- Basic data
- Public finances and the state budget
- Banking system
- Tax System
Real GDP will grow by 3.4% in 2021, driven by growth in mining (including gold and diamonds), agriculture (rubber, cocoa and timber) and manufacturing. In 2022 and 2023, real GDP growth is expected to accelerate to 4.2% and 4.8%, respectively, in line with growing foreign demand for mining and non-mining exports. Growth in the industrial sector will be driven primarily by rising prices of commercial gold and diamonds. The agriculture sector will expand modestly in 2022-23 due to investment in smallholder agriculture, growth in fisheries and increased rubber production. The services sector will gradually recover as coronavirus-related restrictions are eased, boosting the transport, financial services and telecommunications subsectors. The 2022 budget prioritizes agriculture, energy, healthcare, education and infrastructure in line with the goals set out in the Pro-Poor Prosperity and Development Agenda (2018-23), which include poverty reduction, job creation, skills development and bridging infrastructure gaps. After the pandemic-induced widening of the fiscal deficit to an estimated 3.4% of GDP in fiscal year 2020/21 (July-June), gradual progress in deficit reduction is expected in 2022-23 and the deficit will decrease to 2.1% of GDP in 2023. The level of public debt will gradually increase from 53.5% of GDP at the end of 2021 to 54.1% of GDP at the end of 2023. Check ebizdir for economical facts of Liberia.
Table from MOP + additionally balance of payments, indebtedness/GDP.
|GDP growth (%)||-2.3||-3||3.4||4.2||4.8|
|Export of goods (billion USD)||0.5||0.2||0.7||0.7||0.7|
|Import of goods (billion USD)||0.9||0.9||1.1||1.2||1.2|
|Trade Balance (Billion USD)||-0.4||-0.4||-0.5||-0.5||-0.5|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||07.VII||07.VII||07.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||-3.4|
|Public debt (% of GDP)||53.5|
|Current account balance (billion USD)||-0.7|
In November 2021, President Weah presented the legislature with a budget proposal for fiscal year 2022 of US$78million; the budget was approved by the Senate in February 2022. The 2022 budget prioritizes agriculture, energy, healthcare, education and infrastructure in line with the goals set out in the Pro-Poor Prosperity and Development Agenda (2018-23), which include poverty reduction, job creation, skill development and bridging infrastructure gaps. After the pandemic-induced widening of the fiscal deficit to an estimated 3.4% of GDP in fiscal year 2020/21 (July-June), gradual progress in deficit reduction is expected in 2022-23, with the deficit narrowing to 2.1% of GDP in 2023. Income growth will be driven by the acceleration of income from minerals and other raw materials. Expenditure expressed as a percentage of GDP will remain the same in 2022, as the slow uptake of vaccines and repeated waves of the pandemic keep healthcare spending elevated, including the cost of procuring and distributing covid-19 vaccines. Spending will fall slightly to 20% of GDP in 2023 from an estimated 20.3% of GDP in 2021 as pandemic-related spending needs to ease and the government can again focus on cutting spending (such as public sector wage costs) in line with the deal IMF on ECF. However, spending cuts will be limited to election-related spending. The public debt position is therefore expected to gradually increase over the entire forecast period from 53.5% of GDP at the end of 2021 to 54.1% of GDP at the end of 2023. Debt sustainability will remain an issue throughout the period.
The Central Bank of Liberia (CBL) is responsible for licensing, regulating and supervising the financial sector in Liberia. Banking services in Liberia are provided by nine commercial banks, branches including payment windows/annexes, a development finance company and deposit-taking microfinance institutions. Eight commercial banks are foreign banks. CBL said the banking system was stable and safe in 2021 amid challenging economic conditions exacerbated by the global COVID-19 pandemic. According to the CBL, the banking sector accounts for more than 80 percent of the total assets of the financial system and has seen growth in total assets, loans and advances, deposits and capital. Most banking institutions act as a repository of funds and can provide some short-term business financing and working capital to businesses that have a good credit record. Historically, commercial banks have had no domestic instruments in which to place liquidity. However, CBL recently started offering treasury bills in Liberian dollars. Foreign banks or branches may establish operations in Liberia and are subject to prudential or other regulations as required by the CBL. Exchange Controls: Liberia has a managed floating exchange rate system. Foreign investors are not subject to any restrictions on the conversion, transfer or repatriation of funds associated with the investment (eg transfers of investment capital, income, loans, lease payments and royalties). Liberian law allows the remittance of dividends and net profit after tax to investors’ home countries. The Investment Act allows unlimited transfer of capital, profits and dividends. The CBL Regulation on Foreign Currency Transfers stipulates that any business, an entity or individual transferring funds abroad may do so without limitation of the amount to be transferred. However, the transferred amount must be in the subject’s bank account at least three banking days before the transfer. Large-scale business and government transactions are mostly conducted in US dollars, while retail or day-to-day routine transactions are conducted in either Liberian or US dollars. The inflow of funds is the main source of foreign exchange in the Liberian economy.
Liberia has a resident tax base whereby residents are taxed on their worldwide income while non-residents are taxed only on their Liberian income. Generally, residents are subject to tax on all income regardless of source. A resident’s foreign source income is therefore taxable in Liberia subject to available foreign tax credit. Non-residents are subject to tax on income that has a source in Liberia. The corporate tax rate is 25% for general companies and 30% for mining/oil companies. Some mining/oil companies have preferential tax rates with the government. Withholding taxes also apply to certain types of resident and non-resident income. Withholding tax on interest, dividends and royalties paid to a non-resident is a final tax.