Liberia - Public Finance Review 2026 : From Stabilization to Fiscal Transformation

Overview & Synopsis

Liberia's fiscal challenge has shifted from restoring macroeconomic stability to building a fiscal system capable of financing long-term development. Important progress has been made in restoring macroeconomic stability, but economic growth is not yet generating sufficient fiscal space, productive public investment, or improved development outcomes. Delivering the Government's ARREST Agenda for Inclusive Development (AAID) will require structural reforms that strengthen domestic revenue mobilization (DRM), improve expenditure efficiency, increase fiscal returns from natural resources, and strengthen fiscal risk management. Liberia has substantial untapped fiscal potential that can be unlocked through better policies, stronger institutions, and more effective implementation. The report estimates a tax gap of about 3 percent of GDP, tax expenditures of about 5-6 percent of GDP, and significant unrealized fiscal returns from the mining sector. At the same time, improvements in public expenditure management, payroll governance, procurement, and fiscal risk oversight can generate sizeable efficiency gains while improving service delivery and strengthening resilience. The next phase of reform should focus on structural fiscal transformation rather than continued expenditure compression. Recent fiscal consolidation has restored macroeconomic stability but relied primarily on expenditure restraint rather than permanent improvements in fiscal capacity. As external financing becomes more constrained, debt service obligations increase, and climate-related fiscal pressures intensify, strengthening Liberia's fiscal architecture has become central to sustaining macroeconomic stability and achieving the country's long-term development objectives.