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Liberia: Wasteful spending, little savings

World Bank describes GOL operation

Liberia: The latest World Bank report observes that the Government of Liberia spends more money than the average in Sub-Saharan Africa, including countries with similar gross national income per capital such as the Central African Republic, Madagascar, Mali, and Guinea Bissau. The report also notes that the Liberian government makes no saving and contributes very little, if any at all, to financing public investment, thus painting a grim picture of the country’s fiscal management policy.

The observations are contained in the Second Edition of the World Bank’s Economic Update on Liberia, under the theme, “Finding Fiscal Space” released Friday, November 18, 2021, in Monrovia.

Gross National Income (GNI) per capita, previously called Gross National Product per capita is the dollar value of a country’s final income earned in the domestic economy by nonresidents.

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The report stresses the need for government to create enough fiscal space to finance the country’s massive investment needs in physical infrastructure specifically energy, roads, rails, ports, and airports, including investing in its people and institutions to create an educated, skilled, and healthy labor force in both the public and private sectors, as well as protect its economy and vulnerable population against repeated exogenous shocks.

The World Bank Country Director for Liberia, Sierra Leone and Ghana, Pierre Laporte; the Bank’s Country Manager for Liberia Dr. Khwima Nthara, Liberia’s Minister of Finance and Development planning D. Samuel Tweah, and the Executive Governor of the Central Bank of Liberia J. Aloysius Tarlue, among others attended the launch of the report.

Moderating panel discussion subsequently after the launch, World Bank Country Manager for Liberia Dr. Nthara calls on the Government of Liberia to halt wasteful spending and to align the national budget with the government roadmap for development, the Pro-Poor Agenda for Development and Prosperity (PAPD).

“The Government must be commended for making tough policy choices that have resulted in this positive turnaround in macroeconomic fundamentals, especially under a challenging COVID-19 environment,” he says and adds:  “The focus now should be on complementing the improved macroeconomic environment with critical structural and governance reforms that will help boost domestic and foreign private investment to create more jobs.

Liberia is said to have the second-highest proportion of poor people in West Africa after Guinea Bissau, the report says, but notes that poverty is expected to decline in 2022 if recovery is sustained.

However, it suggests four ways in which Fiscal Space could be generated including raising additional revenues thru taxation or by strengthening tax administration; reducing expenditures in order to make room for more desirable ones; borrowing from domestic or external sources, and the Central Bank printing money to lend to the government. 

Finance Minister Tweah concedes during the panel discussion that Liberia is still not out of the wood, stressing this has to do with the slope reducing  rather than shooting upward, saying “As a country, we are very good at physical construction but the challenge is invincible.”

Tweah continues that government would have to double down on domestic savings.

On the question of liquidity shortage in the economy which has been experienced in the past two years, CBL Executive Governor Tarlue assures that with the printing of new families of Liberian banknotes going in circulation by December, the shortage would be addressed, specifically noting that United States Government embarrassed Liberia last year when it warned Americans coming here to bring along about US$10,000 because of severe money shortage in the economy.  

The report also stresses that government should first and foremost reduce a very high level of recurrent spending and strengthen domestic revenue mobilization to generate savings for public investment financing while pointing that between 2012 and 2020, government operating expenses exceeded the domestic revenue is collected by 4 percent of GDP. “This means that the external resources mobilized in the period financed a significant part of the government’s operating expenditure instead of financing public investment in infrastructure”, it explains.

However, the report predicts economic growth is expected to recover to 3.6 percent in 2021, before rising gradually to an average of 5.2 percent over 2022–2025, noting that in the near term, growth will be driven by the expected recovery in the mining sector underpinned by the recent uptick in commodity prices.

It further observes that having reached a peak of 31.3% in 2019, inflation declined significantly in 2020 and 2021, and is now down to single-digit, largely because of strong macroeconomic policies.

According to the report, the drop in world oil prices in 2020 allowed some easing in Liberian fuel prices, a frequent driver of inflationary pressures, although their decline was moderated by the introduction of an excise tax early in the year, adding that but it was a macroeconomic policy that was at the center of the action, with tighter monetary and fiscal policies, and the ensuing lower aggregate demand pressures, helping to ease the self-reinforcing cycle of depreciation-inflation observed in late 2018 through 2019.

 Senior Country Economist and main author of the report Mamadou Ndione, says “The recent efforts to reduce duty waivers and the successful implementation of the pay and payroll reform are steps in the right direction and need to be complemented by actions to improve the efficiency in the consumption of goods and services by the Government.” https://thenewdawnliberia.com/world-bank-announces-forum-to-discuss-growth-pandemic/ Report compiled by Jonathan Browne


The New Dawn is Liberia’s Truly Independent Newspaper Published by the Searchlight Communications Inc. Office is located on The UN Drive in Monrovia Liberia. The New Dawn is a bilingual (both English & French).
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