The Central Bank of Liberia (CBL) has taken down from its website its 2018 annual report which depicts the biggest budget shortfall ever in Liberia’s history. The report was taken down less than 24 hours after it was posted.
Giving an update on Liberia’s fiscal development, the CBL recorded that preliminary statistics showed that Government’s fiscal operations during the year recorded a fiscal deficit of US$225.5 million (7.0 percent of GDP).
This huge deficit, first of its kind in post-war Liberia, according to the Central Bank was as a result of fall in total revenue and grants receipts during the year 2018.
“The deficit was a result of fall in total revenue and grants receipts during the year. Compared with 2017, the size of the deficit in net fiscal operations widened from 6.1 percent of GDP. However, the overall balance of fiscal operations during the year amounted to a surplus of 5.4 percent of GDP, but lower than the surplus of 9.4 percent of GDP recorded in 2017. The surplus in overall fiscal balance vis-à-vis the deficit in net fiscal operations reflects the level of payments of interest on loans during the year,” the CBL stated in the report.
According to the report, government revenue including grants declined by 12.7 percent in 2018. Total government revenue in 2018 amounted to US$402.2 million which is 12.5 percent of the GDP.
“The fall in revenue (including grants) during the year was occasioned by shortfall in both tax revenue and non-tax revenue. Tax revenue fell by 14.9 percent due to declines in taxes on international trade, sales taxes on goods and services, and taxes on income and profits,” the report stated.
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International trade taxes also poorly performed. 2018 experienced a fall of US$154 million (20.7 percent) in collection of taxes and duties on imports. Taxes on income and profits also dropped by 5.2 percent (US$129.9 million) due to slowdown in tax receipt on households’ income and profits.
Both international trade taxes and taxes on income and profits constituted 86.9 percent of total tax revenue, according to the CBL.
The CBL further reported that from January to December 2018, total government expenditure including interest payments on loans and other charges amounted to US$627.7 million (19.5 percent of GDP). This reflects a 4.9 percent decline in public expenditure compared with the amount reported in 2017. The fall in government expenditure during the year was basically due to decline in payments on loans, interest and other charges (Table 19). Payments on loan, interest and other charges fell by 21.4 percent to US$411.8 million. At end-December 2018, recurrent expenditure increased to5.8 percent of GDP, from 3.9 percent of GDP in 2017, mainly due to increase in compensation of employees. On the other hand, capital expenditure witnessed some improvement from 0.2 percent of GDP to 0.8 percent.
Total external debt stock as at November 2018 rose by 18.8 percent to US$722.6 million (22.5 percent of GDP) compared with the stock reported at end 2017. The rise in external debt position was driven by increases in borrowing from both multilateral and bilateral creditors. Multilateral debt surged by 15.2 percent when matched with the stock reported at end December 2017.
The World Bank and African Development Bank were the two leading multilateral creditors to Liberia in 2018, accounting for 75.6 percent of total multilateral debt, while Kuwait’s debt to Liberia constituted 53.1 percent of total bilateral debt during the period. External debt made up the bulk of total public debt in 2018, accounting for 73.2 percent
Total domestic debt stock stood at US$265.2 million (8.2 percent of GDP), slightly reduced by 0.3 percent, from US$266.1 million (8.1 percent of GDP) in 2017. The moderate fall in domestic debt stock during 2018 was as a result of reduction in payments of Government’s obligation to financial institutions, mainly the Central bank of Liberia. When the stock of domestic debt is measured against the amount reported in 2016, total domestic debt declined by 1.2 percent.