Weah’s budget: Pro-poor or business as usual?

Liberia’s infrastructure leaves much to be desired
Photo: MPI f. Evolutionary Anthropology/ J. Junker

Liberians heaved a sigh of relief when President George Weah through his Minister of Finance and Development Planning (MFDP) Samuel D Tweah Jr. submitted the Draft National Budget for 2018/201; writes Seltue Robert Karweaye, Sr.

The proposed Fiscal Year (FY) 2018/2019 budget envisages spending US$562.4M, an increase of about 5% from the 536.2M of the re-casted budget of FY2017/2018.

This consists of US$488.7M (87%) in recurrent expenditures. The recurrent expenditure comprises of US$303.3M for compensation of government employees and US$79.14M for goods and services; US$30M for debt service, including US$7M for domestic debt services and interest and US$23M for payment of external debt, principal and interest; US$1.71M for subsidy to non-governmental organizations;  US$ 48M in social benefits for severance to former elected officers and US$10.97M for non-financial assets relevant to road maintenance and the acquisition of new assets for government operations. Others are US$63.57M in grants to government and non-governmental service delivery entities.

The capital expenditure of US$73.4M (13%) of the national budget would be invested on road construction, maintenance of bridges  & construction of housing, laboratories, libraries and armchairs for selected public schools as well as a mental health services and providing equipment for Jackson F. Doe Hospital.

Whichever way one looks at these figures, they confirm surely that this budget is likely to be a failure on arrival. It won’t come as a surprise to me if there is another budget shortfall.  For example, with all the rhetoric of pro-poor and  that the cost of governance is reducing, one would expect figures that are closer to 25% as is the internationally acceptable standard for recurrent expenditure, but no, the recurrent budget is about 87%  – more than quadruple capital expenditure provisions.

In analyzing the budget, we would see if like previous budgets, this budget does anything to put Liberia’s battered economy on the path of growth or sustained development. What provisions does it offer the hundreds of thousands of unemployed Liberians with no hope of better future? What are its provisions for rescuing the 1.3 million Liberians currently living in absolute poverty? With series of budget shortfalls in Liberia, which aversely impacted the ability of the then Unity Party-led government to execute ambitious activities it had planned to benefit the country and its people we thought the Congress for Democratic Change (CDC)-led government could had taken a good look in figuring 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) warned Liberia in the past asserting 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. Liberian citizens are also no longer surprised that there are duplications and assessed fictitious items that facilitate easy access to public funds and UP pay the ultimate price in the 2016 presidential election.

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 series of budgetary shortfalls.

Previous explanations from the Sirleaf-era 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 about is the country’s outrageous spending spree in running the government and the urgency needed in curtailing such wasteful spending and it seems President Weah’s 2018/2019 proposed budget is taking recurrent expenses and unnecessary spending into a whole different level.

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 component 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, funds educational services such as schools, colleges and universities; and provide healthcare facilities and services among others.

As previously stated, in the proposed 2018/2019 President Weah submitted to the national legislature, 87% of the nation’s budget was allocated for recurrent expenditures while capital expenditures stand at meager 13%.  The Liberian people should be very worried about 87% of the budget going toward recurrent expenditures and13% to capital expenditures because NO Country, I repeat NO COUNTRY, can develop under such provisions. What grows a country or builds the economy is a number of investments you are making in infrastructure and other structural issues that you required to strengthen your economy.

So how did we get to such a high cost of running the government? Under Madam Sirleaf, the so-called Harvard economist, 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.

Now, Weah has increased employment by 90%.  It is not sustainable! You cannot give what you do not have. President Weah 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 continual 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. 

Like the last administration,  Weah’s is also shifting the blames of our economic woes to the Ebola pandemic in West Africa; 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 new government doesn’t want to incur the wrath of the civil service but in the long run, this country will suffer for it.

A budget document that provides only 13% of capital expenditure is a trip in self-delusion and the propagation of falsehood and not pro-poor agenda driven. 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 represent the Weah administration willingness of changing the status quo and moving the pro-poor agenda forward. There must be the political will to restructure this equation in ensuring a bright and prosperous future for our citizens, particularly our teeming youths, the majority of whom are presently seeking jobs in the labor market.

Although Finance Minister Samuel Tweah stated that the budget focuses on the pro-poor policy of the government, suggesting that it is about a people- centered plight and  is little different from previous budgets, the amount available to pursue such an objective seems rather lean and laughable. I won’t be surprised of another budget deficit.

The major trouble with the 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 people whose interest the budget has failed to truly cater for, as it should. At the presentation of the appropriation bill, Minister Tweah and his team said that it was scripted to capture the 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 ever increasing recurrent expenditure at the expense of capital expenditure is ludicrous and Liberia will never develop with such a mindset in crafting the national budget.

FY2013/14: US$582,931, 413M
Recurrent expenditure: US$482.3m (82.7% of the entire budget) 
Capital expenditure: US$100.6m (17.2% of the entire budget)    

FY 2914/15: 635.2M 
Recurrent: US$ 526.0 (82.8% of the entire budget)  
Capital: US$109.2million (17.2% of the entire budget)

FY 2015/2016: US$ 622.7M        
Recurrent: US$482.3m (82.7% of the entire budget)                                             
Capital: US$107.8 (17.3 % of the entire budget)

FY 2016/2017: US$600.2M                                                                                  
Recurrent: US$520.5 (86.7% of the entire budget)  
Capital :  US$79.7M (13.3% of the entire budget)

FY 2017/2018: US$526.5M                                                                                
Recurrent US$499.2M (94.8% of the entire budget
Capital US$27.2 M (5.2% % of the entire budget)

Weah’s proposed FY 2018/2019 US$562.4M                                                   
Proposed Recurrent : US$488.7 million (87% of the entire budget)  
Proposed Capital: US$73.4 million (13% of the national budget).

Even the spending from the Executive and Legislative branches over the years is very disturbing for a country with huge infrastructure deficits

Legislative Branch Spending

FY 2013-2014: US $ 39,249,883
FY 2014-2015 US$41, 937,420
FY 2015-2016 U$ 49,056,394
FY 2016-2017: US$47,031,801                                                                               

FY 2017-2018: US$ 49,299,313                                                                             

Proposed FY 2018-2019: $36,225,747

Executive Branch Spending

FY 2013-2014: US$ 8,941,847
FY 2014-2015: US$8,487,702
FY 2015-2016: US$16,096,666
FY 2016-2017: US$24,274,96                                                                                  

FY 2017-2018: US$18,689,116                                                                                

Proposed  FY 2018-2019  $21,539,211

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 deficits, 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 ongoing re-casted 2017/18 budget, for instance, the level of implementation might be 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.”

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 re-casted 2017/18 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 recurrent expenditure in the 2016/2017 budget while only US$100 Million for capital expenditure under Madam Sirleaf administration. The implication from the ongoing trend in 2017/2018 budget is that capital budget implementation continues to be relegated as in previous years. The 2017/18 implementations may end up being as usual.

Assessing the Weah’s proposed 2018/19 budget, there are 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 budget and must be considered to support growth and employment generation.

Where is the projected sectoral contribution to the Liberia, economic growth in 2018/19? Does it mean we have no sectoral targets? This proposed 2018/19 budget has no foundation per se and is therefore inclined to serve the interest of some few, the creditors and the business as the usual community and 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.

The Weah administration proposing of spending 87% of the 2018/19 budget on recurrent expenditure, but by the time allowance is made for debt servicing, total recurrent spending will be getting close to 90%. 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, as factors aiding poor budget performance in the country.

Under Madam Sirleaf, Liberia’s lacking of inclusive growth manifested itself in unequal access to basic services and social programs. Most Liberians do not have a regular supply of electricity, water or healthcare. A very small percentage is able to purchase generators for the around-the-clock supply of electricity. Those who can afford it buy water from private sources and seek medical treatment abroad. They avoid Liberia’s crumbling public schools by sending their children abroad. The Liberian people elected Geroge Manneh Weah and his Congress for Democratic Change (CDC) for a reason. Liberian voters made a conscious decision to keep the Unity Party (UP) in power because they wanted to break away from Madam Sirleaf and her Unity massive failure with regards to basic service delivery, unemployment, tackling corruption, sound fiscal policies, etc.

So What Can the Weah-led administration Do?

Recurrent expenditure has ballooned over the years and capital spending shrunk to just 5.2% in the 2017/18 budget that Madam Sirleaf signed into law.  In carrying out its role in surveillance of the economy,  the Weah administration must review and appraisal of Pro-poor policies, devise a plan for a realignment of the Pro-proposed budget by cutting recurrent expenditure to check Liberia’s raising  debt profile which according to  International Monetary Fund (IMF) 2017 country report been increasing at a fast pace. The reported asserted that Liberia’s debt stock has increased from US$597 million to US$736 million. Liberia’s debt stock figure is 23.1% of the Gross Domestic Product (GDP).

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 approach consists of stimulating the economy by addressing the nation forecast needs as merging together numerous overlapping ministries parastatals make them more professional and effective to reduce re-current expenditure. Also, the constant creation of several agencies and extra governmental agencies without strengthening the existing once should be curtailed. By streamlining and restructuring of the ministries and MDA’s, it would help in identifying the real staff strength of the different government agencies and leave this is “CDC time” syndrome.  Also a careful identification of the ghost workers, those working with fake identity and fake qualifications should be flourished out of our payroll system to provide space for competent and qualified individuals. The civil service is the engine room for policy formation, etc. and not partisans employment.

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. It is very essential that the Weah administration through its pro-poor policy begin to reverse the trend of increasing recurrent expenditure and channel those recurrent spending to capital projects and other critical sectors of the economy that have direct impact to the Liberian population.

About the Author: Karweaye is a Liberian residing in the United States of America and can be contacted at s.karweaye1668@student.tsu.edu