GOVERNMENT OF LIBERIA

GOVERNMENT OF LIBERIA FISCAL OUTTURN REPORT FOR QUARTER ONE OF FISCAL YEAR 2014/2015 JULY 1 SEPTEMBER 30, 2014 MINISTRY OF FINANCE & DEVELOPMENT PLANNING NOVEMBER 2014

This document is prepared in accordance with Section 36.4 of the Public Financial Management (PFM) Act, which requires that the Minister of Finance provides a report to the President, the Legislature and the general public outlining the budget execution and the revenue collections. Section 13.4 requires that this document outlines any use of the Contingency Fund, while Section 26.3 requires that cumulative budget reallocations be reported. [T]he Minister shall produce a consolidated quarterly report comparing budget execution and revenue collections to the estimates contained in the National Budget. This report shall be [made] available to the President, the Legislature and the general public within forty five days of the end of the quarter Government of Liberia, Public Financial Management Act (2009). Fiscal data should be reported on a gross basis, distinguishing revenue, expenditure and financing with expenditure classified by economic, functional and administrative category IMF Code of Good Practice on Fiscal Transparency 1

TABLE OF CONTENTS ACRONYMS... 3 DEFINITIONS... 4 SECTION 1: MACROECONOMIC DEVELOPMENTS... 6 SECTION 2: BUDGET FY 2014/15... 6 MTEF PROJECTS... 7 MTEF PHASES... 8 FISCAL RULES... 8 MTEF BUDGET SECTORS... 9 FY 2014/15 APPROPRIATIONS... 9 SECTION 3: OUTTURN AND DEVELOPMENTS... 12 GOVERNMENT FINANCE STATISTICS (GFS)... 12 FLOW OF FUNDS... 13 REVENUE... 14 TAX EXPENDITURE... 15 ALLOTMENTS... 16 COMMITMENTS... 16 EXECUTION... 18 SECTION 4: PROSPECTS AND CHALLENGES... 19 LIST OF TABLES Table 1: Budgetary Appropriation FY 2014/15 (US$ million)... 10 Table 2: GFS Table, July 1, 2014 to September 30, 2014 (US$ million)... 12 Table 3: Flow of Funds (July 1 to September 30, 2014) (US$ Million)... 13 Table 4: Revenue Performance (July 1 to September 30, 2014)... 14 Table 5: Tax Expenditures Summary (July 1 to September 30, 2014) (US$ Millions)... 15 Table 6: Budgetary Allotments (July 1 to September 30, 2014) (US$ million)... 16 Table 7: Commitments (July 1 to September 30, 2014) (US$ million)... Error! Bookmark not defined. Table 8: Summary of Budget Execution (July 1 to September 30, 2014) (US$ million)... 18 Table 9: Summary of Percentage Budget Execution (July 1 to September 30, 2014)... 18 LIST OF FIGURES Figure 1: Comparative Analysis of Budgetary Appropriations for FY 2013/14 and FY 2014/1512 2

ACRONYMS AfT ASYCUDA BFP DMU DBDP GDP GoL GST LPO M&As MFDP MFPU MT MTEF PRS II PSIP Agenda for Transformation Automated System for Customs Data Budget Framework Paper Debt Management Unit Department of Budget and Development Planning Gross Domestic Product Government of Liberia Goods and Services Tax Local Purchase Order Ministries and Agencies Ministry of Finance & Development Planning Macroeconomic and Financial Policy Unit Metric Tons Medium Term Expenditure Framework Poverty Reduction Strategy II Public Sector Investment Plan 3

DEFINITIONS Allotment: An increase or decrease in appropriation based on Ministries and Agencies (M&As) cash plans, which give M&As the authorization to initiate spending processes. Appropriation: The establishment of funds for spending purposes by M&As (annual budget passed by the National Legislature). Cash: Checks cashed or other payments from the consolidated account. Cash Surplus / Deficit: Revenue minus Expenditure minus net Acquisition of Assets (capital expenditure). Commitment: Payment request processed through appropriation, allotment, and stamped with pledge of disbursement. Net Cash from operating activities: Revenue minus Expenditure (not including Capital). 4

EXECUTIVE SUMMARY The Liberian economy is estimated to have performed at a slow pace in the first quarter of 2014 on account of the prevailing public health crisis that has adversely affected economic activities across various sectors. These activities are expected to further deteriorate in the remaining months of 2014 and even likely to worsen in 2015. Initially, the country s real GDP growth rate for 2014 was projected at 5.9 per cent. However, due to the attendant adverse effects of the Ebola Virus Disease (EVD), the projected growth has been revised downwards to around -0.4 per cent. This has placed a significant strain on the GoL revenue generation capacity. Inflation is expected to remain in double digits by the end-year of 2014, and is expected to remain so in early 2015 despite stable international prices of food and fuels. Owing to the slowdown in economic activities which has resulted into a drastic decline in the country s domestic production and by extension, a decline in exports, the CBL projects the end-of-year inflation rate at 12.5 per cent while the period average inflation rate stands at 10.5 per cent. However, the average inflation rate during the quarter under review was 11.5 per cent. Liberia s balance-of-payment position is expected to deteriorate due to lower volume of exports and increased importation of food, health, and fuel related commodities thereby impacting on the exchange rate. However, due to the lower Liberian-dollar expenditure by Government arising from the austerity measures currently being undertaken, the anticipated general slowdown in import related activities excluding food, fuel and health related commodities and the increased intervention by the CBL in the Foreign Exchange (FX) Market, the Liberian dollar nominal exchange rate against US dollar has been relatively stable. Thus, the average exchange rate during the quarter under review was 85 Liberian dollars to 1 US dollar. The Draft National Budget submitted to the National Legislature for FY 2014/15 was initially estimated at US$559.35 million, compared to an approved amount of US$582.93 million for FY 2013/14. However, due to the Ebola Virus Disease (EVD) epidemic and its associated additional spending pressures, a revised appropriation of about US$605.9 million has been submitted to the National Legislature for consideration and approval which is been matched against a resource envelope of US$521.2 million, thus leaving the GoL with a funding gap of US$84.7 million. Of the revised resource envelope of US$521.2 million, tax revenue accounts for US$339.2 million (65.1 per cent); non tax revenue,us$56 million (10.7 per cent); grants, US$35.06 million (6.7 per cent); on budget borrowing, US$75.9 million 1 (14.6 per cent); and contingent revenue of US$15 million (2.9 per cent). Actual revenue (excluding borrowing) collected during the period under review (July 1, 2014 to September 30, 2014) amounted to US$124.9 million representing 20.6 per cent of the revised draft appropriation but 24.0 per cent of the revised resource envelope. Of the realized amount, tax revenues accounted for 77.1 per cent while non tax revenues and grants accounted for 12.9 per cent and 10.1 per cent respectively. Overall, budget execution remained relatively strong. Of the US$605.9 million revised total appropriation, US$116.2 million was allotted during the first quarter (representing 19.2 per cent of the total appropriations) of which US$105.5 million was committed (representing 17.4 per cent of the total appropriations and 90.8 per cent of the total allotments). The quarter under review saw a relatively high rate of budget execution in terms of economic classifications (i.e. compensation of employees, use of goods and services, and social benefits). 1 This includes the additional IMF financing of about US$47.9 million to Liberia. 5

In conclusion, the first quarter budget execution for FY 2014/15 faced a number of challenges. Prominent amongst which was the slowdown in economic activities as a consequence of EVD outbreak which drastically reduced the country s GDP growth rate thereby resulting into a decline in revenues and a ballooning of public expenditure demands. This has further been compounded by delays in the timely passage of the National budget thereby resulting into the activation of the 1/12th rule mainly to fund recurrent expenditures. Meanwhile, the GoL remains committed to the National Vision of achieving sustained economic growth and development through people, products and processes. A robust Economic Stabilization and Recovery Plan is being developed to guide the GoL actions during and in the aftermath of the crisis to address the impact of the crisis on the economy, enhance macroeconomic stability, sustain investment in infrastructure, expand the horizons of inclusive growth and development, and most importantly create jobs so as to improve the welfare conditions in Liberia. SECTION 1: MACROECONOMIC DEVELOPMENTS 1. Based on the GoL and IMF estimates, the Liberian economy was projected to grow by 5.9 per cent in 2014. However, preliminary assessment of the effects of the Ebola epidemic resulted into a downward revision of real GDP growth from the previous 5.9 per cent to -0.4 per cent for 2014, that is, an expected decline by about 6.3 per cent. The decline in growth in 2014 is driven especially by slowing down in economic activities in the mining, agriculture and services sectors which have been significantly affected by the outbreak of the EVD. 2. Prior to the emergence of the EVD crisis, the economy was already experiencing a series of negative macroeconomic shocks, prominent amongst which were the declining terms of trade (especially that of rubber), depressed iron ore prices on the global market, reduced aggregate domestic demand due to UNMIL drawdown, infrastructural challenges in the forestry sector, reduction in remittance inflows and inflationary pressures. These shocks have, no doubt, been exacerbated by the Ebola-induced declines in economic activities. 3. Over the course of 2014, inflation has been projected at 12.5 per cent, up from 6.0 per cent in 2013. During the first quarter of FY 2014/15, the average inflation rate was11.5 per cent. 4. Based on the April 2014 World Economic Outlook (WEO) prepared by the IMF, Liberia s current account balance as a percentage of GDP for 2014 is projected at a deficit of 48.3 per cent, up from a deficit of 31.4 per cent for 2013. Over the medium term, the current account balance has been projected to improve to deficits of 30.7 per cent, 26.8 per cent and 24.0 per cent in 2015, 2016 and 2017, respectively. However, the April 2014 WEO estimates failed to capture the full impact of the EVD outbreak on the Liberian economy as the outbreak is still continuing to wreak havoc. 5. The US-Liberian dollar nominal exchange rate remained relatively stable during the quarter; owing in part to the lower Liberian-dollar expenditure by Government arising from the austerity measures currently being undertaken, the anticipated general slowdown in import related activities excluding food, fuel and medical related commodities and the increased intervention by the CBL in the FX market. Thus, the average exchange rate during the quarter was 85 Liberian dollars to 1 US dollar. SECTION 2: BUDGET FY 2014/15 1. The Government of Liberia has remained committed to a strong, transparent and efficient budgetary process in order to achieve greater macroeconomic balance which includes fiscal discipline attained through prudent management of the available resource envelope. This 6

necessitated the adoption of the Medium Term Expenditure Framework (MTEF) budget which contains revenue outlook and expenditure plan covering a period of three years with FY 2014/15 being the last year of implementation. 2. The use of the MTEF budgetary process informs and improves the inter- and intra-sectoral allocation of resources based on priorities set out in the Agenda for Transformation (AfT, the second poverty reduction strategy, or PRS-II) thereby linking the MTEF to the PRS-II. It further ensures greater budgetary predictability for line Ministries and Agencies (M&As) and efficient use of public funds. Thus, it makes the budget more predictable, comprehensive, transparent and to produce measurable results. 3. Thus the revised budget currently at the National Legislature for approval reasonably highlights crucial national priorities particularly expenditures that are geared towards curbing the prevailing health crisis, helping to maintain macroeconomic stability and placing the country back on its course of development. MTEF PROJECTS 4. The MTEF budget highlights the GoL s commitment to the vision for achieving sustained propoor and inclusive economic growth and development through people, products and processes. In an effort to enhance macroeconomic stability and expand the horizons of economic growth and development, the budget focuses on programs which are necessary to address the immediate impact of the prevailing health crisis and investment in critically needed infrastructures so as to ensure that the economic recovery continues to create jobs and improve welfare conditions in Liberia. Though many of these infrastructural projects are at risk, implementation of these projects is essential to improve the infrastructure capacity of the country and enhance medium to long term economic development. These investments are in two categories: A. National High Priority Level Projects: These are national priorities that have been identified. Investment in these projects will enable Liberia to meet the goals and objectives of its development agenda the Agenda for Transformation. They are ranked as follow: Priority 1: Ports, Energy, Transport and Information Technology specifically, the rehabilitation of the Mt. Coffee Hydroelectric Dam, the West African Power Pool (WAPP), HFO development and maintenance of major roads and the installation of the fiber optic back bone in Liberia; Priority 2: Health to support programs and projects in the Ministry of Health; Priority 3: Education to enhance education levels and develop human capacity; Priority 4: UNMIL Drawdown to ensure that national security to be enhanced; Priority 5: Capacity Development in line with the country s National Capacity Development Strategy; Priority 6: WASH supporting and enhancing access to clean and safe water and sanitation facilities; Priority 7: Youth Empowerment to create jobs for new entrants into the country s labor force through gainful employment generation; Priority 8: Reconciliation Fund to promote national unity amongst Liberians; Priority 9: Agriculture promoting agricultural rehabilitation for smallholder farmers and rural entrepreneurs; and 7

Priority 10: Economic Enhancement Fund providing support for domestic investment and activities that enhance economic growth and poverty reduction. B. Sector Level Investment Projects: These are projects developed by M&As to meet the specific objectives in the AfT in order: To maintain financial systems stability and sustainability; To promote equitable access to infrastructure and basic social services; To improve the standard of living for the majority of Liberians; and To facilitate economic development and growth. 5. Sector level projects were selected based on social and economic returns such as the impact on job creation, revenue generation and contribution to public good, and to sector goals consistent with the AfT and their geographical distribution. MTEF PHASES 6. The MTEF budgetary process and structure encompasses the following phases: Strategic Phase Where M&As present plans and strategies to link resources to policy priorities based on the Agenda for Transformation, PRS II; Operational Phase Where M&As prepared their detailed budgets; and Budget Phase Where the budget is now structured into eleven sectors consisting of a group of M&As that share common functions. It is also dis-aggregated by policy areas which are groups of administrative departments and projects within M&As that have common functions. FISCAL RULES The key drivers of the revised draft national budget are the prevailing health crisis and GoL s vision to keep its development agenda on course. Thus, a number of fiscal rules were adopted to ensure that the meager fiscal resources are used as effectively and efficiently as possible. These rules will allow us manage the economic impact of the Ebola crisis while investing in the needed infrastructure and programs for growth and development. The major fiscal rules governing the FY 2014/15 budget are the following Prioritization of spending on activities crucial to the fight against EBOLA. These include spending on social welfare services such as feeding of patients in hospitals, clinics, treatment (isolation) centers, etc. as well as providing safe drinking water and sanitary supplies to quarantined communities; Payment of compensation to employees; The placement of a moratorium on all non-essential purchases including vehicles, furniture, fixtures, office supplies, etc.; The placement of a moratorium on all non-essential foreign and domestic travels: a. Reduction in foreign travels of all agencies of Government by 40 per cent with all foreign travels subjected to written Presidential approvals; b. No more than two persons per delegation and limited number of days for all foreign travels with exceptions to be expressly granted by the President. c. With the exception of the President, Vice President, Speaker, President Pro-Tempore and Chief Justice, only economy-class tickets shall be purchased. 8

Automatic reduction in fuel and lubricant costs by 25 per cent in all Ministries and Agencies (M&As) and commissions that are not directly engaged in the fight against Ebola. MTEF BUDGET SECTORS 7. The formulation of the budget on a sector-specific basis highlights the policy direction of the budget and simplifies the budgetary process. This guides the GoL in terms of measuring performance or impact of the budget on different sectors and it further improves the coordination amongst M&As in a given sector during the budget preparation process. The MTEF budget is divided into the following sectors: Agriculture Education Energy and Environment Health Industry and Commerce Infrastructure and Basic Services Municipal Government Public Administration Security and Rule of Law Social Development Services Transparency and Accountability FY 2014/15 APPROPRIATIONS 8. The Executive Branch of the Government submitted a draft budget of US$559,349,000 to the National Legislature on April 30, 2014 for consideration and approval for the fiscal period beginning July 1, 2014 to June 30, 2015. This draft budget has been revised to an appropriation of US$605,867,078 against a projected total resource envelope of US$521,252,000 with a funding gap of US$84,615,078. 9. The funding gap of US$84,615,078 is informed by a 6.8 per cent downward adjustment in revenue and an 8.3 per cent increase in expenditure demands due the prevailing Ebola crisis. 10. The revised draft budget submitted to the National Legislature for FY 2014/15 shows a 4.0 per cent increase compared to FY 2013/14 and a 17.0 per cent increase compared to FY 2013/14 outturn. 11. Consistent with the MTEF process, Table 1 shows a breakdown of appropriations in the FY 2014/15 budget by sector and economic classification with a comparison to the economic classification totals for the FY 2013/14 budget. 12. The GoL projected wage bill accounts for 39.1 per cent of the current budget (FY 2014/15) compared to about 38.7 per cent of the FY 2013/14 budget. This can be attributed to the scheduled UNMIL draw down and the need for the GoL to expand its presence across the country and perform activities previously undertaken by UNMIL. 13. Appropriations for capital expenditure seem lower in FY 2014/15 a decline of 87.2 per cent, as compared to the FY 2013/14 capital expenditure, as most capital expenditures have been initially classified as PSIP project spending. 9

Table 1: Budgetary Appropriation FY 2014/15 (US$ million) FY 2014/15 Budget Sector Compensation of employees Use of goods and services Capital Spending Interest Subsidies Grants Social benefits PSIP Projects Agriculture 2.4 2.3 - - - - - - 4.8 Education 47.8 5.2 0.0 - - 11.2-0.0 64.3 Energy and Environment 5.4 3.5 - - - - - 15.6 24.4 Health 30.6 43.5 - - - 17.7-8.5 100.2 Industry and Commerce 7.0 6.1 - - - 1.2-0.4 14.7 Infrastructure and Basic Services 6.9 5.2 - - - - - 50.0 62.0 Municipal Government 9.3 1.0 - - - 17.9-2.4 30.5 Public Administration 59.8 73.6 0.2 9.5-22.5 1.1 18.7 185.5 Security and Rule of Law 50.5 19.1 0.6 - - 2.2-10.0 82.5 Social Development Services 2.9 1.9 - - - 1.9-2.3 9.0 Transparency and Accountability 14.6 3.2 - - - 2.2-8.0 28.0 Total 237.1 164.6 0.9 9.5-76.8 1.1 115.8 605.9 Total FY 2013/14 Total 220.5 132.7 7.1 - - 168.2 1.3 53.2 582.9 Source: FY 2013/14 National Budget and FY 2014/15 Draft Budget 10

14. Appropriations for the use of goods and services accounts for 27.2 per cent of the draft national budget for FY 2014/15 compared to 22.8 per cent of FY 2013/14 budget. This can be attributed to the expansion in the activities of the GoL due to the scheduled UNMIL drawn down. 15. Appropriations for the provision of grants account for 12.7 per cent of the draft national budget for FY 2014/15 compared to 28.9 per cent of the FY 2013/14 budget. 16. In the context of economic classification, appropriations for compensation of employees has increased by 7.5 per cent in the current fiscal year (FY 2014/15) budget compared to the FY 2013/14 budget; similarly, the use of goods and services has increased by 24.1 per cent; capital spending, excluding the PSIP projects appropriations has declined by 87.2 per cent; grants shows a decrease of 54.3 per cent while appropriation for social benefit decreased by 11.6 per cent. 17. Appropriations for Agriculture for FY 2014/15 account for 0.8 per cent as compared to 1.4 per cent of the FY 2013/14 budget, a decrease of about 41.5 per cent. 18. Appropriations for Education for FY 2014/15 account for 10.6 per cent as compared to 13.1 per cent of the FY 2013/14 budget, a decrease of about 15.6 per cent. 19. Appropriations for Energy and Environment for FY 2014/15 account for 4.0 per cent as compared to 5.6 per cent of the FY 2013/14 budget, a decrease of about 25.8 per cent. 20. Appropriations for Health for FY 2014/15 account for 16.5 per cent as compared to 11.8 per cent of the FY 2013/14 budget, an increase of about 45.2 per cent. 21. Appropriations for Industry and Commerce for FY 2014/15 account for 2.4 per cent as compared to 3.6 per cent of the FY 2013/14 budget, a decrease of about 29.7 per cent. 22. Appropriations for the provision of Infrastructure and Basic Services for FY 2014/15 account for 10.2 per cent as compared to 5.1 per cent of the FY 2013/14budget, an increase of about 106.7 per cent. 23. Appropriations for Municipal Government for FY 2014/15 account for 5.0 per cent as compared to 5.5 per cent of the FY 2013/14 budget, a decrease of about 4.4 per cent. 24. Appropriations on Public Administration for FY 2014/15 account for 30.6 per cent as compared to 31.9 per cent of the FY 2013/14 budget, a decrease of about 0.48 per cent. 25. Security and Rule of Law for FY 2014/15 account for 13.6 per cent as compared to 14.3 per cent of the FY 2013/14 budget, a decrease of about 0.72 per cent. 26. Social Development Services for FY 2014/15 account for 1.5 per cent as compared to 4.1 per cent of the FY 2013/14 budget, a decrease of about 62.5 per cent. 27. Transparency and Accountability for FY 2014/15 account for 4.6 per cent as compared to 3.5 per cent of the FY 2013/14 budget, an increase of about 36.6 per cent. 11

Figure 1 provides a comparative analysis of budgetary appropriations for FY 2013/14 and FY 2014/15. Figure 1: Comparative Analysis of Budgetary Appropriations for FY 2013/14 and FY 2014/15 Source: FY 2013/14 National Budget and FY 2014/15 Draft Budget SECTION 3: OUTTURN AND DEVELOPMENTS 28. The key objective of this section is to provide information on the status of revenue collection and budget execution as per the revised draft National Budget for the period July 1, 2014 up to September 30, 2014 based on the application of the one-twelfth rule as a result of delays in the passage of the National Budget. GOVERNMENT FINANCE STATISTICS (GFS) 29. Government Finance Statistics (GFS) is basically the government balance sheet; it displays the economic activities of the government which covers revenues, expenditures, deficit/surplus, transactions in assets, transactions in liabilities and other economic flows. Hence, GFS forms the basis for fiscal monitoring by international monetary institutions, most notably the IMF. 30. Table 2 provides cumulative information of the GoL s GFS for the first quarter of FY 2014/15 on a commitment basis. This includes all commitment expenditure for the period July 1, 2013 to September 30, 2013. Table 2: GFS Table, July 1, 2014 to September 30, 2014 (US$ million) Budget Commitments Revenue 445.3 124.9 Tax 339.2 96.3 Non- Tax 56.0 16.1 Grants 35.1 12.6 Contingent revenue 15.0 0.0 Expenditure 605.0 104.9 Compensation of employees 237.1 55.4 Use of goods and services 164.6 34.0 Interest 9.5 1.4 Subsidies 0.0 0.0 Grants 76.8 13.9 12

Social benefits 1.1 0.3 PSIP Projects* 115.8 n/a Sale of Non-Financial Assets 0.0 0.0 Acquisition of Non-Financial Assets 0.9 0.6 Spending on Capital** 0.9 0.6 Net Cash from operating activities -159.7 20.1 Cash Surplus/Deficit -160.6 19.4 Financing 75.9 5.0 Accounts Cash to (-)/from (+) 0.0 0.0 Amortization 0.0 0.0 Domestic Borrowing 10.0 5.0 Foreign Borrowing 65.9 0.0 o/w IMF 47.9 0.0 Others 18.0 0.0 Source: Departments of Budget and Fiscal Affairs Ministry of Finance & Development Planning *PSIP projects is not strictly a GFS expenditure classification, but is used here as some appropriations are not classified until the point of execution. ** Similarly, some capital spending is not classified until the point of execution and therefore appears low here. FLOW OF FUNDS 31. The flow of funds table describes financial flows within the public sector; basically, it highlights how revenues finance expenditures. Table 3 shows the flow of funds for the first quarter on a commitment basis. Table 3: Flow of Funds (July 1 to September 30, 2014) (US$ Million) Jul Aug Sep Total TA Total Available 43.8 34.7 46.5 124.9 R Revenue 43.8 34.7 46.5 124.9 CR Collected Revenue 43.8 34.7 33.9 112.3 TXR Tax 37.1 29.5 29.7 96.3 NTX Non-Tax 6.7 5.2 4.1 16.1 G Grants 0.0 0.0 12.6 12.6 CF Carry Forward 0.0 22.3-9.8 12.5 ECA Expenditure (Commitment) 21.5 44.5 39.6 105.6 Compensation of Employees 9.4 27.2 18.8 55.4 Use of Goods and Services 7.3 12.8 13.9 34.0 Capital Spending 0.0 0.0 0.6 0.6 Interest 0.0 0.1 1.3 1.4 Subsidies 0.0 0.0 0.0 0.0 Grants 4.7 4.3 4.8 13.9 Social Benefits 0.1 0.1 0.1 0.3 BA Balance of the Accounts at Month End 19.3 34.1 42.9 96.3 PBA Projected Balance at Month End 22.3-9.8 6.9 19.4 BCF Including Carry Forward 22.3-9.8 6.9 19.4 13

BG Including Grants 22.3-9.8 6.9 19.4 BWG Excluding Grants 22.3-9.8-5.7 6.8 Financing FR Required 0.0-9.8 0.0-9.8 FI Amortization 0.0 FI Identified 0.0 0.0 0.0 0.0 Account 0.0 0.0 0.0 0.0 Commercial 0.0 0.0 0.0 0.0 Concessional 0.0 0.0 0.0 0.0 T-Bills 0.0 0.0 0.0 0.0 CBL 0.0 5.0 0.0 5.0 Source: Departments of Fiscal Affairs, Ministry of Finance & Development Planning REVENUE 32. The revised draft resource envelope submitted to the National Legislature for approval is US$521.2 million, of which core revenue (Tax, non-tax and grant) accounted for US$430.3 million, contingent revenue accounted for US$15.0 million while on-budget borrowing accounted for US$75.9 million. 33. Of the total resource envelope, core revenue accounted for 82.6 per cent of which tax revenues, non-tax revenue, and grants accounted for 78.8 per cent, 13.0 per cent and 8.2 per cent respectively. A major component of the projected tax revenue is taxes on incomes and profits followed by taxes on international trade, while property income tax accounted for a significant portion of non-tax revenues followed by administrative fees from ministries and agencies. Table 4 depicts the breakdown of GoL resource envelope and first quarter revenue performance for FY 2014/15. Table 4: Revenue Performance (July 1 to September 30, 2014) Category (US$ million) FY14/15 Draft Budget Quarter I FY14/15 JULY AUG. SEPT. ACTUAL GRAND TOTAL REVENUE EXCL. BORROWINGS 445.3 43.8 34.7 46.5 124.9 TOTAL CORE REVENUE 430.3 43.8 34.7 46.5 124.9 TOTAL TAX REVENUE 339.2 37.1 29.5 29.7 96.3 o/w Taxes On Income & Profits 149.5 18.0 13.8 10.0 41.8 o/w Property Taxes 5.0 0.4 0.1 0.1 0.6 o/w Taxes On Goods And Services 45.4 3.1 3.8 2.3 9.2 o/w Taxes On International Trade 126.6 15.6 11.8 11.5 39.0 o/w Other Taxes 12.7 - - 5.7 5.7 NON-TAX REVENUE 56.0 6.7 5.2 4.1 16.1 o/w Property Income 44.3 4.8 3.9 2.6 11.3 o/w Administrative Fees 10.0 1.3 0.9 1.0 3.2 o/w Fines, Penalties and Forfeits 1.7 0.6 0.4 0.5 1.5 o/w Other 0.1 0.0 0.0 0.0 0.0 GRANTS (ON-BUDGET) 35.1 - - 12.6 12.6 14

From Foreign Governments - - - - - From International Organizations 35.1 - - 12.6 12.6 BORROWINGS 75.9-5.0-5.0 o/w Domestic 10.0-5.0-5.0 o/w Foreign 65.9 - - - - CONTINGENT REVENUE 15.0 - - - o/w Budget Support (NOCAL) 13.5 - - - - o/w Domestic 1.5 - - - - Source: Department of Fiscal Affairs, Ministry of Finance & Development Planning 34. Table 4 shows that the grand total revenue (excluding borrowing) collected as at end- September 2014 is US$124.9 million; representing approximately 24.0 per cent of the draft resource envelope. Of the collected amount, tax revenues account for 77.1 per cent while nontax revenues and grants account for 12.9 per cent and 10.0 per cent respectively. TAX EXPENDITURE 35. Tax expenditures are intended to support the Government's policy objectives in different sectors of the economy promoting investment in public transport, stimulating investment activities in mining, agriculture, forestry, etc. It is worth mentioning that these are revenues foregone, not revenues that would be collected if the duties were imposed mainly because if these tax expenditures are not made various beneficiaries would then reduce trade and activity within the economy. Most concession exemptions are set out in their agreements as part of investment incentives. 36. The tax expenditures over the first quarter amounted to US$39.9 million with concession exemptions accounting for 49.3 per cent followed by Ministries & Agencies (20.4 per cent), Executive Orders (10.6 per cent) and Diplomatic Missions (10.0 per cent). Table 5 shows a breakdown of tax expenditures by beneficiaries. Table 5: Tax Expenditures Summary (July 1 to September 30, 2014) (US$ Millions) July August September Q1 Total Concessions 2.06 11.51 6.11 19.68 Investment Incentives 0.37 1.04 0.53 1.94 Diplomatic Missions 1.22 1.88 0.88 3.97 GoL/Ministries & Agencies 6.22 1.59 0.33 8.14 International NGOS 0.15 0.15 0.17 0.46 Local NGOS 0.00 0.00 0.01 Public Corporation 0.01 0.00 0.00 0.01 Religious Institutions 0.01 0.01 0.02 0.04 Educational Institutions 0.00 0.00 Medical Institutions 0.01 0.06 0.06 0.13 National Legislators 0.02 0.01 0.04 0.07 Individual/Returnees 0.01 0.01 0.01 Executive Order 0.37 3.42 0.44 4.23 Petroleum Products 0.30 0.47 0.43 1.20 Total 10.74 20.16 9.01 39.91 Source: Liberia Revenue Authority 15

ALLOTMENTS 37. Allotments during the course of the first quarter of FY 2014/15 amounted to US$116.2 million. Table 6 shows a breakdown of the GoL allotment by sector and economic classification for FY 2014/15 compared to the same period in the previous fiscal year. Table 6: Budgetary Allotments (July 1 to September 30, 2014) (US$ million) Q1 FY 2014/15 Use of Compensation goods Capital Social Interest Subsidies Grants of employees and Spending benefits Total services Agriculture 0.7 0.2 - - - - - 0.8 Education 11.6 0.2 - - - 8.1-19.9 Energy and Environment 1.3 4.6 - - - - - 5.9 Health 7.4 1.3 - - - 3.3 0.0 12.0 Industry and Commerce 1.4 1.7 0.1 - - 0.4-3.7 Infrastructure and Basic Services 1.7 0.4 0.5 - - - - 2.6 Municipal Government 1.8 0.1 - - - - - 1.9 Public Administration 16.8 19.5 0.0 1.1-4.0 0.3 41.6 Security and Rule of Law 12.4 5.5 - - - 0.4-18.3 Social Development Services 0.7 0.5 - - - - - 1.2 Transparency and Accountability 3.4 4.1 - - - 0.7-8.2 Total 59.3 38.0 0.7 1.1-16.9 0.3 116.2 Q1 FY 2013/14 Total 54.8 32.8 0.4 - - 17.6 0.3 105.9 Source: Departments of Budget and Fiscal Affairs, Ministry of Finance & Development Planning 38. Compensation of employees accounted for about 51.0 per cent of the total quarterly allotment while the use of goods and services, capital spending, interest & other charges, grants and social benefits accounted for 32.7 per cent, 0.6 per cent, 0.9, 14.6 per cent and 0.2 per cent respectively. The low allotment for capital spending can be attributed to delays in the passage of the budget which resulted into the activation of the one twelfth rule. COMMITMENTS A total commitment of US$105.5 million was issued out to M&As during the first quarter of FY2014/15. Table 6 shows details of GoL s commitments issues during the period under review. 16

Table 7: Commitments (July 1 to September 30, 2014) (US$ million) Q1 FY 2014/15 Compensation of employees Use of goods and services Capital Spending Interest Subsidies Grants Social benefits Agriculture 0.7 0.1 - - - - - 0.8 Education 10.6 0.0 - - 7.2-17.8 Energy and Environment 1.3 4.3 - - - - 5.6 Health 7.3 0.8 - - - 2.1-10.3 Industry and Commerce 1.4 1.6 0.1-0.4-3.5 Infrastructure and Basic Services 1.6 0.2 0.5 - - - 2.3 Municipal Government 1.7 0.1 - - - - - 1.7 Public Administration 15.8 18.1-1.4-3.1 0.3 38.7 Security and Rule of Law 11.4 4.3 - - - 0.4-16.1 Social Development Services 0.7 0.4 - - - - 1.1 Transparency and Accountability 3.0 4.0 - - - 0.7-7.7 Total (**) 55.4 34.0 0.6 1.4-13.9 0.3 105.5 Total Q1 FY 2013/14 Total 46.6 26.8 0.4 - - 15.7 0.3 89.8 Source: Departments of Budget and Fiscal Affairs, Ministry of Finance & Development Planning 17

39. Compensation of employees accounted for about 52.5 per cent of the total quarterly commitments while the use of goods and services, capital spending, interest, grants and social benefits accounted for 32.2 per cent, 0.6 per cent, 1.3 per cent, 13.1 per cent and 0.3 per cent, respectively. EXECUTION 40. Budget execution during the course of the first quarter was relatively slow due to delays in the passage of the National Budget as a consequence, in part, to the prevailing health crisis. Table 8 provides a summary of budget execution by economic classification in millions of US dollars, while Table 9 provides a percentage execution of the national budget. 41. Of the US$605.9 million revised draft national appropriation pending approval by the National Legislature, US$116.2 million was allotted during the first quarter of which US$105.5 million was committed. Compensation of employees accounted for a significant portion of the budget execution. Table 8: Summary of Budget Execution (July 1 to September 30, 2014) (US$ million) Budget Allotment Commitment Compensation of employees 237.1 59.3 55.4 Use of goods and services 164.6 38.0 34.0 Capital Spending 0.9 0.7 0.6 Interest 9.5 1.1 1.4 Subsidies 0.0 0.0 0.0 Grants 76.8 16.9 13.9 Social benefits 1.1 0.3 0.3 PSIP Projects 115.8 0.0 0.0 Total 605.9 116.2 105.5 Source: Departments of Budget and Fiscal Affairs, Ministry of Finance & Development Planning 42. Of the total budgetary appropriation, 19.2 per cent was allotted during the first quarter out of which 90.8 per cent was committed. Hence, the amount committed is about 17.4 per cent of the total budgetary appropriations. Table 9: Summary of Percentage Budget Execution (July 1 to September 30, 2014) Allotment (% of Budget) Commitment (% of Allotment) Commitment (% of Budget) Compensation of employees 25.0 93.5 23.4 Use of goods and services 23.1 89.4 20.7 Capital Spending 72.6 97.8 71.0 Interest 11.3 128.6 14.5 Subsidies - - - Grants 22.0 82.0 18.0 Social benefits 23.2 98.6 22.8 PSIP Projects 0.0-0.0 Total 19.2 90.8 17.4 Source: Departments of Budget and Fiscal Affairs, Ministry of Finance & Development Planning 18

43. Compensation of Employees (including social benefits): about 25.0 per cent of the total budgetary appropriation for compensation to employees (including social benefits) was allotted during the quarter under review out of which 93.5 per cent was committed. Thus, commitments for compensation of employees accounted for 23.4 per cent of its budgetary appropriation. 44. Use of Goods and Services: Allotments for the use of goods and services amounted to 23.1 per cent of the total budgetary appropriations out of which 89.4 per cent was committed. Hence, 20.7 per cent of the total budgetary appropriation for the use of goods and services was committed during the quarter under review. 45. Capital Spending: Allotments for capital spending during the period under review amounted to 72.6 per cent of its budgetary appropriation out of which 97.8 per cent was committed. Hence, commitments for capital spending accounted for 71.0 per cent of the total budgetary appropriation. 46. Interest: Allotments for interest spending during the period under review amounted to 11.3 per cent of its budgetary appropriation out of which 128.6 per cent was committed. Hence, 14.5 per cent of the total budgetary appropriation for the payment of interest expenses was committed during the period under review. 47. Grants: 22.0 per cent of budgetary appropriation for grants was allotted during the quarter out of which 82.0 per cent was committed. Hence commitments for the provision of grants accounted for 18.0 per cent of the total national budget. 48. Social Benefits: Allotment for the provision of social benefits during the period under review amounted to 23.2 per cent of the budgetary appropriation out of which 98.6 per cent was committed. Hence commitments for the provision of social benefits accounted for 22.8 per cent of the total national budget. SECTION 4: PROSPECTS AND CHALLENGES The first quarter budget execution for FY 2014/15 faced a number of challenges. Prominent amongst which was the slowdown in economic activities as a consequence of the Ebola Virus Disease (EVD) outbreak which drastically reduced the country s GDP growth rate thereby resulting into a decline in revenues and a ballooning of public expenditure demands. This has further been compounded by delays in the timely passage of the National budget thereby resulting into the activation of the 1/12th rule mainly to fund recurrent expenditures. Meanwhile, the GoL remains committed to the National Vision of achieving sustained economic growth and development through people, products and processes. A robust Economic Stabilization and Recovery Plan is being developed to guide the GoL actions during and in the aftermath of the crisis to address the impact of the crisis on the economy, enhance macroeconomic stability, sustain investment in infrastructure, expand the horizons of inclusive growth and development, and most importantly create jobs so as to improve the welfare conditions in Liberia. The MFDP is currently in consultation with Government stakeholders, including the Governance Commission, and development partners on the review of the Agenda for Transformation, in order to align the ESRP with the our existing development agenda and the national budget. 19