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Wednesday, February 28, 2024

U.S. AMBASSADOR MICHAEL MCCARTHY’S REMARKS AT THE MINISTRY OF FINANCE AND DEVELOPMENT PLANNING IN LIBERIA

Date:

Honorable Ministers of the Government of Liberia Staff of the Ministry of Finance and Development Planning Staff of other Ministries, Agencies, and Commissions Distinguished Ladies and Gentlemen.

I am honored by your invitation to speak to you today about the importance of public sector reforms, particularly reforms designed to create a strong public financial management system for Liberia.

A strong public financial management system, as you know, promotes efficient and accountable governance. And governments that are efficient and accountable do a better job at delivering public goods and services, providing for the poor, and creating an environment that attracts investments, spurs private sector growth, and creates jobs.

If there is any country that desperately needs broad-based economic growth, job creation, and poverty reduction that comes from a robust public financial management system, it certainly is Liberia.

We know the story all too well: the twin shocks of the Ebola epidemic and the sharp decline in commodity prices stalled Liberia’s post-war economic recovery just as it hit its stride.

And there has been no respite. COVID-19 and now the spillover effects, including inflationary pressures, of Russia’s invasion of Ukraine, have again hampered Liberia’s economic recovery.

The resulting accumulated effects of Liberia’s stalled economic growth are glaring. Liberia’s GDP per capita stands at just over $600, less than half of what it was in real terms in 1980; the revenue-to-GDP ratio is below the average for Sub-Saharan Africa, rendering the country unable to provide basic public services. The World Bank Human Capital Index tells us that a child born today in Liberia will only be 32 percent as productive when she grows up as she could have been if she had full access to education and healthcare services.

Honorable Ministers, Distinguished Ladies, and Gentlemen: This is the depth and scope of the social and economic problems Liberia faces.

And to state, the problem is not to fix the blame on any government, any political party, or any one leader. But it is only by realizing the scale and magnitude of the problems that we can begin to appreciate the urgency of putting in place a public financial management system Liberia desperately needs and deserves – one capable of mobilizing Liberia’s vast potential resources and allocating them to their most productive and equitable uses so that they lift the lives of all Liberians.

To be sure, Liberia, with the support of its donor partners, has put in place some far-reaching public financial management and governance reforms. These include the Public and Financial Management Act of 2009 and related regulations to ensure the sound management of public finances. There was also the enactment of the General Auditing Commission Act of 2014 designed to enhance the independence of the Commission.

Liberia also deserves credit for the establishment of other accountability institutions, like the Liberia Anti-Corruption Commission, and the Purchasing Procurement and Concessions Commission, designed to improve and bring transparency to public procurement processes.

More recently, and with the strong support of the United States Government and other donors, Liberia enacted the Local Government Act, providing the legal and regulatory framework for decentralization and local governance reforms.

We congratulate President Weah for quickly signing into law this very important legislation as well as the Land Rights Law that if properly implemented would bring enormous benefits to rural communities, helping them unlock the value of their land and generating wealth with broad positive ramifications for the Liberian economy.

But despite these new institutions and laws, Liberia still faces many public financial management challenges. There is still much work to be done on consolidating government cash balances into a Treasury Single Account. State-owned enterprises are still not subject to appropriate oversight and accountability for how they use and manage the revenues they generate. Emphasis must be placed on enforcing tax compliance, identifying non-filers, and monitoring inaccurate reporting, particularly by those with the means to pay their taxes.

Honorable Ministers, Distinguished Ladies, and Gentlemen: Liberia, as we have seen, has adopted key reforms and established important accountability institutions. It would therefore do us little good to talk about reforms in the abstract.

What Liberia now needs above all is the political will and administrative discipline to implement the well-meaning reforms it has adopted and allow its various key accountability institutions to fully do the jobs they were established to do.

We congratulate the Weah Administration for taking some important steps in this regard. We note particularly the politically difficult but sound decision it made on wage harmonization.

We also laud the ongoing efforts to transition from a narrow-based Goods and Services Tax regime to a broad-based Value Added Tax regime.

But the government can — and should — do more, not in 2026, not in 2023, but NOW! It should accelerate plans for fiscal decentralization, including making the necessary amendments to the Public Financial Management Act, to allow counties to raise and spend – subject to appropriate safeguards – their own revenues. Putting resources directly in the hands of local governments will help make services readily available to citizens at the community level.

Just two weeks ago, Chiefs in Bong and Lofa Counties publicly called on urgent implementation of the Local Government Act. The Legislature must move forward with legislation for revenue sharing between the central government and sub-national governments is also critical for ensuring equitable revenue distribution across the country, ensuring that all Liberians benefit from the nation’s wealth.

As part of its decentralization reform efforts, the government needs to put in place mechanisms to improve citizens’ participation in the national budget formulation processes. According to the International Budget Partnership, Liberia currently has a score of 6 (out of 100) for public participation in budget formulation and execution. Improving participatory budgeting would help the Government of Liberia to better reflect and respond to the needs of its citizens through the national budget.

The government also needs to ensure funds are used for their designated purposes. I understand that road rehabilitation and maintenance is a high priority for the Liberian government under the PAPD. However, despite this prioritization, millions of dollars of essential funding from the Road Maintenance Fund have unfortunately been used for other purposes – in violation of the Road Maintenance Act and fundamental public financial management principles.

The government should also ensure that it does not erode the gains made in the fight to promote accountable governance. One way it can do so is by reconsidering its decision to alter the tenure terms of the heads of key accountability institutions: they must remain insulated from political pressures to be free to make decisions without the fear of losing their jobs.

Additionally, the government should work to pass revisions to the LACC Act that meet the criteria under the IMF Extended Credit Facility Program. The revised act should provide the LACC first-tier prosecutorial power over corruption and related economic and financial offenses. This should include vesting the LACC with the authority to establish an effective system of asset declarations for senior public officials, including the power to verify the declarations, publicly disseminate declarations, and sanction public officials who fail to comply.

Honorable Ministers, Distinguished Ladies, and Gentlemen: This year, the United States proudly joined Liberia in celebrating the 200th anniversary of the arrival on these shores of settlers from the United States. Twenty-five years later they would go on together with the indigenous brothers and sisters to found Africa’s oldest independent republic – Liberia – as a home for people like them seeking liberty and freedom.

The hopes and dreams that inspired them often wavered and flickered in the face of enormous and unimaginable difficulties. But they persevered and ultimately bequeathed to you the country you have today.

It is your duty to ensure that the bold experiment in democratic self-governance they started here shall not fail and that Liberia continues to be a shining example of a people’s ability to rule themselves and live in peace and prosperity.

The best way you can do so is by building a public financial management system that efficiently mobilizes and allocates Liberia’s resources for the benefit of all Liberians. Source: U.S. Embassy, Monrovia

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