Revenue outlook for the first quarter of the current fiscal year has cast doubt over official explanation that the unfolding economic crisis in Liberia is due to global commodity price fall and the Chinese economy slow growth.
President Ellen Johnson Sirleaf has confirmed the country has entered the era of economic turmoil after more than one year of falling economic activities or recession.
In November 2014, the domestic economy hit deep into recession recording a negative zero point four percent growth rate from a five point nine percent projection.
Decline in the world prices of the country’s leading export commodities such as iron ore and rubber and the appreciation of the United States dollars against the Liberian Dollar coupled with China’s slow growth and the Ebola public health disaster were factors government’s economists then claimed to be responsible for the economic downturn.
The International Monetary Fund has announced Liberia’s economy will grow at 0.3 % this year and the president has informed Liberians that they are in a “difficult” economic period and tht they should unite just like they did with the Ebola Virus Disease epidemic to beat back the financial crisis.
Yet in spite of these gloomy forecasts, the Liberia Revenue Authority (LRA) has recorded excesses revenue inflow for the first quarter (July- September) of the 2015/2016 national budget with the United States of America showing up as the country’s main trading partner with respect to export (27%) and China (import 15%).
The LRA in its published report said it collected US$145.9million more than the US$141.1million that was projected for the aforementioned period. The report also shows strong domestic revenue performance compared to external revenue that had a sluggish output.
“The LRA’s revenue target (for quarter 1) was US$141.1million while the actual revenue collected exceeded this target by US$4.8milliomn (3&). Thus the LRA’s actual collect revenue amount in the quarter is US$145.9million. the quarter 1 tarter was 22.7% of the total revenue forecast, While the portion of the budget that was actually achieved in quarter 1 was 23.4%. Domestic revenue accounts for 77% and external resources 23%.
“The domestic revenue collection in quarter 1 was US$112.3million, which exceeded target by US$7.8million or 7% as measured against the quarter 1 forecast of US$104.9million. Tax revenue contributed 90%of the actual achieved and non-tax revenue contributed 10%,” the LRA said in its report.
Recording more revenue amidst the economic ‘recession or depression’ is a contrasting situation that validates policy view that diversification of the economy with focus on manufacturing and agriculture is prudential prescription for economic stimulation and growth.
Although economic infrastructures are lacking, the strong performance of domestic tax presents an apparent guilty verdict for government’s relentless pursue of foreign direct investment and reliant on export commodities.
Also the LRA’s report could erase justification that because there is economic recession or depression public spending on programs and projects will be halted since such scenario will cause revenue lose.
Though more revenue is being generated in the “financial crisis”, at the moment there are visible economic difficulties being experienced in the country with vast portion of the 4.5 million populations going to bed hungry while unemployment remains alarmingly high.
The European Commission estimates that 76% of the population lives below the poverty line of US$1 a day, and 52% lives in extreme poverty of under US$0.50 a day.
James Kpargoi – a public policy analyst told The New Democrat that the current economic turmoil is an offshoot of government failure and corruption. He said Liberia being a natural resource export country it should have diversified its economy to absorb shock resulting from unfavorable market condition with respect to the prices of key export commodities.
Kpargoi: “The prices of these commodities are cyclical. More investment in agriculture human resource capacity, manufacturing and technology would have been the most prudential policy decision to keep the economy in good shape.
“But the agriculture sector is non existent. This is glaring policy failure not restricted to this administration but successive governments.”
The Food and Agriculture Organization reports that a 2015 comprehensive food assessment result shows food insecurity affects about 640,000 people in the country. The report further indicates that of the 640,000; fifty-two thousand (52,000) Liberians are “severely food insecure”.
Counties feeling the crunch of the food insecurity according to the FAO include, Grand Kru, River Gee, Grand Cape Mount, and Bomi with 33%, 32%, 30% of the population in these regions worst hit respectively.
“Key factors responsible for food insecurity in Liberia are low agricultural production as production levels of livestock, fisheries and forestry products as well as rice and cassava are insufficient to feed bulk of the population.
“Other reasons are chronic difficulties in accessing markets and low quality food utilization as well as the Ebola impact on human losses and the negative effects of the containment measures are still lingering and affecting the population,” the FAO said in its newsletter.
Despite huge international financial support to the agriculture sector of Liberia, malnutrition still remains a challenge with the Ministry of Agriculture reporting in October, 2013 that 35.8 percent of the country’s population was suffering from malnutrition.
That report sparked concern with Minister Florence Chenoweth calling for a collective effort and budgetary support to tackle the ‘human-belle’ virus.
“This is very huge and we need to address it,” Dr. Florence Chenoweth then Agriculture Minister said when receiving 22,200 metric tons of rice provided by the Japanese government to Liberia..
“In 2006, we recorded 39 percent malnutrition; and later in 2008 it reduced to 36,” she said. “However, in 2010, it jumped to 40 percent and now from 2012 it stands at 35.8 percent which we think is very huge.” Chenoweth stepped down this year as minister, citing low public spending on the sector.
Writes Festus Poquie