R 061700Z FEB 09
FM AMEMBASSY MONROVIA
TO SECSTATE WASHDC 0770
INFO ECOWAS COLLECTIVE
DEPT OF TREASURY WASHDC
DEPT OF COMMERCE WASHDC
NSC WASHDC

UNCLAS MONROVIA 000119 
 
 
E.O. 12958: N/A 
TAGS: EFIN PGOV ECON EAGR LI
SUBJECT: LIBERIA: GOL ANNOUNCES PRICE CUTS AND TAX CUTS 
 
REF A)MONROVIA 90; B) 08 MONROVIA 629; C)08 MONROVIA 647 
 
 
¶1. SUMMARY: The Liberian Ministry of Commerce lowered price ceilings 
on rice, petroleum and cement on January 29.  The cuts come three 
days after the President announced a decrease in business and 
personal tax rates during her annual "State of the Nation" address 
January 26 (ref A).  The President also announced that the GOL will 
end the monopoly on rice imports, and described a $1 million 
facility at the Central Bank to ensure continuous supply of both 
imported and locally produced rice.  These initiatives continue the 
GOL efforts to buffer Liberian consumers from the impact of the 
global financial crisis and the trend towards more market-based 
responses to price fluctuations, but fall short of removing 
restrictions on sale of "strategic" commodities.  END SUMMARY. 
 
 
Taxes Down 
--------- 
 
¶2. In her annual "State of the Nation" address to the legislature on 
January 26 (ref A), President Sirleaf previewed the revised Revenue 
Code by revealing plans to reduce business and personal income taxes 
from 35% to 25%; and to reduce the presumptive tax on business with 
turnovers exceeding LD$201,000 ($3,190) from 4% to 2% of their gross 
quarterly income.  This fiscal reform follows an increase in the 
civil service minimum salary (to $70 a month, in the July 2008 
budget).  Ref B reported waiver of taxes on salaried income of $70 
and below in August 2008, a more fiscally sound way than the 
traditional price caps to address the surge in food and fuel prices 
than. 
 
Prices Down 
----------- 
 
¶3. (U) The GOL attempts to control the price of "sensitive" 
commodities such as rice, fuel and cement, but responded to last 
summer's surge in prices by acknowledging market forces and raising 
prices.  There had since been criticism that the price ceilings were 
not dropping in conjunction the reduction in world market prices. 
On January 29, the Ministry of Commerce released new price ceilings, 
with an 8.5% reduction in the retail price of a 50kg bag of butter 
rice.  Below is the new price structure: 
 
Product    Former Price  New Price 
Butter Rice    $35.00    $32.00 
Cement    10.50      9.50 
Gasoline (PMS)    2.75      2.50 
Diesel (AGO)    3.30      3.00 
 
¶4. MOCI promised further price decreases if world prices decline. 
(Note: The GOL eliminated the tariff on rice prices in 2008 to help 
control price increases, with forgone revenue of $9 million, and has 
taken other steps to boost food production and ease import of basic 
machinery and agricultural equipment.  End note.) 
 
¶5. MOCI and Liberia's monopoly wholesale cement company (CEMENCO) 
also reduced the retail price of cement to $9.50 (from $10.50) a 50 
kg bag. Cement has been in the news recently as MOCI cracked down on 
distributors who were selling short-weight bags, and CEMENCO ran ads 
encouraging firms to have a reliable agent accompany bags from the 
factory to the store to avoid siphoning off of cement en route. 
 
¶6. The 25-cent reduction in the price of gasoline and 30-cent 
reduction in diesel fuel take effect February 6 and mark the sixth 
round of price cuts in petroleum products, since the peak in 
mid-2008. 
 
Markets Opened 
-------------- 
 
¶7. The GOL has not only controlled rice prices, it has restricted 
imports (and retail distribution, which is still limited to Liberian 
firms only.)  In 2006, the GOL gave the monopoly on rice importing 
to the Liberian-owned Sinkor Trading Company.  (Comment:  which may 
not have had the financial strength for the task.  End comment.) 
Prior to that, imports had been dominated by Lebanese merchants. 
 
¶8. In a recent meeting of the Economic Revitalization Committee that 
comprises GOL, foreign partners, civil society and private sector 
representatives, there was lively debate on the validity of price 
ceilings for rice.  Rice has a tradition of political sensitivity 
and conventional wisdom holds it was an underlying cause of Samuel 
Doe's 1980 coup.  At the ERC, a Deputy Minister of Labor said it was 
time to look beyond rice as a cause of the coup, and lift price 
controls.  It was agreed the topic merited fuller discussion. 
 
¶9. In her speech, the President also announced a $1 million facility 
at the Central Bank to purchase paddy rice from local producers and 
stimulate production in the coming planting season.  The GOL will 
also launch a pilot program (Note:  suggested by the Ambassador. 
End note) to provide land to ten citizens of each county (except 
Montserrado) who are currently living in Monrovia but are willing to 
return to farming.  Those selected will be provided five acres of 
land in their home county, with seeds and cuttings to plant food and 
cash crops. 
 
¶10. Comment:  The decrease in the prices of "strategic" commodities 
is a relief for consumers.  Ultimately, however, the GOL's efforts 
to control basic commodities leaves the economy more vulnerable to 
temporary supply and price anomalies.  Nascent discussion on a 
longer-term move to more completely liberalize markets and prices in 
these sectors is a welcome development. 
 
THOMAS-GREENFIELD