GDP Records Favorable Growth (7.5%)…Despite Shortfall
The Ministry of Finance had been preparing for some time to send out the message that keen economic analysts had already known, that Liberia’s budget, a product of political compromise and bickering, was about to implode.
The news came earlier than expected in a memo circulated to Government Agencies, against the background of sluggish performance from concessionaries, weak management oversight at RIA and a low return on borrowing revenue that would affect budget execution of key infrastructure projects.
As it stands, the government has yet to realize over US $ 80 million projected revenue from borrowing, a situation insider has blamed to the bureaucracy and fiscal timing in the credit market and amongst potential lenders. With revenue shortfalls projected in the forestry sector as well, a number of austerity measures had been on the cards for some time.
Just a day ahead of his departure to the World-IMF spring meeting in New York, as Head of the Liberian Government delegation, Finance Minister Amara Konneh, has officially confirmed the shortfall that would lead to a corresponding decrease in agencies spending, decrease in spending on infrastructure projects and a potential impact to the execution of the Medium Term xpenditure Framework. This shortfall, he cautions, should not be interpreted as weak economic performance.
The Liberian economy, he said is experiencing growth indicative of an IMF review, citing 7.5% growth in GDP. The impact, he said would have been worse given “the unexpected global decline in the price of iron ore” but the economy remains sound with relatively prolonged stability of interest rates, inflation and exchange rates.
The IMF has confirmed the 7.5% growth during a recent review of Liberia’s performance under the IMF’s 11th Extended Credit Facility (ECF), an IMF-sponsored program.
The review outcome shows that Liberia was on course to completing all of its structural benchmarks, except for the ceiling on the Central Bank’s gross direct to Government, which was exceeded by a small margin.
A Ministry of Finance statement quoting Minister Konneh, says “the fundamentals of our economy are solid and we are poised to register positive growth in GDP of around 7.5%”.
He was quick to point out that the positive GDP growth was not a sufficient measure of economic progress but the news was encouraging. “It shows that the overall health of the economy is good,” declared Minister Konneh.
Further commenting on measures the government has taken to calibrate the economy, Konneh said “Over the last year, more Liberian entrepreneurs have received investment incentives with relative ease than ever, as the Ministry of Finance continues to work with the National Investment Commission and the Ministry of Commerce and industry to ensure that domestic manufacturing is protected from cheap imports.”
He further disclosed, that where necessary protective tariffs and/or import quotas have been imposed to achieve this purpose.
He indicated that although the global economic downturn is improving, evidenced by an increase in the price of iron ore since the first quarter of 2013, the decision by global steel magnate ArcelorMittal to remain committed to its Liberia project is a contributing factor that helped stabilize the situation.
“This is why we remain committed to encouraging more investment in service provision and light manufacturing so that more jobs are created by the private sector,” Minister Konneh maintains.
More especially, from a tax administration perceptive, Minister Konneh averred, government will continue encouraging investors to do more business with local Liberian entrepreneurs with the aim of producing more jobs. “We will do all within our powers to support the efforts of the National Investment Commission to emphasize local content as part of the corporate social responsibility program for multi-national corporations doing business in Liberia,” Minister Konneh asserted.
“Nevertheless, our core revenue sources (tax and non-tax) continue to show impressive growth rates and are expected to continue as we anticipate that China Union and Western Cluster will begin production in 6 to 9 months,” Minister Konneh said.
According to the MoF release, there is an anticipated budget shortfall of about US$ 120 million in this fiscal cycle. The shortfall is a result of fact that projected borrowing of US$80 million did not actualize; and the US$3 million brought forward from the previous budget cycle did not materialize and a likely shortfall of US $ 20 million in the expected US$80 million contingent revenue; and finally, that forestry revenue of US$12 million may not be actualized within this fiscal year. The government has therefore revised its projected revenue to around US$550 million.
“As at the end of March 2013, revenue generated was US$375 million. We have already generated the US$45 million from the ratification of LB 13. This will bring the total to US$420 million.
With three (3) months left in the year, we expect to generate no less than US$45 million per month on average, which will land us at our new target of US$550 million,” Minister Konneh disclosed, adding that with the revised revenue of US$550 million, it means that some sector
projects and recurring expenditure will have to be cut to accommodate the loss of nearly US$122 million in expected revenue.
Minister Konneh however quickly pointed out that despite the expected shortfall, government is fully committed to implementing those projects and introducing policy measures that will serve as shock absorbers to positively impact the lives of Liberians and create more jobs for the populace. He said projects such as Roads and Bridges, Energy, Ports (air and sea), Youth Development, Capacity Development, as well other key infrastructure development programs, will continue to be implemented to accelerate national socio-economic recovery.