VZCZCXRO1705
RR RUEHMA RUEHPA
DE RUEHMV #0838/01 3221728
ZNR UUUUU ZZH
R 181728Z NOV 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 1469
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF JUSTICE WASHINGTON DC
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 02 MONROVIA 000838 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON EFIN LI
SUBJECT: FISCAL SQUEEZE SPARKS CALLS FOR BUDGET TRANSPARENCY 
 
REF:  MONROVIA 524 
 
¶1. (SBU) SUMMARY: While the global downturn could be expected to 
impose some constraints on Liberia's 2009-2010 budget, the Ministry 
of Finance's admission that revenue collection fell a full 25 
percent short of planned expenditures in the first quarter alone has 
raised questions about the efficacy of the budget process.  The GOL 
vowed to preserve education and health spending, while trimming 
non-essential operational and administrative expenses.  However, 
Liberia's fiscal watchdogs warn that as long as budget execution 
remains opaque and politicized, the public cannot evaluate the 
veracity of these government promises.  An unexpected, albeit 
welcome, consequence of the dramatic budget shortfall may be the 
emergence of an unlikely alliance among civil society, the General 
Auditing Commission and Liberia's budget director himself, all of 
whom have begun outlining plans for budget transparency and civil 
engagement in fiscal decision-making.  This transparency will be 
essential in the next budget, likely to be the first following HIPC 
Completion Point.  END SUMMARY. 
 
¶2. (SBU) The Ministry of Finance (MOF) announced October 18 that 
delayed payments from concessionaires, declining customs revenues 
and lackluster income tax receipts conspired to constrict revenue 
collection in the first quarter ending September 30.  The MOF 
collected only $70 million, against $93 million in anticipated 
expenditures.  On November 13, deputy minister of revenue Elfreida 
Tamba told Econoff that fresh projections indicate the MOF can 
expect to raise $302 million this fiscal year, against a $372 
million budget ratified by the National Legislature.  Given that 
Liberia continues to operate a cash-based budget per HIPC 
requirements, every dollar in lost revenue compels the GOL to pare 
an already-modest resource envelope and devise a contingent budget. 
 
 
¶3. (SBU) President Sirleaf and Finance Minister Ngafuan have pledged 
to defend spending on education, health care and road construction, 
while cutting unpopular overhead expenses, including fuel, vehicles, 
allowances and foreign travel.  George Gonpu, deputy minister for 
budget, told Econoff he worked closely with the House and Senate 
Ways and Means Committees and line ministries throughout October to 
identify $35.9 million worth of economies that would not debilitate 
essential government functions.  However, to balance the budget, the 
GOL must impose an additional $34 million in painful cuts to 
substantive social programs. 
 
¶4. (SBU) Samim Cilem, GEMAP advisor in the Bureau of Budget, 
downplayed the GOL's commitment to its public rhetoric, suggesting 
that as line ministries face budget cuts, those ministries at the 
center of the fiscal process - notably the Ministry of State for 
Presidential Affairs and the Ministry of Finance - have managed to 
preserve their original allocations.  He lamented that political 
clout and access to information may trump widespread social benefit 
as ministers jockey for increasingly scarce resources. 
 
¶5. (SBU) While the Ministry of Education and the Ministry of Health 
and Social Welfare (MOHSW) each bear a relatively small share of 
total budget cuts (seven percent versus up to 15 percent at other 
ministries), their resources remain too limited to fulfill Poverty 
Reduction Strategy objectives.  USAID notes that the MOHSW cannot 
independently finance its payroll and faces a salary shortfall for 
2,000 workers.  Donors and NGOs pay salaries for some workers, while 
others may abandon their posts because MOHSW salaries remain too 
meager.  Police Director Marc Amblard confided to Ambassador that 
without a rational budget process he cannot plan even a few months 
ahead, let alone set forth a multi-year strategy.  To combat 
corruption, he estimated he would need to triple the salaries of 
officers, which he cannot do in this fiscal climate. 
The Budget as a Portrait of Social Priorities 
--------------------------------------------- - 
 
¶6. (SBU) If budget execution remains hostage to politics, Auditor 
General John Morlu believes fault lies with a "scanty" Public 
Financial Management Act that fails to codify how budget cuts should 
be prioritized and permits MOF and a National Budget Committee 
chaired by the Finance Minister too much control over what should be 
a technical process.  "The Minister of Finance is Liberia's chief 
economist, not its chief accountant.  Once the budget is passed, he 
should remove himself," and permit the Cash Management Committee to 
forecast cash flow and disburse funds accordingly. If revenue falls 
short, technocrats should impose surgical budget cuts that preserve 
the social priorities enshrined in the Poverty Reduction Strategy 
(PRS), Morlu proposed. 
 
¶7. (SBU) A consortium of civil society organizations known as AGENDA 
(Actions for Genuine Democratic Alternatives) contends that the 
legislative shortcomings Morlu describes only amplify the 
distortions that occur when citizens exercise no role in fiscal 
decision-making.  Jasper Cummeh, chairman of AGENDA, asserts that a 
 
MONROVIA 00000838  002 OF 002 
 
 
decoupling of actual spending and PRS priorities occurs because the 
GOL is insufficiently accountable to the public at several critical 
junctures in the budget cycle.  The GOL does not release the 
macro-fiscal assumptions that support revenue projections, nor the 
mid-year review that evaluates budget implementation and details 
spending at the line ministries.  The legislature does not hold 
pre-budget hearings where citizens can voice their spending 
priorities or question government fiscal policy.  Finally, the 
absence of a Freedom of Information Act limits citizens' ability to 
independently appraise the GOL's fiscal performance. 
 
¶8. (SBU) Unless Liberians come to see the budget as a living 
document and the benchmark against which government promises should 
be measured, AGENDA believes these institutional deficiencies will 
give rise once again to veiled self-dealing, fiscal profligacy, and 
a failed HIPC process.  To engender widespread public interest in an 
otherwise arcane process, AGENDA is organizing "budget clubs" at 
universities throughout Liberia and plans to lobby the MOF to hold 
pre-budget workshops and consultations in each county next year. 
Further, AGENDA is creating a public expenditure tracking system 
that follows funds from appropriation to expenditure.  The 
organization will measure tangible outputs, evaluate their link to 
the PRS, and post scorecards on its Web site. 
 
The Budget as a Weapon against Corruption 
------------------------------------------ 
 
¶9. (SBU) While Budget Director Gonpu has had no contact with this 
civil society movement, he shares their conviction that a 
transparent and participatory budget process ensures equal 
distribution of resources and safeguards essential social safety 
nets.  Elevated to budget director in June, after the draft budget 
went before the legislature, Gonpu privately regards the original 
$372 million budget as bloated and founded on questionable revenue 
projections (reftel).  Yet, in a break with precedent, he took to 
the airwaves in October, braving dozens of radio call-in shows in 
order to explain how MOF would address the budget shortfall while 
preserving essential social services.  He also has begun publishing 
a monthly budget circular, which explains how changing revenue 
projections will affect line ministries' allocations, and he has 
requested permission to distribute the document outside the GOL.  In 
early 2010, as next year's budget process begins, Gonpu hopes to 
convene a civil society advisory group and hold decentralized budget 
hearings in several counties. 
 
¶10. (SBU) Gonpu acknowledged that some MOF colleagues and 
legislators disparage his approach, claiming his media blitz and 
zeal for government accountability exposes the GOL to charges of 
incompetence whenever unforeseen circumstances constrain government 
spending.  However, he has found an ally in Auditor General Morlu. 
Gonpu pictures the budget as a real-time barometer of fraud, waste 
and mismanagement.  If Gonpu obtains the funds to establish an 
independent economic forecasting unit, as he has long desired, he 
believes he can address leakages from one quarter to the next, and 
help the GAC target ministries and agencies that warrant a careful 
mid-year audit. 
 
¶11. (SBU) COMMENT: The nearly two years that will pass between HIPC 
Decision Point and Completion Point may be seen to impose 
limitations and delays on Liberia's rightful economic sovereignty. 
However, to enshrine the spirit of HIPC trigger points in laws, 
institutions and individual reformers takes time.  We welcome these 
promising, albeit nascent, movements to engender widespread 
engagement in public financial management as a more authentic and 
enduring "completion point." 
 
¶12. (SBU) COMMENT CONTINUED: However, would-be reformers will 
require careful nurturing and guidance if they are to be effective. 
Gonpu is energetic and well-intentioned, but after five months as 
budget director, he is struggling to implement his vision, and has 
yet to reach out to civil society organizations. We will continue to 
offer moral support and ensure like-minded reformers become 
acquainted.  Liberia will likely achieve HIPC Completion Point in 
May or June 2010, meaning that the 2010-2011 budget will be the 
first in which the GOL can borrow to anticipate revenues to cover 
costs.  This will provide a more rational approach for operations, 
but will be a temptation for more profligate spending, and any 
measure of transparency will be helpful. 
 
 
THOMAS-GREENFIELD