Monrovia, Liberia – The cancellation of a critical $17 million USAID-funded project has shaken Liberia’s development efforts, with Finance Minister Augustine Ngafuan acknowledging that the freeze will severely impact various sectors in the country. The project, which was part of the Local Empowerment for Accountability and Decentralization initiative, was pivotal in enhancing Liberia’s domestic revenue capacity, particularly its tax reform efforts. Ngafuan expressed his concerns over the ripple effects, which would be felt across health, education, and governance, given that USAID has been a significant donor to Liberia’s development.
For years, USAID has been Liberia’s second-largest aid partner after the World Bank, channeling billions into projects across various sectors. According to Minister Ngafuan, USAID’s support had been crucial for reforms in tax administration, including transitioning from a goods and services tax to a value-added tax by 2026. The freeze now jeopardizes these essential reforms, threatening the country’s ability to raise sufficient domestic revenue and secure the long-term financial stability needed for its growth.
The minister explained that the aid freeze affects more than just the LEAD project. It also disrupts funding for vital education programs, which have been helping to increase access to schooling and improve educational quality. Similarly, health initiatives, including medical supplies and hospital support, are now at risk, potentially leaving vulnerable communities without necessary services. USAID also played a critical role in Liberia’s election process, funding transparency measures and supporting democratic institutions, which will now suffer due to the sudden withdrawal of resources.
Minister Ngafuan noted that the freeze mainly damages Liberia’s tax system, which significantly improved with USAID’s assistance. The LEAD project was helping to modernize Liberia’s tax collection, and without continued support, efforts to curb tax evasion and broaden the tax base will stall. The project also provided training and digital tools central to building a robust, efficient tax system that generates revenue to fund public services.
Despite the dire situation, Minister Ngafuan remained optimistic about Liberia’s ability to mitigate the impact of the aid freeze. He stated that the government is already taking steps to address the financial challenges, including conducting an impact assessment on the short- and long-term effects of the aid cut. The Ministry of Finance submitted its report to President Joseph Boakai, outlining the potential ramifications and proposed measures to overcome them. The report is also being shared with the legislature for further discussion.
As part of the government’s response, Ngafuan highlighted the need for an enhanced focus on domestic resource mobilization. While USAID has been a key partner in strengthening Liberia’s tax system, the government is committed to finding alternative ways to raise revenue, including improving tax compliance and reducing financial inefficiencies within government agencies. Minister Ngafuan emphasized that Liberia must become more self-reliant, reduce dependence on foreign aid, and develop sustainable income sources.
In addition to increasing local revenue, Liberia is engaging in regional cooperation to counter the loss of foreign assistance. Minister Ngafuan mentioned that the government is exploring opportunities within regional organizations such as ECOWAS and the African Union (AU). The goal is to create new partnerships and collaborative efforts to mitigate the USAID freeze’s economic consequences and reduce the pressure on Liberia’s economy.
Minister Ngafuan also addressed the issue of fiscal discipline, stating that the government will implement measures to curb wasteful spending and improve financial management. By tightening fiscal controls, the government aims to prevent any misuse of available resources and ensure that every dollar spent contributes to the nation’s development goals. This fiscal responsibility, he explained, will be crucial in navigating the challenges posed by the aid freeze and keeping Liberia on track toward its long-term economic objectives.
Despite the significant setback, Minister Ngafuan expressed confidence that Liberia’s resilience and determination will allow the country to overcome this challenge. He stressed that with strategic planning, smart partnerships, and a renewed commitment to self-reliance, Liberia can weather this storm and continue its progress toward sustainable development. The finance minister concluded that while the road ahead may be difficult, the government is committed to taking decisive action to maintain economic stability and ensure that Liberia’s development journey does not falter.
