By Cyrus L Gray, Jr.
Last week Liberia’s Finance Minister Augustine Ngafuan, offered a summary of the impact of the USAID aid freeze on Liberia and measures the government of Liberia is considering in mitigating the dire impact of this important assistance. Often, we miss the fact that Liberia’s annual budget does not cover the full extent of Liberia’s public expenditure. In the FY2025 forecast reflecting a budget of $852M, there is a projected off budget expenditure of $342M taking Liberia’s total spending package to $1.194B. $202M of the off-budget expenditure is listed as grant money and of the amount, USAID accounts for the items categorized in the below table.
Although not included in the budget, the US government provides millions more in support to the Judiciary, Liberia Bar Association, LRA, Central Bank, Security Institutions, AFL, Civil Society, LACC, GAC and Elections Commission. Thirty Percent of Global Fund resources are provided by the United States so if the US decides to hold back its contribution Liberia may forfeit another $10M out of the $32.2M earmarked from Global Fund support to healthcare in Liberia.
The estimated 400 strong FSN (Liberian Staff) with USAID, who have been taken off the clock, contribute anywhere between 15 – 25% of their salaries as income taxes to LRA, amounting to some $20M (estimate) annually which forms part of the government tax revenue; not to speak of the impact of reduction of cash inflow into the economy from this high-income group of FSN, USAID US Citizen Staff and employees of the dozens of NGOs and Implementing partners for USAID projects, including UN Agencies like the UNDP that is paid, in part , by USAID and the Global Fund to manage the medical warehouse in Caldwell and conduct quarterly nationwide distribution of drugs and health supplies to more than 600 public and faith based health facilities in the fifteen counties. USAID Funds, among things, pays health workers and schoolteachers, support school feeding and support hospitals through the FARA programs in amount close to $1M monthly for some counties.
A reasonable picture of the amount of money that will be unavailable to Liberia in FY2025 because of the abrupt withdrawal of United States Aid to Liberia will be well over $120M. Recent fixation on $17M intended for financial advisory is a gross understatement of the dire reality we are about to confront. There have been calls from various circles for government policy makers to reassess the FY2025 Budget, some calling for reduction in several public expenditures.
In the face of this new challenge, the loudest call for mitigation I have heard is engaging ECOWAS, the African Union (AU), and other bilateral partners to discuss potential financial support mechanisms. Let us not forget, the United States has been the financial backbone for most of the countries that make up these institutions and it makes sense to assume that the Aid withdrawal impacts all of them in one way or the others.
Running back to the IMF and World Bank may help short term but our answers are not there. Already, our debt financing is at $137M annually (FY2025 Budget), representing 16% of our national budget, over a debt burden of $2.58B. We are not getting out of this hole any time soon if we do not drastically improve the performance of our economy and accumulating more debt to address short term needs is not sustainable policy. When Minister Ngafuan told the VOA last week “this is also an opportunity for us to strengthen our financial independence and build resilience,” I sat up straight to hear some of the things the Minister and his team were urgently considering. I am sure they are at work finding solutions but here are my thoughts.
Withholding foreign aid should be viewed as a wakeup call for us to begin to own up to our sovereignty. Nationalists’ sentiments are being reborn in many western countries at the foot of whom we have prostrate our economic challenges. Tomorrow a right-wing government could be elected in Germany, Sweden, France, and what will become of our economy if they abruptly terminate aid as we see the Trump administration do today.
One thing most people agree on is that Liberia has natural resources, is ideally located and has a small population to do well for its people economically. But it is also clear that we do not have the agency, the governance culture and political will to address the elephant that has block our way to the nation’s wealth and prosperity. Why are we projecting expenditures way above our ability to support? Why do we amortize brand new $45,000 vehicle over only three years of the product’s life when even the manufacturer offers a minimum of six years to pay off the vehicle? Why are we awarding large monthly sums for fuel to officials who live merely 10 miles from their places of work? Why are we taking whole Ministries and agencies to hotels and resorts for meeting costing millions annually when there are conference rooms at the various places of work? Why are we still importing fish when just along our cost we hold renewable marine fisheries in billions of dollars in value?
Look at our budgets and the various agencies procurement plans, they are littered with waste and excesses. There are people on government payroll taking home US$5,000, $20,000. Look at the Legislature for example. Out of its $40M budget, the speaker, deputy speaker and president pro tempore gross monthly salaries are whooping $21.187, $21,187 and $17,412, respectively. To put it in perspective, the monthly salaries of the United States Speaker of the House, Senate Pro Tempore, Senators and Congressmen are $18,625, $16,117 and $14,500, respectively (Congressional research Service 97-1011). Members of the US House of representatives and Senators get the same pay. These are the amounts allotted monthly for fuel: Speaker – $7,629; Pro Temp – $4,999; Deputy Speaker – $5,162; the rest of the Senators and Members of the House, together – $4,591,611.
State own enterprises were created basically as government monopolistic businesses to generate income for the support of the government. The NPA, LPRC, NOCAL, LEC, LWSC, LTA. LAA, LiMA, NASSCORP, NAFAA, FDA, LBS, LTC, NTA are all examples of major engines for income generation. Look at these institutions in other countries and measure how they perform. They heavily support their countries economy. In our case, we even subsidize the incompetence of some of our SoEs, while the corporate leaders enrich themselves and the political class. There are however some SoEs whose total income are remitted to government and operate on the national budget, i.e. FDA (FY2025). The National Port Authority (NPA) generated $164M over the six years of the last administration up to October 2023 and contributed $2.6M to the national budget (NPA Turn Over Note 10/2023), even though 90% of port operations in Liberia is concessioned to 3rd party companies. What have they been using the money on? It will not be surprising to see similar scenario in the case of other SOEs.
Bear with me, I am not trying to piss on anyone’s party but let’s face it, the reason government business performance is mostly poor, is the same across most of the SoEs. Placement of SoE leaders is based more on politics than competence, as though our leaders do not expect much from the SoEs. We do not hold our institutions and their leaders to any clearly defined and articulated performance standards. The Board of Directors that oversee our SoEs are poorly equipped, loaded mostly with patronage hire, many to collect Board Fees, as though a welfare, clueless about the essential roles of the seats they hold.
As it is, we are a poor country, or better still a poorly managed country. It is time that we use this financial disruption to begin to put our house in order. Rather than a token reduction of fuel allotment and other benefits which should not be at the current levels in the first place, I recommend to the President and the Legislature the followings:
- Slice the FY2025 Budget by 30% and send Minister Ngafuan and team back to the drawing board to reengineer the budget base on priorities, informed by prevailing realities. Other than funding associated with LGA2022, the County Development Agenda ($9,406,295), and debt servicing, take nothing else off the table.
- Set a quota of 30% of gross revenue as SoE’s contribution to the national budget. For example, 30% of the gross intake from the NPA which average $27M (2018 – 2023) should be $8M per year rather than $2.6M paid over six years. Think about it, in June 2024, barely five months after assuming the role of MD at the NPA, Sekou Dukuly remitted $2M as NPA budgetary contribution. Where did that money come from?
SoE contributions to the budget have been treated as matter of choice rather than obligation. Government must make it an obligation and a measure of the performance of the SoE’s leadership. In the Tolbert administration, the SoEs did not collect their own revenue. A Comptroller for State Owned Enterprises collected and managed the receivables and ensured that the proper contribution of the SoEs to the national budget was forthcoming.
The Liberia Maritime Authority (thru LISCA), for example, contributes 20% of its oversea intake directly to the government general account, averaging $22M out of which an estimated $4.5M or round about goes to LiMA’s annual budget. Similar modal should be instituted for the SoEs, as a standard. Done properly the SoE support to the national budget could easily exceed $100M per annum. The BSE can fit the role of the Comptroller for State Owned Enterprises.
- On domestic revenue generation, a more liberal tax policies will increase volumes and the associated revenue from import and export. Three dormant areas of revenue that needs to be considered are fees paid to MedTech, CTN fees paid to GTMS and share of storage and demurrage income collected by APM Terminal and Shipping Agencies, respectively.
Despite the outcry of the business community because of the unusual collections by MedTech and GTMS, the government has allowed these schemes to continue with token receipt to government. Let me elaborate:
- Medtech collects tens of millions of dollars from importers and exporters ($190 per shipment) every year for performing a job that is the responsibility of the Liberia Revenue Authority (LRA), principally, the assessment of import and export and levy of taxes. This has been one of the burdens on trade to and from Liberia. The hope was that the Boakai administration would immediately abolish this travesty, but it has remained in place. Here is my question. If the government has decided to keep this revenue stream in place, why is this routine work still been done by a Dubai company, retaining the lion share of the income generated? Why hasn’t the LRA taken over this role and retained the huge revenue therefrom?
- The CTN (Container Tracking Note) for which a charge of $250 is levied per shipment is one of the valueless services which accrues tens of millions annually to another foreign company GTMS. Tracking container/shipment is a service provided by the carrier, embedded in the shipping charges. All one needs to do to locate shipment is to go into the carrier website and track the shipment using the bill of lading or container number. There is nothing else to it that warrants a $250 fee. Here is a private company leveraging our sovereignty with the acquiesce of public officials to extort money. Again, the hope was that the new government would have terminated what is really a scam, by any standard, perpetrated on the Liberian economy by the previous administration. Well, it persists. Knowing what we know and considering the need to increase government revenue, why don’t the government transfer this role to the Liberia Maritime Authority (LiMA) and enable the government to retain the tens of millions as government revenue?
- Then again let’s look at the storage and demurrage charges levied on shipment in and out of Liberia for which nothing accrues to the port authority or the government. APM Terminal makes more than $40M per annum in storage charges, far more money that the actual Terminal Handle and Marine Services Charges out of which they provide royalties to NPA. In the 2010 concession negotiation, APM Terminal argued against setting royalties from storages revenue because they claimed it was not an income stream, but just a measure to deter delay by customers in clearing their cargo. The reality is storage is a major income stream and may have accrued billions on APM Terminal’s books since taking over the Freeport in 2011. It is within the right of the Liberian government to demand a share of that income, and maybe some back pay. Similarly, the shipping lines, following APM Terminal, started to levy demurrage charges in the millions for cargo that have not gated out of the port; this is unique to Liberia. Be as it may, we need to demand a share of that ill-gotten revenue collected from Liberian businesses, right, in our back yard.
These are but a few areas that will serve to mitigate the gab that is already opening between our revenue projection as reflected in FY2025 and the reality that is beginning to unfold on account of the US aid freeze. President Boakai is in a much better and ideal position to impose some of these unorthodox measures to set a new trajectory and create a new culture of performance and accountability for the way we approach national development.
If we are smart at this, Donald Trump may very well be a blessing in disguise for Liberia, despite his manifest disdain for the African people. The old ways of doing business will not suffice under an American administration that has chosen to dethrone the era of America global influence clothed in benevolence to which we have been so long accustomed
