President George Manneh Weah has predicted a more sustained and robust economic outlook in 2023. The President predicted an economic growth rate of 4.2% forecast for 2023, from 3.7% in the previous year of 2022.
Liberia’s economic growth is expected to make progress in stabilizing debt, President George Weah told members of the joint session of the Legislature during his State of the Nation address on Monday, January 30th.
“The past fiscal year recorded the highest level of domestic revenue performance since the end of the civil conflict,” Weah told lawmakers late Monday, referring to a war that ended in 2003. “We continue to show strong improvements in mobilizing domestic revenue.”
The Liberian leader said when he took office in January of 2018, the Liberian economy was in a state of distress. According him, the macroeconomic foundations were weak. The country’s net international reserve, which had been used by the previous Government to stabilize the exchange rate, was very low. The exchange rate had plunged into free fall, and the then Government did not seem to have the tools to deal effectively with stabilizing the currency at that time. As a consequence, inflation was increase at an alarming rate, while domestic revenue and development assistance were in decline.
President Weah disclosed that the country’s development partners met with him during my first week in office and informed him that the Health Pool Fund, which had been paying the salaries of some 2,000 health workers, had dried up. “They asked us to take these workers on to the Government’s payroll, at a cost of about $12 million U.S. dollars a year. The United Nations Mission, which had been spending some $115 million US dollars annually in Liberia, was also leaving, thereby depriving the economy of these resources. By 2018, all of these inflows were gone,” President Weah recalled.
He also recounted the Government’s credit rating with commercial banks was at its lowest because the Government could not settle its domestic obligations to lenders. The President added the total Government obligation to the Central Bank of Liberia was not even known because some Government debt to the Central Bank was not officially recognized. “This was the bleak nature of our economy when we assumed responsibility for the leadership of the Government at the beginning of 2018.”
“What we did not realize at the time is that the recipe for economic disaster had already been set. We had assumed that our economy was sitting on a strong foundation, but we were in for a rude awakening when the decline in the exchange rate began to accelerate. We had to get to work quickly, to re-think, to re-work and to re-establish the principles of macroeconomic fundamentalism as they are known around the world,” President told the 54th Legislature.
He stated in 2019, he delivered an Economic Address to the Nation, in which he announced an end to Government borrowing from the Central Bank of Liberia. This policy forced the Government to depend on its own resources and to live within the means of the national budget. This was a policy to help contain inflation and to reduce the Government deficit.
In 2019, President Weah noted that they also set out to fix the broken and unfair wage system in which Government workers were paid without any set rules or pay grades. “To end this unfairness, we had to abolish a general allowance system that was allowing this to happen. Although we were faced with revenue challenges, we were determined to keep all civil servants on the payroll. And so we adjusted the wage system and gave every Government worker a salary which is based on a standard and consistent pay-grade. As a result of this exercise, fifteen thousand (15,000) civil servants received higher salaries, while some seven thousand (7,000) were adjusted downward.”
Also in 2019, President said his government entered an IMF-supported program, and began a series of fiscal, monetary and governance reforms. Under this program, the Central Bank of Liberia developed a new monetary framework that worked to stabilize the exchange rate without drawing down excessively on net international reserves, as had been done by the previous Government. “We set out to improve our fiscal balances, domestic debt management, and strengthen the fight against corruption.”
“As a means of restoring Government’s credit rating, which was at its lowest in 2018, my Administration formally and officially acknowledged all of its debt owed to the Central Bank of Liberia, and issued bonds to commercial banks to settle the legacy debt that we met on the books,” President Weah recalled as he addressed the 54th Legislature on Monday, January 30, 2023.
Growth of the Economy
In more positive mood, President Weah told the 54th Legislature that five years after the launch of these painstaking reforms, the results are out there for the world to see. “Today, Liberia is a macroeconomic exception in the West African region. We have brought inflation down from a high of thirty (30%) percent to a single-digit rate that is now under seven (7%) percent. We accomplished this in just under two years, making it one of the fastest rates of inflation collapse in recorded economic history.
We also stabilized the exchange rate for one of the longest periods, and we grew net international reserves to their highest level in decades. We increased domestic revenue to the highest level in Liberian history, and took our national budget to its highest level as well.
We established credibility to Government’s finances; and reformed the banking sector, which had been exposed to excessive risk-taking and a high level of non-performing loans. With the increased domestic revenue generated, we undertook a series of development programs in roads, electricity, education and health.”
The President stated these results were obtained despite the outbreak of COVID-19. “What this means is that if the pandemic had not happened, Liberia would have been on a faster growth trajectory than it is today. But we give Almighty God the glory and we thank our international partners for standing with us and for the confidence they continue to repose in our judgement and in our leadership.”
The President then noted that the broad lines of their story will define their Administration as its faces national elections in 2023. “These are the macroeconomic and development narratives that the world is now beginning to learn about Liberia, but which our critics and opposition have tried to repress over the last several years. But as it is often said that: “truth crushed to the ground, shall rise again.”
“The truths of the difficult decisions and courageous corrections we have made during our tenure, concerning the pro-poor investments in education, health, roads and electricity, are out there for all Liberians to see and experience. It is on these truths that we stand, as we continue to face existing challenges to deliver a more prosperous future for all Liberians.”
Commenting on the future prospects of a vibrant economy in 2023, President Weah firstly recounted the progress made in 2022. He disclosed revenue collection for 2022, including grants, was $740 million U.S. dollars, compared to $646 million U.S. dollars in 2021. “A large part of this difference is attributable to an increase in domestic revenue mobilization for the calendar year 2022. This revenue performance was driven by higher receipts of tax and non-tax revenues, especially taxes on international trade and taxes on income and profits. Of this amount, domestic taxes was $605 million U.S. dollars and external resources received from our Development Partners was $135 million U.S. dollars.
On the other hand, total cash expenditure for the same period under review was $774 million U.S. dollars. The excess of expenditure over revenue collection, amounting to $34 million U.S. dollars, is attributed to the use of treasury instruments.
Of the total cash expenditure, $286.38 million, or 37% percent, was spent on compensation of Government employees; $258.93 million, or 33.45% percent, was spent on goods and services, including grants and subsidies; $89.37 million, or 11.46% percent, was spent on domestic and international debt; and $139.32 million, or18% percent, was spent on public sector investment programs.
The past fiscal year recorded the highest level of domestic revenue performance since the end of the civil conflict. This is clear evidence of economic recovery and macroeconomic stability. We continue to show strong improvements in mobilizing domestic revenue, which are due to key reforms under the domestic revenue mobilization strategy of the Liberian Revenue Authority.”
President Weah said sustaining domestic revenue performance is the only way the government can guarantee the funding of its public sector investment programs, which will then enable it to address critical infrastructure and social sector challenges, such as roads, electricity, healthcare, and education. It is also the only means to diversify the Liberian economy.
The Liberian leader then called on all national stakeholders to support these reform efforts, and also encouraged all Liberians and businesses operating within Liberia to pay their taxes fairly and timeously as is required by law.
“Last year we spent $139.32 million U.S. dollars on public sector investments. To support public sector investment for the 2023 fiscal year, in support of our Pro-Poor Agenda for Prosperity and Development (PAPD), we have proposed to spend about $154 million US dollars, which is 19.8% percent of the proposed national budget for the 2023 fiscal year,” Mr. Weah indicated.
“Major public expenditure items include: $46 million US dollars, mainly for the transmission of electricity from La Côte d’Ivoire through the CSLG transmission lines, and to expand our electricity distribution; about $44 million US dollars for road infrastructure; $23 million US dollars through the National Road Fund, $21 million US dollars through direct national budget; and about $36 million US dollars for the holding of the 2023 presidential and legislative elections.
Thus, Mr. Speaker, electricity, roads and elections will consume about $126 million US dollars in 2023, demonstrating my Government’s commitment to put the Liberian peoples’ money where it matters the most.”
Positive Economic Outlook under President George Weah Administration
It can be recalled recently one of Liberia brightest Economist, Samuel P. Jackson said there is a positive economic outlook under President George Weah administration because the Liberian economy is experiencing its strongest and most sustained growth since the onset of the Ebola Virus Disease in 2014.
According to the IMF, Liberia’s economic growth rose above three percent in 2022 and will exceed five percent in 2023, as the global economy recovers. Moreover, domestic resource mobilization (DRM) from the effective tax administration policies of the Weah Administration has seen the country’s budget increased to nearly 800 million United States dollars in 2022.
Inflation has moderated to single digits, stabilizing the Liberian dollar to US dollar between L$150 to L$160, and improving purchasing power when compared to other countries, including Ghana where the Cedi, that country’s currency, has depreciated by more than 50 percent year on year from 2021 to 2022.
According to famous Liberian Economist, Samuel P. Jackson, “Lower inflation means goods and services are cheaper than our neighbors.”
Electronic Payment Systems
According to Mr. Jackson, the country is experiencing a revolution in electronic payment systems with more than 25 percent of GDP being intermediated by banks. That improves the circular flow of money, with producers and consumers using payment systems like mobile money, credit cards including Visa and Mastercard. Financial inclusion, the percentage of population with bank accounts has increased with more than 30 percent of adults using the country’s integrated payment system.
Much of the global economy is still suffering from the negative effects of the Covid-19 Pandemic, which saw a steep decline in economic activities, including reduced income and standards of living. In Liberia, the opposite is true. Liberia was among ten percent of countries on the planet that saw an increase in the human development index (HDI), moving from 480 to 481, a modest increase but nevertheless an increase. This is all due to the sound economic policies of President Weah and his team of economists.
Moreover the 2022 UNDP Human Development Report also indicates that Liberia has the highest life expectancy in the Mano River Union, with Liberians now expected to live beyond 61 years, and that number is higher at 64 from the World Bank Development Indicators. Liberia was also among only 20 countries on the planet that saw a substantial decrease in multidimensional poverty, according to the United Nations Multidimensional Poverty Report of 2022.
The official development assistance to Liberia has substantially reduced as a percentage of GDP since 2017 due to the United Nations Mission in Liberia’s (UNMIL) drawdown and the country is using own source revenues for security, police and the army. Yet, despite the use of own source revenues, security is improving despite challenges of logistics to state security.
The prospects for sustained economic growth and development look positive due to projections by Liberian national authorities including the Central Bank, Ministry of Finance and Development Planning and our international partners, the World Bank and IMF. Accordingly, Liberia should see increasing prosperity with more income and jobs created in the near to midterm, and all this indicates the election of President George Weah, though it will be rough, and tumble appears to be certain, Mr. Jackson concluded.
