-For ‘Pro-Poor Or Stay Poor’ Statement Regarding FY2018/19 Draft Budget
The Center for Policy Action and Research (CePAR) has been lambasted by two promising Liberian economists for its recent analysis of the draft National Budget, fiscal year 2018/2019.
In its recent analysis of the draft budget, the local CSO alleged that the draft budget doesn’t reflect the interest of the ‘suffering masses and the pro-poor agenda of the government’.
The CePAR’s analysis assumed that the budget suggests a poor start for development planning and is remarkably different from a policy instrument that tends to address poverty.
“Figures assigned to interventions were done arbitrarily and the budget seemed to be hurriedly prepared with the aim of only meeting the submission deadline. It contrasts the Government’s pro-poor aspiration on several fronts. It points to a potential budget shortfall based on unrealistic revenue projections,” the group said.
They also alleged that many revenue lines are projected significantly higher than their performance trends. According to them, 21 public sector institutions in the budget are only receiving salaries with no programmatic activity.
“The FY 2018/19 Draft National Budget carries a total allocation of US$8,544,461 for compensation to public sector institutions and zero for programs. This is simply telling the workers of those entities that they should only go to work, sit and do nothing because there is no money in the budget to fund programs,” the group further.
Meanwhile, responding to the allegation from the Center for Policy Action and Research (CePAR), two promising Liberian economists, Jamel Dugbeh and S. Emmanuel Lloyd expressed disappointment that the analysis from CePAR is meant to confuse the public.
According to the young Liberians, the interpretation from CePAR sends out a clear message that the draft national budget runs in complete contradiction to the many reasons why President George Weah, through the Coalition for Democratic Change (CDC) received an overwhelming mandate from the Liberian people at the just ended elections in 2017.
Dugbeh and Lloyd said to ease such fear, they decided to do an independent analysis of the Draft FY2018/19 for the sole purpose of a comparative analysis between government methodology for allocating resources and CePAR’s average method; a validation of the data CePAR based her analysis on. To ascertain whether the pro-poor sectors were adequately funded compared to other budgetary periods and; to validate some of the claims made by CePAR which was communicated through their key findings.
“Our data was collected from all of the national budget books from Fy2012/13 to FY2018/9. We also took into considerations the fiscal outturn reports for the same period. After sleepless nights of thorough analysis, we have come out with the following conclusions: CePAR’s claim: Average spending should form the basis for appropriation in FY2018/19. For CePAR to argue that the average spending on a sector should be used as a floor for expenditure projection is not only unfortunate but they have unintentionally committed an error in statistics called “Lying with statistics”. We think this is the most risky and faulty analysis any technician can make for policy decisions,” they added.
They said CePAR should note that mathematically, arithmetic mean is very relevant for the computation of averages of certain data set. “However, if such average is to be considered relevant for economic decision making such as forecasting budgetary appropriation, it must survive the elementary Statistical test of standard deviation which shows how close the mean is to the individual sample.
“Unfortunately, the average appropriations or outturn computed for the years (FY2012/17-FY2016/17) and used by CePAR, clearly show that the five years average is very far from each year appropriation or outturn. This means that CePAR was very wrong to have proceeded with further analysis using such framework which is not a good representation of the individual year data set. CePAR’s claim: FY2017/18 not ideal for analysis because of its implementations responsibilities due to elections,” they further indicated.
The young economists said they strongly disagreed with CePAR on grounds that given the close proximity between FY2017/18 and FY2018/19, the cleverest thing to have done for an analysis of a one-year budget was to compare it with its immediate predecessor.
“The case for this is that, there is no significant difference between the macroeconomic climates of two adjacent years. It can be said that the same macroeconomic conditions that informed the 2017/2018 budget year are still pervasive for 2018/2019. There is no structural break. But as you go further back in the past, the conditions that prevail today are less pervasive for three, four, or five years ago. That is, the conditions decay. By this we mean, changes in macroeconomic indicators such as the Rate of Inflation, the Balance of Payments, Real GDP are of less magnitude when comparison is made between FY2017/18 and FY2018/19 than FY2013/14 and FY2018/19,” they noted.
The economists further lambasted that for CePAR to have knowingly or unknowingly ignored a significant year in their analysis suggest that their findings had information gap which was very relevant to an analysis that should be conducted on FY2018/19 budget.
In its analysis, CePAR alleged that the 562.2million revenue forecast presented in the 2018/2019 draft national budget is unrealistic and does not make sensible use of up-to-date macro-economic data.
“CePAR’s argument that the 3.8% annual average growth of the Liberian economy predicted in World Economic Outlook (WEO) will be firmly undermined by GoL lack of substantial investment through the draft national budget to sectors such as agriculture and energy is untrue. To shed the light on this, what is reported in the World Economic Outlook is that improved access to road transport network and cheaper sources to electricity are the interventions needed to facilitate the recovery. To this end, considering that the GoL has allocated 40.56 million in the draft 2018/2019 National Budget for roads, an amount which is more than the 24.2 million appropriated in the 2016/2017 approved national budget, contradicts what CePAR has reported. An increase of 68 percent in on-budget support to roads and bridges demonstrates a very strong commitment from the GoL to provide access to road network and other infrastructural interventions.
“CePAR’s claim that the revenue forecast in the 2018/2019 National Budget does not make sensible use of up-to-date macroeconomic data, but does not provide an alternative revenue number or a forecasting technique that is superior to what was used to inform revenue forecast is an intellectual disservice. This raises doubt on their thought process and highlights the ‘pretense of knowledge’ syndrome that has plagued our intellectual landscape. Is there an alternative but powerful information set that is critical to a realistic forecast of the 2018/2019 fiscal year that CePAR has but the GoL is lacking? Have they modelled the numbers, incorporating an index of global business cycle, and found that the GoL model performs significantly worse than theirs? We should not pretend to know the bots and nots of a modelling process that we have the least elementary understanding of,” the group concluded.
However, CePAR has not responded to the latest statements from the two promising Liberian economists.