An illustration of the high cost of low state (fiscal) capacity in Liberia

Reactions to a statement from the US Ambassador to Liberia

I: (Mis)governing Liberia

The United States ambassador to Liberia recently penned a statement decrying the state of public infrastructure and services in the country. In the statement (below) the ambassador succinctly describes a number of structural problems associated with low state capacity, including the problem of weak public finance management (PFM). In particular, he contrasts the appropriations for political institutions (such as the legislature’s US$65m budget) against the lack of resources to fund the quotidian operations of hospitals in Liberia’s southeast. For this reason, I found the statement worth sharing in full.

However, the statement also needs some contextual reinforcement. As it turns out, and contrary to some of the conclusions made (or implied) by the U.S. ambassador, the Liberian state’s PFM problems cannot be solved by slashing politicians’ salaries or merely fighting corruption.

A good place to start would be to appreciate the fact that Liberia is stuck in a very bad equilibrium. Since its founding on July 26,1847, Liberia has invariably been too weak to provide an enabling environment for private enterprise to flourish (at one point it experienced full-blown state collapse). This trend continues under the generalized post-1945 tolerance of weak “juridical states” by the international system. Despite lacking standard empirical expressions of stateness, Liberia continues to exist. Furthermore, its inherent weakness is self-reinforcing. The anemic economy restricts the government’s ability to raise revenue and provide essential public goods and services, while the lack of essential public goods and services restricts the possibility of having a flourishing private sector-led economy. Liberian incomes today are less than a third of what they were in the 1950s.

Under the circumstances, merely cutting politicians’ salaries or reducing corruption — as suggested/implied by the ambassador — might actually cause the whole thing to collapse. In the grand scheme of things, paying, say, US$65m (the budget for the Liberian legislature) as the cost of elite political stability is not too steep a price to pay (trust me, I study legislatures in contexts not too dissimilar to Liberia). A quick look at the budget appropriation numbers suggests that it would make much more sense to go after the budgets of the Presidency ($21m), Foreign Affairs ($17m), Revenue Authority ($15.2m — why relatively so high?), or Justice ($40m). But even then, any comparative PFM knowledge would dissuade one from thinking that it is suspect for a country of 5.2m people to spend $21m on its presidency (not to mention global fixed costs like having to attend summits, host foreign leaders, etc).

More importantly, these are not earth-shattering figures. The real story here is that Liberia is a desperately poor country that is in need of rapid and transformational economic growth. With this in mind, the focus should be on cementing elite political stability and building good-enough institutions to facilitate sustained rapid economic growth (more on this in a future post). Given the current size of its public sector and the real cost of doing politics in post-conflict Liberia, the country will not anti-corruption/downsize its way to economic prosperity. While better governance and elite-level austerity may improve service delivery at the margins, the harsh reality is that there is no money to fund operations in Liberian hospitals because there is no money.

Stated differently, Liberia’s level of income is the principal barrier to effective government and delivery of public services in the country (which is the obverse of the common belief that the country needs to fix its often misdiagnosed (mis)governance challenges before it can grow). The only way out of this bad equilibrium is to figure out how to achieve economic growth. And to that end, Liberia will have to go to war with the elites and institutions it has and eschew the common belief that the country has to have the best institutions and saintly, public-spirited elites before it can grow. Good enough is enough.

II: Poverty is bad for both state capacity and public goods provision

The annual operating budget of the Republic of Liberia (US$778m) is about half that of my university, Georgetown ($1.5b). Liberia has a population of 5.2m, while our student enrollment stands at around 20,000. The total budget in Liberia amounts to about $150 per capita in public spending. For comparison, the commensurate figure in Kenya is about $540. Out here in Washington, DC it is $27,600. Adjustments from these nominal to real figures do not always yield comparable figures (e.g. at some level expertise might be more expensive in Liberia than in Washington, DC). The point is to provide some perspective regarding the Liberian state’s fiscal capacity.

Source: Republic of Liberia, Ministry of Finance and Development Planning

The Liberian government spends 38% of its budget on employee compensation, leaving little for operations & maintenance (which consume about 14.4%). Again for perspective, in Kenya wages and salaries consume about 17% of the total budget, while operations and maintenance account for just over 20%.

In a country of 5.2 million people with standard departments and government offices all over the country, there is only so much you can cut from the compensation envelope. In other words, it may not be possible to cut staff and related expenses from the public service without totally collapsing the Liberian state.

The government of Liberia employs a mere 67,300 public sector workers. This adds up to 1.3% of the total population, well below the modal figure for African states for which I could readily find data (3%). It is worth noting that African states tend to have much smaller governments relative to other regions of the world (African states have historically been terribly under-governed — see Thandika Mkandawire). Comparable figures for North America (9.1%), Europe & Central Asia (7.7%), South Asia (5.5%), East Asia & Pacific (4.9%) and Latin America & the Caribbean (4.2%) are much higher.

In short, Liberia simply cannot afford to effectively serve its people with the current fiscal resources it has. While there is no denying that its institutions need strengthening as a foundation for accountable and limited government, it also true that too much focus on governance as the problem distracts from the real problem: an anemic economy that doesn’t generate enough revenues for the state. With that in mind, please read the ambassador’s statement.

III: The Ambassador’s statement

Source: US Embassy in Liberia

In the past three weeks I visited Bomi, Gbarpolu, and four counties in the Southeast, and I have now been to every county in Liberia.  This fulfills my promise to the U.S. Congress to be an Ambassador to all Liberia, not just Monrovia. I am happy to report that each capital city has its own unique bundle of trade and cultural ties, and that Liberians throughout the country share a warm, welcoming spirit!   

Unfortunately, on the trip I was startled and deeply troubled to encounter multiple county hospitals that received not one penny of what they were promised in the 2022 budget.  Hospitals on which lives depend, where outbreaks are prevented and suffering is alleviated, did not receive any portion of the US$100,000 or more appropriated by the legislature for them to operate.  As reported in the press last week with Tellowoyan Memorial Hospital in Lofa County, these facilities currently survive on the backs of incredibly dedicated health professionals, making do with whatever they can scrape together.  Lest you think this is the work of one political party, that notion was quickly dispelled by Liberians I talked to. 

The blocking of resources is so complete that it must be institutional: and the lack of any alarm being raised indicates a syndicate involving players at the legislature, the Ministry of Health, and the Ministry of Internal Affairs. In one town, administrators look with anticipation mixed with fear at the brand-new, modern hospital that sits vacant, knowing that they can barely keep the existing makeshift facility going, and running the new one will require ten times the resources. 

The United States Government is about to spend a total of over US$40 million constructing Liberia’s state-of-the-art National Reference Laboratory (NRL) that, when completed, will require US$3 million to US$4 million a year from the Government of Liberia to operate.  If the Government is failing to deliver statutory appropriations of only US$100,000 to existing hospitals, why would we ever trust annual pledges of US$3 million for the future NRL?   

I also visited most of the County Service Centers, and in 2022, NONE had received any of their budget allocation (usually around US$13,333). One Center has not printed marriage certificates for four years because the printer broke, and their last allocation was received five years ago. Virtually all of them, beautifully electrified over the past two years with UNDP-supplied solar power systems (costing around $35,000 – $40,000 each), and amply staffed by (mostly) salaried employees in tidy buildings, are reduced to the job of middlemen. 

Limited to forwarding paperwork to Monrovia periodically for time-consuming processing, their plight makes a mockery of decentralization efforts. The one functioning office in every center, the Liberia Revenue Authority (LRA), has representatives who collect duties and regularly forward funds to Monrovia – apparently a one-way street.       

It was striking that the further I went from Monrovia, the more elaborate and explicit were the reasons given for the lack of funding from the central government. “Oh, it is challenging for the government these days.” “Oh, Putin’s war has made everything more difficult.”  “Prices have dried up the budgets.” “You donor partners must fill the gaps.”  I wonder if these people are aware that, much to their credit, the LRA has surpassed projections and increased revenues for the past four years, climbing from US$435,682 million in 2019 to US$605,005 million in 2022? 

I suspect the country folk don’t know that the Liberian economy grew by 3.7% in 2022. And I am quite sure they have not been told that the legislature has spent more every year for the past three years buttering their own bread, allocating over US$65 million in 2022 for salaries and operations. That’s correct – while hospitals went without, and service centers withered on the vine, the 30 senators and the 73 representatives spent sixty-five million U.S. dollars feathering their own nests.  

We withhold 25% of the salaries of our Liberian employees at the Residence and at the Embassy to pay their legally mandated income tax to the LRA. Why are the much better-paid representatives and senators not paying a full 25% of their salaries? Why are legislators and ministers, those living on the top of the heap, given annual duty-free imports that deny the LRA much-needed additional revenue? Is there any reason other than the perverted version of the Golden Rule – “those that have the gold, make the rules”?   

U.S. taxpayers spend around US$60 million a year on health care in Liberia, and another US$23 million on education. The same legislature that spent US$65 million on itself in 2022 appropriated around US$7.1 million for grants and subsidies to county health facilities and US$2.76 million for operations at basic and secondary education (although, as we saw, that doesn’t mean the funds reached their intended destinations). But if the legislature could just appropriate an additional US$10 million a year to primary education (for a country that is tied in last place for average days of school attendance), and an additional US$10 million a year for county hospitals, even the greatest cynics concede that it would make a big difference. 

Just US$500,000 each per year of actual maintenance (not make-believe budgeted funds) on four unpaved roads (Zorzor –  Voinjama; Zwedru – Fishtown; Greenville – Barclayville City; and Greenville – Buchanan) would dramatically improve the lives of more than a million of Liberia’s poorest citizens, lowering food costs, revolutionizing farm to market access, and eliminating seasonal shortages of life-saving medicines and equipment. The legislature would still have US$43 million a year to somehow get by. Anyone interested in a pro-poor agenda?     

As for me, should the U.S. Congress ask how the elite in Monrovia are treating destitute citizens in the leeward counties, my honest response would have to be, “those citizens are treated with a neglect that borders on contempt.” Is this the best that Liberia can do?  

IV: Conclusion

The ambassador’s statement raises important points to consider. Liberia needs to do a better job of spending the small amounts of appropriated funds (PFM in post-conflict contexts is hard). Operational and maintenance costs should be an important consideration in the design of donor-funded projects (including hospitals). Small-ticket investments in road infrastructure have the potential to unlock improvements in rural agricultural productivity. American support for Liberia’s health sector makes up about 76% of annual government appropriation for the sector (note that only a small fraction of the $60m mentioned actually gets spent in Liberia). Finally, Liberians are not being well-served by their elected representatives.

Is this the best that Liberia can do? At current levels of income, pretty much. If we could end corruption in Liberia tomorrow, we would still only have $778m to serve a population of 5.2m. The theories of change presented by the good governance for growth arguments have never been convincing to me. Which is to say that a serious pursuit of transformational growth (in parallel to these other efforts) seems to be a much better way of getting out of Liberia’s bad equilibrium. Now if only Liberia had a governing class that is consolidated and secure enough to gamble on development.