Deputy Minister for Fiscal Affairs at the Ministry of Finance Development Planning (MFDP), Samora P.Z. Wolokollie, has disclosed that Liberia owes billions of dollars in both domestic and foreign debt.
Wolokollie made the disclosure when he addressed the Thursday, August 26, 2021 edition of the Ministry of Information, Cultural Affairs and Tourism regular press briefing, indicating that the country’s debt currently stands 1.47 billion United States dollars.
“The country’s total debt stock as at end February 2020 stands at US$1.47 billion of which domestic debts account for US$604.4 million (41 percent) while the external debt stock account for US$861.8 million (59 percent),” Wolokollie said.
Out of this figure, the domestic debt owed Liberia’s Central Bank of Liberia amounts to US$487.5 million, accounting for 80.7 percent, and arrears with commercial banks equates to US$65.2 million or 10.8 percent; while other institutions owed, accumulates to US$51.5 million, representing 8.5 percent; and as well as claims, which amount to US$0.2 million.
As for the total external debt owed by Liberia, multilateral institutions account for US$748.3 million or 86.8 percent, while bilateral sources stand at US$113.5 million, representing 13.2 percent.
Wolokolie reported that as at June 30, 2021, the Liberia’s domestic revenue leaped to a record $560 million United States Dollars, stating that it’s the highest ever recorded in the country’s revenue generating process.
He credited the leap in the country’s revenue generation to various tax policies being jointly implemented by the Ministry of Finance and Development Planning and the Liberia Revenue Authority (LRA). He named the policies as Excise Tax Reform; Investment Incentives Reforms; Surcharge Reforms; among others, as well as tax administration efforts, such as online tax payment; robust tax enforcement mechanisms; and etc.
Please read below for full text of Wolokolie’s speech at the last Thursday’s MICAT press briefing.
Officials of Government present, invited guests, the members of the Fourth Estate, distinguished ladies and gentlemen:
I am profoundly pleased to be here today, and exceedingly grateful to the Leadership of the Ministry of Information Culture and Tourism (MICAT) for inviting me to speak at this historic forum. I could not be humbler to stand here today as one of the speakers here at this auspicious occasion especially having the distinguished honor of sharing this platform where many other great erudite statesmen in have once appeared. Thank you Mr. Minister of Information and team for the invite.
Within the context of the Pro Poor Agenda for Prosperity and Development, PAPD, the Government of Liberia under the leadership of H.E. Dr. George Manneh Weah is fully committed to domestic resource mobilization. The fiscal direction of this Government is more focused on ensuring that domestic resources are maximized. This Government believes that to increase our resource envelope (our budget), we must look within – that is we must review our fiscal policies, especially revenue policies with the objective of ensuring that those policies are geared toward the expansion of economic activities.
These expansionary policies will ultimately lead to increased economic activities and subsequently to more domestic tax generation. Our focus on domestic resource mobilization would also ensure that our tax regimes are not overly restrictive and prohibitive. Our objective is to foster those policies that would facilitate trade and other economic activities.
For the period under review, that is, fiscal year 2020/2021, ending June 30, 2021, I am pleased to report that this Government, under the leadership of Dr. George Manneh Weah, with fiscal guidance by Minister Samuel D. Tweah, Jr., recorded a significant milestone in domestic revenue generation. At June 30, 2021, domestic revenue peaked to a record $560 Million United States Dollars – the highest ever recorded! This magnificent performance in domestic revenue generation can be credited to various tax policy (Excise Tax Reform, Investment Incentives Reforms, Surcharge Reforms, etc.) and tax administration efforts (Online tax payment, robust tax enforcement mechanisms, etc.) by the Ministry of Finance and Development Planning and the Liberia Revenue Authority.
A year-on-year comparison of domestic revenue performance shows the following:
For now, and into the foreseeable future, this Government will continue to take deliberate steps aimed at increasing domestic revenue so that the lives of our people are improved and infrastructure development is achieved.
#6. The total draft budget for FY 2020/2021 covering the period July 1, 2020 – June 30, 2021, as enacted by the National Legislature and signed into law by the President was $570.1 Million United States Dollars. The breakdown of which is as follows:
Domestic Revenue – $ 428.1 Million Dollars
External Resources – $132.0 Million Dollars
Brought Forward – $10 Million Dollars
Total – $570.1 Million Dollars
During the course of the execution of the budget, actual revenue over performed the projected revenue envelope. This over performance resulted in the recast of the previously submitted budget. This recast, unlike many other recast in the past, was to account for the over performance of revenue, not its underperformance. As stated earlier, the budget for the last fiscal year, FY 2020/2021 recorded a significant over performance due to prudent fiscal leadership. The recast resulted into the revised budget as indicated below:
Domestic Revenue – $466.8 Million Dollars
External Resources – $133.5 Million
Cash brought forward – $23.8 Million
Total Resource Envelope – $624.1 Million Dollars
Ladies and Gentlemen of the Press, it is my pleasure and honor to inform you that in spite of the recast to increase the resource envelope for the budget year under review, the year-end revenue again exceeded projection. At year end (June 30, 2021), and pending final reconciliation, total revenue collected for FY 2020/2021 amounted to $695.7 Million Dollars – resulting in a whopping $71.6 Million Dollars over performance of revenue. In simple and direct terms: Revenue exceeded approved expenditures by $71.6 Million Dollars – Revenue over performed and this over performance was mainly on account of Domestic Revenue.
The country’s total debt stock as at end February 2020 stands at US$1.47 billion of which domestic debts account for US$604.4 million (41 percent) while the external debt stock account for US$861.8 million (59 percent). Of the domestic debts, debt owed to the CBL amounts to US$487.5 million (80.7 percent); commercial banks, US$65.2 million (10.8 percent); other institutions, US$51.5 million (8.5 percent); and claims, US$0.2 million. On the other hand, of the total external debt, multilateral institutions account for US$748.3 million (86.8 percent) while bilateral sources account US$113.5 million (13.2 percent).
Rising debt levels coupled with falling growth rates have resulted into the country being classified into the category of moderate rate of debt distress and as such, it inhibits our ability to borrow to finance infrastructure projects needed to narrow our infrastructure gap and to also fund a meaningful stimulus package for the country.
Hence, to curb the increase in the public debt, the government is committed to attracting donor grants and low cost financing to support the fight against the virus and to stimulate the economy.
Total debt service as at end February 2020 amounted to US$21.4 million of which principal repayment amounted to US$7.6 million (35.5 percent), interest payment amounted to US$12.8 million (59.8 percent), while subscription amounted to US$1.0 million (4.7 percent). Of the principal repayment, domestic debt accounted for US$2.2 million (28.9 percent) with payments made entirely to debts owed to other institutions while external debt accounted for US$5.4 million (71.1 percent) of which multilateral sources account for US$4.1 million (75.9 percent) while bilateral sources account for US$1.3 million (24.1 percent). With regards to interest payment, interest paid on domestic debt amounted to about US$8.0 million of which US$5.9 million was paid to commercial banks while US$0.2 million was paid to other institutions. This made interest paid on external debt amounted to US$4.8 million with interest paid on multilateral debt amounting to US$3.8 million while bilateral debt amounted to US$1.0 million.
A major challenge to the country at this crucial time is that those debts previously contracted on concessional terms are coming due now. Thus, with falling growth rate and revenue, rising expenditures and widening current account and fiscal deficits, the country risks defaulting on its debt service obligations.
To prevent this from occurring, the Government is seeking debt waiver on its external debts and a restructuring of its domestic debts. The IMF under the Catastrophe Containment and Relief Trust (CCRT) has approved debt service relief for the country. This provides grant to cover IMF debt obligation for an initial phase over the next six months. This frees up scares financial resources to be channeled towards the health sector to combat the viral outbreak and also towards domestic debt services to stimulate the domestic economy.
For the purposes of today’s event, I have also come to inform the Liberian people and the world at large about recent transformative developments that have been achieved at the Ministry of Finance and Development Planning. These developments include, but are not limited to regularization of the payroll process, prudent cash management, tax policy reform and financial reporting.
Under the direction of our Minister, the erudite, Samuel D. Tweah, Jr., we have successfully cleared the backlog of unpaid salaries, regularized salary payment, and taken proactive steps to clean the payroll of any defects. In this role, the collaborative efforts of the Civil Service Agency cannot be overemphasized, and we must commend its Director General for his leadership in collaborating with the MFDP and the IAA.
Prudent Cash Management System:
In addition to the launch of the new Fiscal Data Transparency Measure, the Ministry has begun implementing a newly designed Cash Management System that has effectively addressed the issue of the unavailability of cash when allotment is being made. Under the new system, allotments are now being approved based on the availability of cash.
In order to buttress fiscal transparency, a weekly fiscal report is published on the Ministry of Finance and Development Planning website which detail inflow and outflow of GoL budget execution. This report entails Appropriation, Allotments, Financial budget and cash Expenditures by economic classification for Ministries and Agencies.
In addition to strengthening fiscal transparency, the Ministry of Finance and Development Planning (MFDP) has embarked on a First in First Out (FIFO) approval process at the cash management and Financial Approval unit. By this, M&As will received an alert or a call whenever payments are approved in financial budget. Moreover, the ministry has also embarked on a working relationship with the Internal Audit Agency (IAA) to improve on the Public Financial Management (PFM) reinforcement and also fast track the payment process flow. With this relation, a clearing house comprising staff from the IAA and MFDP will clear every payment vouchers in order to enhance the process flow.
#4 Comparative Analysis on the drop in inflation:
2019 26.97% – up to 31% at end December
Jan. 2021 10.86 %
As a result of a prudent cash management and fiscal discipline by spending within our means and not borrowing from the Central Bank of Liberia (CBL) through which arrears were accumulated and the payment of our debts especially international debts, which has given rise to constant inflows of budget supports, there has been a tremendous decline in inflation from 31% in December 2019 to 0.7% in April 2021.
In addition to the deliberate fiscal measures aimed at ensuring the decline of inflation rate, the Ministry of Finance and Development Planning embarked on the following strategic undertakings of Macroeconomic reforms consistent with both domestic and international best practices leveraging support from both bilateral and multilateral like IMF, World Bank, AFDB, EU, etc.:
These reforms are in four broad areas:
A. Restoring Macroeconomic Stability
B. Ensuring a fiscally sustainable growth path
C. Addressing weaknesses in public sector governance and the rule of law
D. Providing basic social services
Reducing inflation from a Fiscal indicator perspective is supported by the full implementation of the above reforms with specific actions like:
a. Reducing and adjusting wage and timely payment of salaries for Government employees
b Paying the Country’s debt on time (especially external debt while working to improve the domestic vendors’ payments)
c. Ensuring that there is absolutely NO borrowing from the Central Bank of Liberia (CBL)
d. Investing in projects that are beneficial (i.e. Agriculture, infrastructure- roads, energy (electricity)
e. Ensuring serious efforts to reduce the cost of doing business
With these fiscal measures put in place under the leadership of H.E. Dr. George Manneh Weah, with the support and directional supervision of the erudite Hon. Minister Samuel D. Tweah, Jr., the economy has experienced high level of stability and we are convinced that economy will show better performance in future years provided we continue of this unapologetic public sector economic and financial management prudence.
I THANK YOU!