import costs can come down if the Government, the National Port Authority, shipping lines, and other stakeholders remain on their current path of bringing prices down and improving efficiency in that sector.

The cost and reliability of electricity is also a challenge to the business environment. Per kilowatt-hour cost of power in Liberia is 35 US cents, while for most countries in West Africa it is less than 15 US cents. The completion of the CLSG transmission lines early next year will enable Liberia to import cheaper power from neighboring countries, helping to improve the business climate.

Contract enforcement and the litigation of business cases in Liberian courts remain areas of concern. The Business Climate Group is working closely with the Chief Justice and leaders of the judiciary as well as key private sector groups such as banks, which are often affected in these types of cases, to situate contract enforcement on a more transformative path.

Mr. President, distinguished colleagues, job creation is a big theme for this Dialogue. The country cannot absorb the number of young people entering the job market yearly and this is a serious recipe for crisis and tension. In this regard, the Government, its partners, and all stakeholders are challenged to open frontiers for all our young people. A major area in the field of agriculture, where business climate challenges of the cost of electricity, for example, do not necessarily apply. The President and the Government view the agriculture space as the clearest path to short to medium term job creation.

The benefits here are too great and we would like to see some consensus developed around agriculture investment during this Dialogue.

To our bankers in the room, you are sitting on immense vault cash that is NOT making its way to the agriculture sector to improve the value chain in domestic food production. So the question is why is money not going in the sector when it is clear that the returns on investment can be large? The answer is, of course, the risks are high. We need to have a serious conversation on de-risking bank lending to agriculture. There is absolutely no way we transform agriculture if banks do not seriously participate.

To begin this transformation, President Weah mandated that we include US 2 million in the budget as an agriculture guarantee fund. We intend to increase this amount every year. This money is to back more flexible lending terms to the agriculture sector. Firms in agriculture production need very flexible terms, such as one to two year grace period and longer loan maturities. The Government is ready to put its money where its mouth is by using public resources to relax constraints in transforming the agriculture sector. We encourage our Development Partners to adopt this approach and the Government is engaging with major partners on support for de-risking, as a way to stimulate lending across agriculture value chains involving, road infrastructure, transport, warehousing, storage, inputs supply, etc. In the next three, we are all challenged to put Liberia on a sustainable path of food security and job creation, using agriculture as a conduit.

And so over the next 3 days, I trust we will be fully vested in finding paths to transformation, on thinking big, on blaming less and working together more. There is NO economic progress for Liberia if it remains an undiversified economy, still dependent on the sale of iron ore and rubber with NO value-added, and on the raw export of gold and diamond and timber. That model has failed. Looking for strategies within this failed model will also fail. Taking big steps move the whole governance and business process around creating opportunities for value addition and for diversifying our economy is the focus of this Government and must be the substance of conversations over the next three days. Let us identify low hanging fruits, small areas of risk-taking and collaboration across spaces of government, development partners, private sector. Let us ask why is Ghana and Cote d’Ivoire doing better in Cocoa production than Liberia. Cocoa exports have precipitously fallen in Liberia over the past several years. Something is wrong with Liberian agriculture. Let us look at the shortest routes to digitizing our economy and accelerating the move toward less use of cash. Let this Dialogue tease out some of these missing links and forge a consensus around them.

Let an entrepreneur somewhere here say if the Government can increase its agriculture guarantee to 4 million, our Bank Group will provide flexible 10 million financings for agriculture before the end of this year.  The Government is working with investors to pour resources in the sector and is prepared to give these agriculture investors very generous incentives if they provide jobs for our young people and grow the food we eat here.

As a Government, we are committed to situating this country on a path to change. We are tacking difficult challenges and enjoin on all stakeholders on the need to support these changes. We are tackling the beast of bloated wage through a harmonization policy that pays all Government workers equitably. This is a difficult problem we have not been able to solve in the past. We must solve it now to avoid major shocks in the future. We remain committed to improving governance and fighting corruption. We remain committed to strengthening the rule of law.

All stakeholders must equally commit. All Liberians must commit to maintaining their peace and avoid disrupting governance, which is NOT good for investment and long-term growth.

I believe unity and a stronger sense of shared ownership of challenges and opportunities for prosperity can issue from this Dialogue, with robust follow up actions and enhanced coordination among different stakeholders.

I wish all success in these deliberations and the Actions that will derive from them.

I thank you.

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