Liberia’s 2016/17 recurrent expenditures

Liberia's Finance and Development Planning Minister Boima S. Kamara Photo: mfdp.gov.lr

Liberia’s Finance and Development Planning Minister Boima S. Kamara
Photo: mfdp.gov.lr

Liberians heaved a sigh of relief in  May of  2016 when the newly appointed Minister of Finance and Development Planning (MFDP), Boima S. Kamara  submitted the Draft National Budget for 2016/2017 of US$555.9 million, comprising of US$495.5 million for Core Domestic Revenue; US$30.2 million as Grant; and US$30.1 million as Contingent Domestic Revenue.; Seltue Karweaye writes 

However, between the battle for more money from the executive and the legislature branches, President Sirleaf October 1, 2016, President signed into law the National Budget for the fiscal year (FY) 2016/2017. The approved fiscal year (FY) 2016/2017 is US$600,204,076, which equivalent to L$57,319,450,867.  US$524.9 million will be raised from domestic sources (taxes and non-tax revenues); US$50.2 million in grants from external resources while unspent revenue from the last budget year comprises US$2 million. The national budget is divided between recurrent expenditure in the amount of US$520.5 million or 86.7% and the Public Sector Investment Projects (PSIP) with US$79.7 million or 13.3%.  

With series of budget shortfalls, the United States of America (USA), through its ambassador accredited near Monrovia at the time, Debora Malac, urged the Government of Liberia to discontinue the spending of money it does not have. Ambassador Malac said the Liberian Government is facing a serious budget shortfall, which has impacted its ability to execute “ambitious activities” it has planned to benefit the country and its people. The US Ambassador noted “It is hard, when you are impatient to make things happen when the money is not there. Sometimes it is good to take a step back to figure out what is possible with the funding that is available, and then looks and hopes for other ways to look for funding.” The International Monetary Fund (IMF) asserted that “addressing significant shortcomings that have emerged in the budget process and expenditure controls will be critical in the coming months.”

Liberians, no doubts, are no longer strangers to the news of poor budget implementation, though it still remains a thorn in the flesh. The citizens are also no longer surprised that there are duplications and assessed fictitious items that facilitate easy access to public funds. Even the issue of late submission of the budget proposal, possible wrangling, claims and counter claims over votes for various sectors, Ministries, Departments and Agencies (MDAs) are the business as usual. 

The importance of sensible and prudent budgetary allocations cannot be overemphasized because the budget itself is an expression of public policy. It is the vehicle through which the various programs and agendas of a government come to life. It is the major economic policy instrument which 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 details are neglected and figures just altered from existing templates can only exacerbate social and economic problems within the country. The effect of faulty budget choices will inevitably be felt mostly by the ordinary citizens who are at the mercy of dysfunctional government policies and facilities. Sadly, in the Liberian context, budgeting is still based on guesswork as evidenced in a series of budgetary shortfalls. 

Previous explanations from the Ministry of Finance and Development Planning   (MFDP) to the National Legislature for the numerous budget shortfalls were poor revenue collections. I tend to partially agree with these explanations because revenue generation is the nucleus and the path of modern development, but what these explanations failed to educate or inform the legislature and the Liberian people is the country’s outrageous spending spree in running the government and the urgency needed in curtailing such wasteful spending. The volume of public expenditure has risen in Liberia because of the continuous expansion of the activities of the state and other public bodies on several fronts. 

Public expenditures are the expenses which government incurs for the maintenance of the government and the society in general. Generally, public expenditure in Liberia can be categorized into two components, namely capital expenditure and recurrent expenditure. Recurrent expenditure is the spending by the Ministries, Departments and Agencies (MDAs) of government on salaries, purchase of vehicles, stationaries, gasoline, etc. while capital expenditure is used to provide infrastructures such as roads, water and power; fund educational services such as schools, colleges and universities; and provide healthcare facilities and services among others.

In the approved 2016/2017 budget, 86.7% of the nation’s budget was allocated for recurrent expenditures while capital expenditures stand at meager 13.3%.  Liberians should be very worried about 86.7% of the budget going toward recurrent expenditures and less than 13.3% of capital expenditures because NO country can develop under such provisions because what grows a country or builds the economy is the number of investments you are making in infrastructure and other structural issues that you require to strengthen your economy. 

So how did we get to such a high cost of running the government? It was the two sets of increases that were done on the public sector salaries that actually catapulted recurrent expenditure to where it is today. It is not sustainable! You cannot give what you do not have as Ambassador Malac had said. We must re-examine public sector salaries, including that of political office holders across all levels of government. We must stop the stealing going on in government, plug the leakages and hold our so called civil servants accountable. There are people who say civil servants are underpaid but if you look at it, it is in terms of giving what you really do not have. At the onset of the global recession, there were countries that actually reduced wages of their civil servants because they could see that their revenue profile could no longer support the continued payment of these wages. But what did Liberia do? Not only did we literally double the minimum wage, we actually established all sorts of new institutions and escalated our expenditures through the roof. There is nothing that the minister of finance or the government can do to reduce recurrent expenditure and avoid shortfalls without really facing the real issues, without engaging the people.

I know we started are shifting the blames of our economy woes to the Ebola pandemic in West Africa in 2014. We must face the issues! Liberia must face the issues! We cannot run away from it forever. Our recurrent expenditure is outrageous! It might seem convenient now because the government doesn’t want to incur the wrath of the civil service but in the long run, the country will suffer for it. A budget document that provides only 13.3% of capital expenditure is a trip in self-delusion and the propagation of falsehood. The weight of recurrent expenditure cannot be supported by the capital budget. This is symptomatic of a rent economy whose long-term growth is not sustainable. The ratio of recurrent to capital expenditure does not present our pcurrent leadership as willing 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.  

Although Finance Minister Kamara stated that the budget “outlines and captures our country’s priorities in the best possible,” the amount available to pursue such an objective seems rather lean and laughable, won’t be surprised of another budget deficit. The major trouble with Liberia’s budget 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 now believe they are the primary and ultimate beneficiaries of the budgeting process. Thus, the fight between the executive and the legislature has been at the expense of the common man whose interest the budget has failed to truly cater for, as it should.

At the presentation of the appropriation bill, Minister Kamara and his team said that it was scripted to capture our country’s priorities, however, the discordant tones trial policy documents pointed to the lack of synchronization of recurrent and capital expenditures in fiscal plans to tackle development.  Still, there have been rising concerns over what makes up the nation’s recurrent expenditure, how real and necessary they are in the economic management of the country. For instance, the rationale for the yearly budget of the legislative and executive branches is ludicrous.

Legislative Branch Spending
FY 2013-2014: US $ 39,249,883
FY 2014-2015: $41, 937,420
FY 2015-2016: $49,056,394
FY 2016-2017: $40,635,340
Total: $197,973,730
Executive Branch Spending
FY 2013-2014: $ 8,941,847
FY 2014-2015: $8,487,702
FY 2015-2016: $16,096,666
FY 2016-201:   $15,841,287
Total: $49, 367,502

These figures in the recent years have become mind-boggling, leading to serious distortions in our national priorities. In a country where there is a huge infrastructure deficit, spending huge sums on recurrent items is detrimental to economic progress. The biggest constraint to productivity in the economy today is the quality of infrastructure. Improvements in this area can only be achieved if there is a significant investment. The situation is an even greater concern because the full implementation of even the meager allocation is often not guaranteed (shortfalls).

For the ordinary Liberian, the budget is gradually losing its relevance. Most of the time, there has been a great variance between what is budgeted and what is actually implemented or spent, thus rendering the entire process a mere formality designed to just make the people feel good that something is being done about their affairs. In the 2014/15 budget, for instance, the level of implementation was less than projected. Granted, Liberia’s economy has been growing, but there is a greater argument that it is in figures. That is typical of the government spending. The real effect of such a growth in government spending has not been proportionately felt by the populace, resulting to the paradox of “growth without development.” 

So, despite the burgeoning increase in expenditure, unemployment has remained high as the development indices have remained poor. But is capital expenditure really implemented? Obviously, much of the spending through the country’s budgets go to service the establishment — MDAs, and at the end, very little is actually spent in a way that benefits the ordinary man. An assessment of the performance of the 2013/14 budget so far showed various reasons for the failure of the budget implementation, while its impact has remained unimpressive.

The Medium Term Expenditure Framework (MTEF) projections and policy objectives over the years had shown 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 years past. 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.

The figures speak for themselves. US$504 million were released for capital expenditure in the 2015/2016 while only US$100 million for capital expenditure. The implication from the trend in 2015/2016 is that capital budget implementation continues to be relegated as in previous years. The 2016/17 implementations may end up being as usual. 

Assessing MTEF, on which the 2013/14 and 2014/15 budget bill were based, listed fundamental gaps in the document, which could raise excuse for failure in the future. They further queried the absence of indicators of the growth drivers in the document. To them, it was not all about recurrent expenditure, but the entire system on which those assumptions were made and possibility of getting positive results from faulty background. The framework fell short of the requirements expected of it on the projections and forecasts of economic growth, inflation rate, interest rate and credit policy, which should galvanize the private sector to create wealth and jobs to improve the economy.

The monetary component wasn’t considered in the MTEF and must be considered to support growth and employment generation. Where is the projected sectoral contribution to Liberia’s economic growth in 2016/17? Does it mean we have no sectoral targets? This current MTEF has no foundation per se and is therefore inclined to serve the interest of a few, not the social welfare of a wider society.

There have been various figures bandied around on the GOL 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 per cent, the story for capital expenditure is quite different. Yet the critical problem of infrastructure deficit can only be addressed by scaling up capital budget performance. Recurrent spending is 86.7% of the 2016/17 budget, but by the time allowance is made for debt servicing, total recurrent spending will be getting close to 90 per cent. However, bureaucratic bottlenecks, capacity issues in the MDAs, weak institutional capacity to capture all revenue due to the GOL Account, corruption and wrong expenditure priorities, are factors aiding poor budget performance in the country.

So what the can the Government of Liberia (GOL) do? The GOL must start planning to cut recurrent expenditure by 65 per cent in the 2017/2018 budget to boost economic growth. The gains from the reduction would be redirected at critical areas of the Liberia economy to ensure economic growth and reduction in unemployment rate.

The GOL should address the problem of infrastructural inadequacies to ensure economic growth by increasing capital expenditures. Economic growth and development are mainly enhanced by the expansion of infrastructural facilities, the improvement of education and health service, the encouragement of foreign local investments, low-cost housing, environmental restoration, and the strengthening of the agricultural sector. The approach consists of stimulating the economy by addressing the nation forecast needs. Dealing with these issues will result in a great amount of money spent by the government and certainly lead to increased public expenditure. The size and structure of public expenditure will determine the pattern and form.

If government spending is used to finance investment in roads, education, health, agriculture and other areas (Capital Expenditure), these investments will have direct social and beneficial economic effects on the country. Furthermore, by providing new opportunities and expanding the capabilities of the masses, government capital spending plays an important role in ensuring sustainable economic growth.

Seltue Karweaye, the writer of this article, is currently studying in the Doctor of Public Administration with Specialization in Public Policy program at West Chester University in the USA and can be contacted at SK882079@wcupa.edu 

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