Liberia’s Minister of Finance and Development Planning Samuel Tweah says under the new macroeconomic framework, government fiscal policy is contractionary to better manage deficit, which also has 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”, he says.
Addressing the start of a three-day National Economic Dialogue here, Minister Tweah recalls that immediately after taking office in 2018, President George Manneh Weah ordered a reduction in salary of public officials as part of ongoing austerity measures 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 mandates rationalization of public spending and cuts to unnecessary public expenditures.”
According to him, this initial 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.
Chaired by veteran Liberian economist and ex-Foreign Minister,Dr. Toga Gayewea McIntosh, the National Economic Dialogue kicked off here Wednesday, 04 September at the Ministerial Complex in Congo Town, bringing together technocrats, including bankers, economists, corporate executives and international partners, among others.
Minister Tweah continues that in the FY2019/2020 draft national budget precently before the House, government aims to moving toward 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, coupled with 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”, he explains.
He says 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, and that President Weah 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.”
He reminds Liberians that exchange rate instability and its pass-through impact on inflation have reduced the income of the vulnerable poor, especially rural residents, which has been primarily caused by the loss of significant amounts of United States dollar from the Liberian economy over the past several years.
Tweah explains that the inflows of United States dollar that have supported the exchange rate in the past did not happen because of fundamental domestically driven economic variables. Instead, he notes that these US dollars inflows were not primarily based on exports from the agriculture and manufacturing sectors, but largely on the presence of UN foreign troops, external assistance, and oversees remittance, saying, 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.”
The dialogue enters its second day today, Thursday, 05 September at the recently dedicated US$50 million Ministerial Complex constructed by the Chinese. Editing by Jonathan Browne