Liberia: U.S.$1.2b National Budget Marks Policy Pivot Toward Development Spending
Liberia has proposed a US$1.211 billion national budget for 2026 that significantly increases capital spending, relies on new tax measures, and allocates the entire US$200 million ArcelorMittal signature bonus for projects, even as debt service rises more than 50 percent year over year.
Finance and Development Planning Minister Augustine Kpehe Ngafuan presented the draft to House Speaker Richard Nagbe Koon late Friday on behalf of President Joseph Nyuma Boakai, framing the plan as a shift from fiscal consolidation to targeted investments in roads, electricity, and social services while maintaining spending discipline. The resource envelope reflects a 37.5 percent increase over the approved 2025 budget, driven by higher domestic collections and the one-time ArcelorMittal inflow. Domestic sources are expected to provide 94.1 percent of all revenues, with the rest coming from development partners.
Two structural choices define the draft. First, the Boakai administration proposes to move appropriations that had been allocated to supervising agencies into a new “General Government Expenditure” category. According to the Ministry of Finance and Development Planning, the reclassification aims to separate an agency’s core costs from cross-government items and improve oversight without changing supervisory roles. Second, the expenditure framework divides the plan into recurrent operations and a strengthened Public Sector Investment Plan, or PSIP, which becomes the main focus for infrastructure-led growth.
Recurrent spending is estimated at about US$929.6 million, roughly three-quarters of the budget, covering higher payroll costs, goods and services, and protected categories such as medical consumables. The ministry emphasizes that these categories are ring-fenced and jointly managed with the Civil Service Agency. The PSIP rises to approximately US$281.5 million, a 154.8 percent increase compared to 2025, as the administration aims to turn fiscal space into visible projects. Every dollar of the US$200 million signature bonus from ArcelorMittal is allocated to PSIP, as detailed in Annex 7 of the draft.
Sectorally, the plan remains committed to service delivery while initiating larger capital investments. The government’s key financial plan allocates approximately US$145.80 million to Public Administration and US$66.90 million to Municipal Government for essential functions, sanitation, and local development. Transparency and Accountability programs are allocated about US$34.42 million, while Security and Rule of Law receive roughly US$151.83 million. In the social sectors, funding for Health is around US$101.71 million and Education about US$123.98 million, with Energy and Environment near US$78.19 million. Agriculture is estimated at US$13.66 million, and Infrastructure and Basic Services at approximately US$133.21 million.
Under the detailed sector chapters, Education’s published ceiling rises to roughly US$132.98 million for 2026, including payroll, grants, and PSIP lines, reflecting commitments to tuition-free policies, school rehabilitation, and targeted inputs such as seating and school health programs. The University of Liberia, Tubman University, the Monrovia Consolidated School System, and vocational institutions are all scheduled for higher allotments compared to the 2025 estimates.
Infrastructure and Basic Services, the umbrella under which public works and transport sit, shows one of the strongest step-ups, to about US$133.21 million. The Ministry of Public Works alone would account for roughly US$114.29 million of that total, signaling an emphasis on roads, bridges, and heavy equipment after years of deferred maintenance and stalled corridors.
To support the buildout, the draft relies on tax policy changes aimed at expanding the base without disrupting activity. The Goods and Services Tax would increase from 12 percent to 13 percent as a gradual step toward a modern value-added tax system. A 2 percent presumptive corporate income tax would be applied to major concession agreements, an effort to ensure that large operators contribute a minimum share even during low-profit years. Budget drafters also highlight new mechanisms and enforcement measures for taxing cross-border digital commerce to address leaks in VAT-related activities.
The headline figures are based on a clear partnership with donors, which the ministry describes as a vote of confidence. Official development assistance for 2026 is projected at about US$312.84 million, with US$72 million flowing directly through the budget, US$40 million from the World Bank, US$20 million from the European Union, and US$12 million from the African Development Bank, while the remaining funds support aligned off-budget programs in line with the administration’s ARREST agenda.
Even with new room for investment, the plan recognizes a tightening debt situation. Liberia’s public and publicly guaranteed debt was about US$2.70 billion at the end of September 2025, roughly 56.6 percent of nominal GDP, divided between US$1.08 billion in domestic debt and US$1.62 billion in external obligations. The draft forecasts debt service at US$230 million in 2026, a 50.3 percent increase from an estimated US$153 million in 2025, with around US$159.04 million due on domestic liabilities (mainly to the Central Bank and commercial banks), US$68.20 million owed to external creditors, and approximately US$2.65 million in subscription payments. The ministry’s profile shows the largest domestic exposure is to the Central Bank of Liberia, followed by commercial banks and other institutions; externally, multilateral creditors hold the main share.
Within the transparency and oversight framework, the draft allocates higher funds for audit and anti-money-laundering agencies, arguing that stronger controls are necessary before increasing spending. Sector pages show increases for the General Auditing Commission, the Internal Audit Agency, and the Financial Intelligence Agency compared to 2025 estimates, while the Liberia Anti-Corruption Commission maintains elevated appropriations as it transitions under recent legal reforms.
State-owned enterprises continue to be both revenue sources and fiscal risks. The draft highlights projections for SOEs and notes slight improvements in operational performance at key utilities. For instance, the Liberia Electricity Corporation is expected to report a small operating surplus in 2026, following a projected deficit in 2025, primarily due to prepaid energy sales; the Liberia Electricity Regulatory Commission anticipates a break-even year driven by regulatory levies. Meanwhile, total SOE transfers to the budget are projected to be around US$55.3 million, slightly lower than the 2025 estimates.
The ministry pairs the revenue and spending plan with a set of execution rules aimed at safeguarding the reform gains it highlights. Entities are required to fully disclose internally generated revenues, incorporate them into the resource framework, and adhere to established ceilings. Rental and lease agreements will remain under centralized supervision by the General Services Agency and the Public Procurement and Concessions Commission to ensure cost management. Starting January 2025, ministries, agencies, and SOEs must negotiate and settle utility payments directly, preferably in advance, rather than relying on the finance ministry to clear arrears. Travel must follow updated fiscal guidelines, and sensitive categories such as compensation and medical supplies are protected from mid-year virements.
The draft budget highlights improved scores on the Open Budget Survey and the expansion of the Fiscal Transparency Advisory Group to include integrity organizations and civil society. Pre-budget consultations across 13 counties resulted in adjustments to specific budget items, including water and sanitation improvements, the installation of toll booths on major routes, a new judiciary complex, classroom renovations, efforts to address drug abuse, and repairs to health facilities. The document links these actions to a core principle: that transparency and citizen input are vital for building the donor confidence necessary to support a larger budget.
On the revenue side, the GST increase, presumptive levy on concessions, and stricter enforcement of the digital economy tax aim to counteract cyclical risks and guide Liberia toward a VAT system consistent with the region. On the capital side, directing the US$200 million ArcelorMittal bonus entirely through PSIP is designed to prevent dilution from ad-hoc spending and to achieve measurable results, such as kilometers paved, megawatts stabilized, and classrooms restored, in a single fiscal year. Strict adherence to execution rules should prevent leakage. However, the challenge remains with debt service: at US$230 million, it competes with all policy priorities, and an increase in domestic borrowing costs or currency pressures could necessitate mid-course adjustments.
The sector chapters suggest local-level changes if funding remains stable. In education, the ministry’s limit, over US$132 million, combines higher pay with grants and a modest PSIP program that includes renovations and targeted school-feeding expansions. This is in addition to a broader human capital effort in the off-budget ODA pipeline, where donors allocate approximately US$119.9 million for health, education, and social protection projects aligned with government objectives.
In infrastructure, Public Works’ triple-digit allocation clearly expresses its commitment, supported by transport-sector funds for aviation, transit, and vehicle regulation. The draft budget highlights equipment procurement and corridor connectivity as key themes, with legislators likely to scrutinize project readiness, partner funding, and safeguards before approval.
The security and justice envelope, approximately US$151.83 million under the broad sector category, aligns with a new judiciary complex and broader justice-sector enhancements discussed during consultations. This combination is politically significant after a period of resource strain in courts and corrections and may serve as a bargaining chip in committee hearings as lawmakers consider the balance between hard and soft infrastructure.
By Liberian Investigator.
