Recurrent Expenditure Tops Liberia’s US$785M 2022 Budget

The importance of sensible and prudent budgetary allocations cannot be overemphasized as budget itself is an expression of public policy.   It is the major economic policy instrument that indicates a government’s priority and is also a tool to correct anomalies and inequities within the society.

An efficient budgetary system is critical to economic growth and developing sustainable fiscal policies. On the flip side, a poorly designed budget where attention to detail is neglected and figures just altered from existing templates can only exacerbate social and economic problems within a country.

However, the effect of faulty budget choices, where recurrent expenditure is the hallmark of the budget, will inevitably be felt mostly by the ordinary citizens who are at the mercy of dysfunctional government policies and facilities.

And this is the case with the government of Liberia draft budget for fiscal year 2022.  Despite a month-long delay in the submission of the 2021/2022 draft budget to the National Legislature, the draft budget was officially submitted by the Executive on Thursday, November 18, 2021.   In his communication, President Weah said of the total revenue envelope of US$785,587,340, external resources total US$145 million.

Out of the total budget, the recurrent component of expenditure is US$643,207,340, while the total cost of the Public Sector Investment project is projected at US$142,380,000.

In this case, the government has failed to understand that there is a proven correlation between declining economic growth and sluggish investment in Africa. In an Africa Pulse report by the World Bank released in October, the Bank disclosed that Sub-Saharan Africa including Liberia had failed to make sufficient public capital investments and as such were unable to address infrastructural needs.

The World Bank 2021 Africa Pulse report stresses that reducing the countries’ debt burden and wasteful spending will release resources for public investment, in areas such as education, health, and infrastructure.

The 2017 Africa Pulse report revealed that closing the infrastructural gap for the affected countries could increase their Gross Domestic Product (GDP) per capita by 2.6% per year. Despite these reports, persistent yearly increases in the recurrent expenditure, which is a continuum from the previous administrations in Liberia, have become a permanent feature in the last fours.

Specifically, the last budget (FY 2017/2018) under President Ellen Johnson Sirleaf’s government had 499.2 million recurrent expenditure (94.8%), out of US$ 526.5 million total plan, followed by President George Weah’s first budget (recast 2017/2018 budget) at US$563.5 million with US$489.3 million recurrent expenditure, while in 2018, it moved to the US$511.3 million out of  US$570.1 million total budget, followed by President Weah’s second recast budget for 2019/2020 at US$518.0 million with US$445.82 (86%) in recurrent expenditure.

 Liberia in 2021 apportioned US$511.4 million (89.7%) out of its US$$570 million budget to recurrent expenditure. This left 10.3% of the total budget–US58.1 million– to capital expenditure. In the same year, a special budget was approved for July to December of 2021 to the tune of US$301.5 million of which US$272.1 million for recurrent expenditure and US$29.3 million for capital expenditure.

In the 2021/2022 proposed budget, Liberia is once again trotting down this well-traveled route with its proposed US$785.5 million budget. As usual, recurrent expenditure received a prominent percentage of US$570.1 million (89%) leaving capital expenditure at US$58.7 million (10.3%). The recurrent expenditure in the proposed 2021/2022 budget is bigger than the 2020/2021 budget.  It is a known fact that most of the recurrent expenses in Liberia’s budget are used to fund the most mundane of activities.

Purchase of new cars, furniture, and office equipment for legislators, gas slips, travels, per-diem, huge salaries & incentives for government officials, renting a presidential private jet, or at worst, a series of never-ending renovations of the Executive Mansion.  Continue increment in Liberia’s recurrent expenditure cannot be the sign of a system that is taking steps to remove waste, inefficiencies and build sustainable public infrastructures and economic growth.

At the presentation of the appropriation bill, the  Minister of Finance and Development Planning Samuel Tweah said the 2021/2022 budget was scripted to solve educational and health challenges; while also helping to protect women and mothers from childbirth complications, issues of drugs, and other administrative issues across hospitals, teachers, and primary spending in education

However, the discordant tones in the policy documents pointed to the lack of synchronization of recurrent and capital expenditures in fiscal plans to tackle development.

The major trouble with Liberia’s budget over the years is the overbearing interest of those charged with the responsibility of preparing the document and appropriating its contents for the benefit of the Liberian people. Rather than see themselves as stewards, they believe they are the primary and ultimate beneficiaries of the budgeting process.

For instance, the rationale for the yearly budget of the National Legislature, which had been pegged an estimated US$555 million over the past 15 years, with no downward. Yet, the proposed 2021/2022 budget is increasing the legislature budget from US$44.6 million in 2020/2021 to US$54.5 million and additional providing US$3.5 million for the so-called Legislative Engagement and Public Accessibility.

In 2020/2021 approved budget additional US$3.6 million was given to the legislature for their Legislative Engagement and Public Accessibility in which each sitting legislator took home US$ 30,000.

But is Capital expenditure implemented? Much of the spending through the country’s budgets go to service the establishment — MDAs, and in the end, very little is spent in a way that benefits the ordinary man. An assessment of the performance of the 2020/2021 budget so far showed various reasons for the failure of the budget implementation, while its impact has remained unimpressive.

The budget Medium Term Expenditure Framework (MTEF) and policy objectives over the years had shown that the nation has not moved from the old practice of heavy recurrent and light capital projection and subsequent poor implementation of the budget in the past year.

The pattern is that recurrent expenditure is fully drawn down while the capital expenditure bears the brunt of all kinds of delays, bottlenecks, inefficiencies, and outright economic sabotage. There have been various figures bandied around on the government of Liberia's budget implementation performance. The figures from the MDAs are at variance with what is coming from the Finance Ministry. But what is clear in all of these is that capital budget implementation has not been satisfactory.

This has been a recurring trend in budget performance over the years. Whereas recurrent spending often achieves close to 100 percent, the story for capital expenditure is quite different. The figures speak for themselves. The fiscal year 2020/2021 mid-year performance report revealed US18 million was disbursed for the infrastructure sector. In 2020/2021, US$371.3 million was released for compensation of employees, use of goods and services.

Yet the critical problem of infrastructure deficit can only be addressed by scaling up capital budget performance and strengthening domestic revenue mobilization to generate saving for roads, bridges, railway lines, dams, airports, seaports hospitals, schools, colleges, agriculture, etc. instead of borrowing and spending it heavily on recurrent expenditure.

 Our recurrent expenditure is Outrageous! It might seem convenient now because the government doesn’t want to incur the wrath of the civil service or elected political office holders as the 2023 elections get nearer, but the country is suffering.

Liberia’s inability to prioritize its needs and allocate resources accordingly through the years has finally accorded us the unenviable rank of amongst the top tenth poorest countries in the world according to the World Bank’s 2021 World Development Indicators (WDI).  In conclusion, the proposed 2021/2022 budget is a trip in self-delusion and the propagation of falsehood. This is symptomatic of a rent economy whose long-term growth is not sustainable. The ratio of recurrent to capital expenditure does show that our present leadership has the Will to change the status quo.

There must be the political will to restructure this equation if, as a nation, we are mindful of the need to ensure a bright and prosperous future for our citizens, particularly our teeming youths, the majority of whom are presently in the labor market.

Economic growth and development are mainly enhanced by investing in roads, bridges, railway lines, dams, airports, seaports, hospitals, schools, colleges, agriculture, the encouragement of foreign and local investments, low-cost housing, environmental restoration, and the strengthening of the agricultural sector. If government spending is used to finance investment in roads, bridges, railway lines, dams, airports, seaports hospitals, schools, colleges, agriculture, and other assets that are crucial for rapid economic growth and development, these investments will have direct social and beneficial economic effects on the country.

Furthermore, it will provide new opportunities and expand the capabilities of the masses while ensuring sustainable economic growth.