The 2nd quarter of the fiscal year has practically ended, the beginning
of the 3rd quarter has started, yet Liberia and Liberians are yet to
know how a portion of the projected US$582 Million budget are being
spent and how much more is going to be borrowed in our name to provide
for services that we can neither see nor feel.
Appearing before the National Legislature, the Minister of Finance
predicted a budgetary shortfall of around US$74. 5 million at the
beginning of quarter three of the Fiscal Year (FY) 2013/2014. With
series of budget shortfalls, the United States of America (USA), through
its ambassador accredited near Monrovia, Debora Malac, urging 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 that “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 look and hope 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.
Minister Amara Konneh and his team raised the hope of the Liberian
people by adopting the Medium Term Expenditure Framework (MTEF) after
MTEF the legislative approval as required by the Public Finance
Management Act of 2009. The reasons most African countries are
participating in the MTEF are that it provides the basis for annual
budget planning and consist of a macroeconomic framework that indicates
fiscal targets, estimates, revenues and expenditure, including
government financial obligations in the medium term. The documents also
set out the underlying assumptions for these projections, provide an
evaluation and analysis of the previous budget and present an overview
of consolidated debt and potential fiscal risks. MTEF also produce a
number of important outcomes, including the macroeconomic outlook,
fiscal balance, and other key indicators.
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 Liberia context, budgeting is still based on guess work as
evidenced in series of budgetary shortfalls.
In a nutshell, Minister Konneh’s explanation to the legislature for the
numerous budget shortfalls were poor revenue collections. I tend to
partially agree with Minister Konneh.
Revenue generation is the nucleus and the path of modern development,
but what Minister Amara failed to educate or inform the legislature and
the Liberian people are 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 been on a rise in Liberia if not
almost all countries of the world, because of the continuous expansion
in 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 parts, namely capital expenditure and recurrent expenditure.
Recurrent expenditure is the spending by the ministries, departments and
agencies (MDAs) of government on salaries, pensions & overheads
salaries. Capital expenditure is used to provide infrastructure such as
roads, water and power; fund educational services such as schools,
colleges and universities; and provide healthcare facilities and
services among others.
During FY( fiscal year) 2005/06 – FY2012/13, public spending increased
by nearly three times supported by a steady increase in revenue.
Spending rose from 9 percent of GDP in FY2005/06 to 33 percent of GDP in
2012/13. This was driven by rising personnel costs, goods and services,
and transfers. Capital expenditure has risen from a very low level of
0.5 percent to reach 7.8 percent of GDP in FY2012/13. In the 2013/14
budget, 83.2% of the nation’s budget was allocated for recurrent
expenditure while capital expenditure stands at meager 16.7%. We are
very worried that over 83.2% of the budget is actually going for
recurrent expenditure and less than 16.7% on capital expenditure. No
country develops under such provisions because what grows a country or
builds the economy is the amount of investments you are making on
infrastructure and other structural issues that you required to
strengthen your economy. It is a shame within the 8 years since Madam
Sirleaf came to the presidency and with over $2.716 billion collected in
total revenue collected in revenue, the ordinary people haven’t felt
the impact economically.
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 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. 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 16.7% for 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 show that our
present leadership has the will 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 the Minister of Finance stated that the budget is for job
creation, the amount available to pursue such an objective seems rather
lean and laughable; that is why I am not surprised of the numerous
shortfalls.
The major trouble with the Liberian 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 Konneh and his
team said that it was scripted to create employment and was development
oriented, however, the discordant tones in the 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 National Assembly, which had been pegged at US$189 million
over the years, with no upward nor downward. Yet the legislators are
requesting US$73 million for so called “direct district development.”
Corruption is also a factor in this equation. The 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
even of 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 2012/13 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
2013/24 budget so far showed various reasons for the failure of the
budget implementation, while its impact has remained unimpressive.
The MTEF projections and policy objectives over the years had shown
that 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 $485.7 million was
released for capital expenditure in the 2012/2013 while only US$68
million for capital expenditure. The implication from the trend in
2012/2013 is that capital budget implementation continues to be
relegated as in previous years. The 2013/14 implementations may end up
being as usual.
https://docs.google.com/a/mopea.gov.lr/viewer?a=v&pid=sites&srcid=bW9wZWEuZ292LmxyfG10ZWYtYnVkZ2V0fGd4OjRhMjRkNjRkOWVmM2VmNmY
Assessing MTEF, on which the 2012/2013 and 2013/14 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 the Liberia, economic growth in 2013/14? 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 some few, the
creditors and the business as 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 achieve 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 estimated
at 83 percent. 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, as factors aiding poor
budget performance in the country.
Economic growth and development is 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 nations 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.
The writer, Seltue Karweaye, holds an MS in Development Studies &
MS in Politics and International studies with specialization in Peace
and Conflict Studies from Uppsala University in Uppsala, Sweden and can
be reached at Seltue.Karweaye.4687@student.uu.se or karweayee@gmail.com
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