Gov’t Risks US$74M Shortfall…Finance Minister Discloses
By Alva Mulbah Wolokolie
Despite shortfalls in revenue collection totaling US$17m, Finance Minister Amara Konneh says even if he were to collect all revenues for fiscal year 2013/2014, government would still experience US$7m shortfalls while it also risks a total of US$74m uncollectable revenue that may not be collected by June 30, 2014.
However, Minister Konneh disclosed that Liberia’s economic outlook remains vulnerable to fluctuations in commodity prices particularly for its key exports, rubber and iron ore and China’s decreasing demand for both commodities.
Speaking to the 53rd members of Representatives on Tuesday after they wrote him a letter of summon to give reasons to shortfalls in the budget, Minister Konneh admitted there are challenges in revenue collection and there has been a sharp decline in the global commodity since 2012 which has negatively impacted domestic revenue generation, and this trend, he added is expected to continue over the next five years.
The Minister pointed out that rubber, the key export commodity of the agriculture sector, would be the most affected. On the other hand, prices of the key import commodities, rice and petroleum, have declined and expected to remain so. He said this could upset the lost export revenue with respect to the balance of payment depending on the growth rate of export and import volumes.
“It is my intention to speak candidly, truthfully and in all sincerity, nothing has changed in the last three months, no new Act has been enacted to change the situation. The situation is real and so we need a solution and you are part of this solution,” Konneh told the lawmakers.
Amara Konneh appealed to members of the House of Representatives to put aside separation of power and deal with the issue collectively because the economy of the country is presently going toward the economy of 1989 before the civil crisis.
As regard the exchange rate, Minister Konneh suggested that the monetary issue should be given to authorities at the Central Bank of Liberia (CBL).
He indicated that although the monetary and financial conditions remain favorable, the Liberian dollar depreciated by 19% against the United States dollar in 2013, after having remained broadly stable since 2010.
In his explanatory notes taken from fiscal year 2013/14 revenue fact sheet, the Finance Minister told the lawmakers that when the budget was submitted, the exchange rate used was LD$75.19 to US$1.00.
Now that the exchange rate is around LD$89 to US$1.00, the total impact on the budget for taxes that has been collected in LD$ is US$5m but this amount could increase to about US$7m by the end of the budget year.
Still on the revenue fact sheet, Amara Konneh reminded the House Plenary that the original draft revenue (2013/2014) estimates presented by the Ministry of Finance was US$553,262m, but after budget hearings, additional revenue of US$29,669m was discovered by the National Legislature and added to the revenue envelop.
When this was done, the total projected revenue approved by the National Legislature for 2013/2014 was US$582,931m.
The Minister named line ministries and agencies that have not lived up to their contribution projected to the budget. For example, the National Port Authority (NPA) should have contributed US$1m but to date; only US$750.00 has been paid while LPRC was assessed US$4m but to date, the corporation has only paid US$1m, something he said is contributing to the shortfall.
He indicated to them (lawmakers) that they increased fishery fines by US$3m to US$4m. Out of the total amount, only US$200.000 has been realized and the value of the vessel is less than US$250.000.
As for Maritime and Foreign Mission, he put in plain words that challenges in global maritime market means that Liberia Maritime Authority (LMA) will not be able to raise the US$22 million projected in the budget and therefore estimates that only US$19m will be collected. Foreign missions have not been remitting fees for consulate services and passport sales have been less than projected.
Konneh recapped that additional challenges remain in the forestry sector; logging companies have not been able to ship the quantity of logs projected in the budget and so government may only be able to collect US$8m of the US$14m projected in the budget even though forestry is showing more encouraging signs as the end of the budget approaches.
Touching on Libercell License resale and vehicle registration and license, Mr. Konneh made clear that the National Legislature increased Transport revenue by US$2m to US$8.4m but to date, Transport Ministry has not been able to raise this amount.
The same lawmakers he added placed US$3.8m into the budget as amount to be realized from the sales of Libercell license but such amount has also not been recognized because the case is still in court.
Konneh also clarified that due to change in the revenue Code in 2011 coupled with slow down in drilling activities in 2013 and 2014 by oil companies, government experienced a reduction in presumptive taxes as well as withholding on contract services.
He explained that similar situation has occurred in the Customs Revenue due to lower trade volume, customs will collect approximately US$155.8m out of the projected US$170m. However, the total duty exemption at as March 31, 2013 stands at US$62m.
The Finance Boss told the lawmakers that the adjusted revenue projection or remaining revenue to be collected after identified risks is US$508.415m, while the total revenue collected as of May 12, 2014, is US$423,800m and the difference between adjusted projection and outstanding amount to be collected by June 30, 2014 is US$84.615m.
Meanwhile, the House plenary has mandated Minister Konneh to write a letter of apology to the office of Speaker Alex J. Tyler and Plenary and publish such letter in 7 local dailies for about 7 days.
Konneh’s letter comes as a result of a press release his ministry wrote describing the comment of the two lawmakers as reckless and irresponsible. Minister Konneh has also been instructed to report weekly with the House Committee on Ways, Means and Finance and the Committee on Public Accounts on all financial matters concerning the country’s budget.