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Analysis
of Liberia's Fiscal Year 2009-2010 Proposed Budget
Wednesday,
June 17, 2009
By Nyankor Matthew
A budget is more than just a
technical document; it reveals government’s strategic choices and decisions,
and serves as an important political tool to effectual change.
Efficiently distributing limited financial resources, especially in
developing countries and countries emerging from conflict is an important
challenge for those responsible for deciding who gets what, when, and how. A
good sound budget can be used as a valuable road map for economic growth and
development.
Proposed
Revenue Composition
The proposed revenue for fiscal
year 2009-2010 is $347 million; a 16% or $48.9 million increase from fiscal
2008-09. The proposed revenue is
funded by anticipated tax revenue of US$201,033,911, which is 58% of total
revenue, and non-tax anticipated revenue of US$146,001,776, including grants of
US$23.3 million. Taxes on
International Trade remain the largest component of tax revenue, accounting for
29% or $102 million of the total projected revenue, and have grown by 28% or
$22.5 million, from fiscal 2008-09 to the current proposed budget.
The second major contributor to
tax revenue is taxes on income and profits, which accounts for 16% or $55.2
million of total revenue, and has increased by 1% or $777.
The government is anticipating “overdue tax” revenue of $2.5 million.
The little to no growth in taxes on income and profits is an indication
that either economic activity has slowed down, thereby decreasing taxable
individual incomes and business profits, or the tax code needs to be
strengthened to take advantage of economic growth and deter tax avoidance by
individuals and businesses.
For the non-tax revenue
component of the budget, “other revenue/non tax” accounts for 30% or $105.2
million of total revenue, with a growth of 62% or $40.3 million from fiscal year
2008-09 to the current proposed budget. The
second largest non-tax revenue category is “extraordinary revenue” which
accounts for 22% or $76.1 million, with a growth of 102% or $38.5 million from
fiscal 2008-09 to the current proposed budget.
Our legislators should keep in
mind that the 2009-10 $347 million budget being proposed is not only being
proposed in though economic times globally (which could negatively impact
revenue collection), it also consists of millions of dollars in one time revenue
sources such as grants, and the western cluster revenue.
One can only hope that our government isn’t creating recurring
expenditures for these one time revenue sources, because once these one time
revenue sources dry up, the government will need to create other revenue streams
to replace the one-time sources.
Proposed
Expenditure Composition
The current proposed 2009-2010
budget consists of five functional sectors or categories: Public and
Administrative Services, Rule of Law and Public Safety Services, Social and
Community Services, Economic Services, and General Claims.
In terms of budget composition,
the public administrative Service Sector makes up 24% of total current proposed
expenditure. The second largest
categories/sectors are social and community Services with 21%, and General
claims with 21% of total budget, respectively.
The last two sectors, economic services sector and Rule of Law and Public
Safety sector are 19% and 13% of total budget, respectively.
The five sectors have grown by
double digits from fiscal 2008-09 to the current proposed budget.
The largest expenditure growth is the Economic Service sector, which has
grown by 37%, with a proposed budget of $69.1 million, from fiscal 2008-09.
Rule of Law and Public Safety sector grew by 26% when compared to fiscal
2008-09, and has a proposed budget of 46.2 million.
Major
Object Expenditure Category
Wages/personnel costs makes up
31% of the total proposed expenditure, followed by goods and services and
capital acquisitions at 24% and 18%, respectively.
Although by international standards wages/personnel costs as a percentage
of total expenditure is average, it should be noted that the government has
downsized it’s work force from 54,826 employees (2008-09 fiscal year), to
53,097 employees for the proposed 2009-2010 budget year; a decrease of 1,729
employees. The decrease in total
government employees could be a result of the government’s “downsizing”
and “right sizing” policy.
The category of “goods and
services”, which consists of line items such as: Fuel and lubricants for
vehicles, vehicle servicing, maintenance and repairs, residential property
rental and lease, domestic daily subsistence allowance, office materials and
services, etc., account for 24% of total expenditure.
When combined with personnel
costs, these two categories account for over half or 55% of the total proposed
expenditure. The third largest
major object expenditure category is “Capital acquisitions”, which accounts
for 18% or $63.2 million of total expenditure, with a growth of 32% from fiscal
2008-09 to the current proposed budget. From
my analysis of the budget, most of the money budgeted for “Capital
acquisitions” is budgeted for the purchase of cars.
When wages/personnel costs, goods and services, and capital acquisitions
are combined, they account for an astounding 73% of the national expenditure.
Under-funded Programs:
- The
Family Assistance Program, under the Ministry of Health gets a budget of
$10,000, while the Ministry of Transportation gets $25,000 to purchase
household materials.
- Center
for Vulnerable Children gets a budget of $15,000, while the Ministry of
commerce gets $12,000 to purchase household materials.
- Youth
Rehabilitation Center gets a budget of $9,000, while the Ministry of
Commerce gets $132,000 for food and catering, and the Chief Justice gets
$10,000 for domestic travel. Granted
the Chief Justice needs to travel out of Monrovia to the lower courts, I
find it hard to believe he needs $10,000 a year to do so, especially when
gas and other travel and transportation related expenses are accounted for
in the budget.
- The
Youth Agricultural Training Program budget has been cut from $132,522 to
$118,654.
- The
Youth Job Training program has been cut from $83,521 to a proposed budget of
$ 60,021.
- Monrovia
Vocational Training Program has been cut from $185,834 to a proposed budget
of $130,069.
- The
budget for the Advanced Vocational Training Program has been cut from
$350,782, to a proposed budget of $177,189.
- The
Division of Family Welfare has a proposed budget of $23,000, while the
Election Commission gets a budget of over $67,000 for domestic allowance.
- The
National housing Authority continues to be underfunded, with a proposed
budget of $500,000.
- The
Country’s County hospitals continue to be underfunded, with average
proposed transfers/budgets of $150,000, while the Liberian Broadcasting
System gets $195,000 to purchase cars.
The
programs that are essential to the protection and economic empowerment of our
people get very little attention in the budget, while thousands of dollars are
spent on daily allowances, fuel, cars, furniture, etc.
Issues
and Concerns
It is often easier to criticize
than to praise; so with this in mind it should be noted that the 2009-10 budget
has improved tremendously when compared with previous budgets, thanks to the
staff at the bureau of the budget and the Ministry of Finance.
Having said this, I want to point out some issues in the proposed budget
that concern me greatly.
In spite of the positive
rhetoric in the president’s budget message, and her assurance that the
proposed budget is “pro-poor”, the proposed 2009/2010 budgets is a
continuation of non-productive spending that does not meet the needs and demands
of the poor, especially women, youth, children and rural Liberians.
In her budget message, the president tells us that the 2009/10 budgets is
a “pro-poor” budget, meaning it is a budget aimed at reducing poverty and
improving the socio economic conditions of the Liberian people.
As
optimistic as the president’s budget message seems, the actual budget falls
short of being “pro-poor”, and does not reflect the president’s
"pro-poor" budget message. The
president’s budget message relies heavily on analysis of growth rates,
inflation rates, and the status of signed concession agreements, which, by
themselves, do not really tell us what the situation is for the vast majority of
Liberians, especially those living in rural areas, and internally displaced
people.
Here we are three years later,
and scarce financial resources are still to be allocated to purchase cars when
the average Liberian farmer lives in poverty because they lack the financial
resources to purchase seeds and tools for farming.
We are spending millions fiscal year after fiscal year on purchasing cars
and fuel for those cars, yet the Liberian people lack basic public
transportation. Are the cars being
purchased the property of the Liberian people or their politicians? In these
tough economic times, the Liberian government needs to curtail its wasteful and
non-productive spending.
How can the president claim
that the proposed budget is pro-poor when millions of dollars is budgeted to
purchase cars? In fiscal 2006-07,
$6.6 million was budgeted to purchase cars. In fiscal 2007-08, $5.7 million; in
fiscal 2008-09, $8.2 million; and for the 2009-2010 proposed budget, about $9
million is budgeted to purchase cars.
In the Ministry of Finance
alone, a little over $700,000 is proposed to be spent on purchasing cars. Over
$340,000 was budgeted to purchase cars for fiscal year 2008-09, and over
$220,000 dollars for fiscal year 2007-08. Why
so much money is being spent by the ministry to purchase cars, especially
considering the fact that the ministry of Finance has the second largest budget
($14.7 million) in the Public and Administrative Sector? From fiscal 2006 budget
year to the current proposed budget, over $1.5 million has been allocated to
purchase cars in the ministry of Finance.
More Examples of wasteful
spending:
- Civil
Service agency, $154,500 budgeted for cars
- General
Service Agency, $189,000 budgeted for cars
- Liberian
Institute of Public Administration, $45,000 budgeted for cars
- Liberian
Institute of statistics, $287,500 budgeted for cars
- Supreme
Court, $200,000 budgeted for cars
- Voter
registration, $750,000, even though the Election commission has a budget of
a little over $3 million
- Transfers
to individuals of $100,000, for two consecutive budget years, even though
the budget has a line item for domestic debt. If the $100,000 being transferred to individuals is not
part of the domestic debt payment, then what is it for?
- Forestry
development Authority budgeted $5,000 for agriculture supplies, while
$97,000 is budgeted for domestic allowance.
The spending spree goes on and
on! How is this budget a pro-poor budget? The Ministry of finance receives over
$700 to purchase cars, yet the Liberian National Police gets $500,000 dollars to
purchase cars? Is it not safe to
assume that more money would be budgeted by the National Police to purchase
patrol cars? How many cars can the
office of the speaker purchase? For four consecutive years a minimum of $30,000
has been budgeted for the office of the speaker to purchase cars.
Is it the responsibility of the government to purchase cars for all
high-level government officials?
What's the deal with the
government spending millions of our scarce resources to purchase cars year after
year? Is the government in the business of purchasing cars? I am
not naïve to believe cars cannot be purchased for ministries and agencies;
however it is unacceptable to spend millions of the Liberian people money
purchasing cars year after year for government employees.
The 2009-2010 proposed budget
is a welfare budget that does nothing more than subsidizes the upper echelon of
government. The president’s “pro-poor” budget rhetoric falls far short of
reality. Even if fully implemented, the budget will fail to substantially
improve the living standards of over half of the population currently living on
less than $US2 a day.
It should also be noted that
the budget does not have the number of employees employed in the National
Legislature, why is that? Bureau of
rural development and community services also has no listed employees.
The Ministry of Foreign Affairs also has no employees.
The Governance Commission as well, has no employees, according to the
budget. It is possible that this
could have been an oversight on the part of the budget staff, but considering
our Legislature has had issues with ghost employees, I think it is important
that the Liberian people are fully aware of the number of individuals (besides
the lawmakers) working in the National Legislature.
Moving
Forward
Moving forward, future budgets
must seek to improve basic services and stimulate growth through infrastructure
spending on major projects. The
performance of the Ministry of Public Works on infrastructure spending was not
only dismal, but left a lot to be desired, so the Liberian people can only hope
that the new minister of Public works will turn over new leaf by using public
work as a key driver for employment for Liberians, especially those outside of
Monrovia.
Future budgets need to be
focused on creating real jobs, ensuring access to basic necessities and a
lifestyle of dignity for all citizens regardless of class or place of location.
Our Monrovia focused budgets need to be re-focused to go beyond Monrovia,
and include our brothers and sisters outside of Monrovia.
The challenge for the Liberian
government is to translate the modest macro-economic gains into tangible
improvements in the living standards of the Liberian people. Despite the growth
in the budget and the economy, over 60% of the Liberian population still lives
below the poverty line, with over 70% unemployed or under employed. Despite the growth in government revenues and double digit
increase in wages, the average civil servant has seen very little growth in
salary, when adjusted for inflation.
Considering the contraction in
the global economy, one would think our government would tighten its financial
belt, instead the government has decided to go on a spending spree. This is not
the time for wasteful spending; it is time to curtail non-productive government
spending and redirect those funds to social programs that will improve the
social and economic condition of our people.
Nyankor Matthew can be
reached at Nyankorm@gmail.com
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