Budget Performance Favorable…Says Finance Minister
The Minister of Finance, Amara Konneh has said that in spite of the challenges faced with the execution of our budget and the pressure we have encountered in recent times, our budget performance outlook is favorable comparing allotments and disbursements records for the previous year ending February 2013 to this year February 2014.
The Liberian Finance Minister made the disclosure when he addressed a special press conference at the Ministry of Information Culture and Tourism (MICAT) on March 25, 2014.
According to Minister Konneh, this analysis is relevant as it tells the rate at which allotted funds are being disbursed to spending entities.
He added that the variance between allotment and disbursement was much higher in FY 2012/13. Conversely, he said we have seen this gap significantly narrowed in FY 2013/2014.
“This is a significant progress and demonstrates that spending entities are now given allotments for which they have absorptive capacity to spend and which are in line with the trend in revenue generation and cash forecasting. By February 2013, we had allotted US $ 394 million and disbursed US $ 308 million during the same period. This fiscal year as at February 2014, we had allotted less, US $ 371 million but have disbursed more US $ 322 million, pointing to a contraction in the gap between allotment and disbursement,” Minister Konneh said.
Overall, the Finance Ministry boss said the Liberian government has been able to stabilize expenditure on employee compensation, with slight reductions in both allotment and disbursement over the last two fiscal cycles. Consumption of fixed capital has significantly reduced in allotment but has seen substantially high disbursement in FY 2013/2014.
Additionally, he said “Grants and Use of Goods and Services have been on the increase for both allotment and disbursement for the two fiscal years. This trend is worrying as the accountability mechanisms for grants needs strengthening and to service the increased expenditure on goods and services would mean moving away money from investment projects with long-term growth implications.”
Still on compensation, Minister Konneh intoned that disbursement on basic salary for civil servants is lower in 2014 than the previous year but disbursement on general allowance, consultancy services and special allowances have increased.
He said reduction in basic salary is attributable to the payroll clean-up exercise while increase in disbursement for special allowances is due to the adjustment in presidential appointees pay. Domestic debt repayment too is significantly higher this year than the previous year.
So, what we have accomplished over this period as demonstrated by the budget performance analysis is ensuring some level of stability within our fiscal space by tightening the procedures and rules around our budget and expenditure processes.
Contrary to what many people think that Government revenue has been reducing compared to previous years, this is not correct. In fact, Government revenue has instead increased.
“Contrary to what people think, that the Government is not spending money in the economy; the evidence shows that Government spending has indeed increased.
First, on the revenue front: In FY10/11, the total revenue collected was US$387.9 million; in FY11/12, the total revenue collected was US$477.2 million; in FY12/13, the total revenue collected was US$559 million. From these numbers, there is nowhere it shows that revenue is reducing.
Now, because we spent all the money we collect each fiscal cycle, it means then that correspondingly, Government spending has been increasing. How from these numbers can any reasonable person argue that revenue and/or expenditure has been reducing? The facts and evidence are clear,” Minister Konneh opined.
However, he said “what is true is that aggregate demand or purchasing power in the economy has evidently reduced. What this means is that the total demand for goods and services in the economy has reduced and this is why business people are having problem selling their goods.”
Commenting on some the negative meditating against government, the Liberian treasury chief said investigation has shown that UNMIL drawdown; the scaling down by INGOs and activities in forestry have had an impact on consumer spending, jobs, income and overall health of the economy.
He intimated that the reduction in aggregate demand as a result of these factors has not been compensated by an increase in Government spending, the net effect of which has been fewer purchases of goods and services in economy adding that this is the real situation but detractors as always, would want to make our people believe the economy is being mismanaged.
“In addition to what is happening in the broader economy, our budget has come under immense pressure. There has been a number of extra budgetary expenditure that we have to deal with. Now, because we did not plan for these unexpected expenditure and they are critical to national security for instance, we have to make cuts in some areas. When this happens, it comes across as us trying to stifle other agencies, resulting to the spread of misinformation,” the youthful Liberian Finance Minister said.
Responding to concern as to who is responsible for the prevailing situation, Minister Konneh said “the fact is, without assigning blame to any single person, we did not anticipate and adequately plan for this. But as the nation’s chief economist, it is my responsibility to deal with it and I am doing so effectively.”