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IMF’s Scenarios, the real driving force behind slicing of Top officials’ pay

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By Our Staff Writer

Up to few weeks ago, Liberian Lawmakers and other very top officials were rather ambivalent about drastic cut in their fabulous pay (or some even any cut), but not until Finance Ministry officials kept reminding them about the preconditions for onward budgetary support from international financiers such as the IMF.

The IMF is the International Monetary Fund and its June 2019 ARTICLE IV CONSULTATION REPORT in our possession and published on its website spells out  two scenarios to highlight the consequences of the Liberian government not reducing its fat wage bills especially for its top officials. And the report also went on “to highlight the consequences of different policy choices.” https://www.imf.org/en/Publications/CR/Issues

Salaries harmonization until recently met stiff resistance from many Senators and Representatives, with some of them even saying they will not allow anyone to cut their salaries. Even after the pay cut action was taken by the House of Representatives reflected in the passage of the US$526 million budget (31% cut for Reps and 36% cut for Senators), Montserrado County District #10 Rep. Yekeh Kolubah vowed that he’ll not allow anyone to cut his salary.

In the 2019/2020 budget just passed, Justices of the Supreme Court bench and the Judiciary have seen their fabulous wages sliced by 16%.

After a period of assessment by its experts, the IMF called for austerity measures to be taken by the CDC government to include drastic cut in the huge wage bill dominated by fat pay of officials. Anything less than that, a promised US61 million will not be forthcoming to support the 2019/2019 national budget.

Count 12 of the IMF report says “Almost two thirds of total budget expenditure are accounted for by the wage bill, which now represents about 10 percent of GDP, compared to 7 percent of GDP among regional peers.”

According to the report, “structural rigidities within the budget severely limit the ability to satisfy social needs or act as an effective development tool.”

The IMF report also says the FY2019 budget is no longer credible. The revenue outturn for FY2019 is estimated at $475 million (14.7 percent of GDP), close to US$100 million lower than the approved budget of US$570 million (17.6 percent of GDP). “

With the adoption of a comprehensive package of reforms—including a combination of fiscal and monetary tightening and structural policies, the report says—growth will exceed 5 percent by 2024. However, a financing gap remains even in this scenario, highlighting the need for external support.

In addition to cut in the government’s wage bills, the IMF is also calling for other measures in the medium term.

“2) Borrow less (i.e., new loan disbursements of US$85 million per year instead of US$145 million per year), with less off-budget project-related spending,” the IMF told the Liberian government last June.

The IMF’s experts also advised that “the approved budget (2019/20120) should be based on the previous year’s outturn, instead of past budgeted amounts, to guarantee availability of funds.”

This writer is yet to see what has been outlaid for the Central Bank of Liberia in its 2019/2020 budget, but the IMF has called for a drastic curt in the CBL’s expenditures including wages.

“6) Shift CBL expenditure to Liberian dollar (e.g. pay half of CBL wage bill (US$6 million) currently paid in USD in Liberian dollar,” says the IMF June 2019 report.

When the House Finance, Ways and Means Committed presented the budget to Plenary this week, they said the reduction in the huge wage bills of Lawmakers, the Supreme Court and the Presidency and Ministers would ensure that there is no budget shortfall/deficit this fiscal year.

The IMF said the last 2018/2019 budget was not credible and that unless the austerity measures were taken, the country would experience serious financial and economic problems going forward.

Before now, critics of the government say there has been no political will to cut their fabulous pay. Former Montserrado County Senator now current President George Manneh Weah was one of the Senators who never joined forces with Margibi Senator Oscar Cooper during the 53rd Legislature, when he (Sen. Cooper) launched a one-man campaign for the reduction of the extravagant salaries of Liberian Lawmakers. For three years, then Senator Weah and other collected the 15 or more thousand US dollars monthly then.

The FY2019 budget is no longer credible. The revenue outturn for FY2019 is estimated at $475 million (14.7 percent of GDP), close to US$100 million lower than the approved budget of US$570 million (17.6 percent of GDP),” according to the IMF report.

The report also stressed the need to mobilize domestic resources by the Liberian government, “given the declining trend in external assistance.”

It says “Liberia must continue its efforts to mobilize domestic revenue, with due consideration for its administrative capacity.”

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