The World Bank Says Liberia Is Leaving 5% of Its Economy on the Table

LIBERIA · ECONOMY

Liberia fiscal space could widen by between 3.9% and 5.3% of GDP a year by 2030, the World Bank says, if the country improves revenue collection, spending quality and risk management. Its tax gap alone is put at about 3% of GDP.

What Liberia fiscal space actually means here

Fiscal space is the room a government has to spend without borrowing unsustainably. It can be created by collecting more, spending better, or carrying fewer hidden liabilities.

The World Bank’s 2026 Public Finance Review, launched in Monrovia on Monday, puts the available room at between 3.9% and 5.3% of GDP a year by 2030. Country Manager Georgia Wallen framed it as annual fiscal gains from sustained reform. For an economy Liberia’s size that is a transformative range.

The review’s theme, From Stabilization to Fiscal Transformation, is the argument in four words. The emergency is over, and the harder work has not started.

The stabilisation part is real

Liberia’s fiscal deficit fell from 7.1% of GDP in 2023 to 2.1% in 2025. Public debt declined over the same period and inflation moderated, though the review’s coverage does not put figures on either.

Domestic revenue has climbed alongside it, from US$699m in 2024 to US$848m in 2025, and the Liberia Revenue Authority is within US$45.3m of collecting US$1bn this fiscal year.

The Bank credits the government for that macroeconomic and fiscal stability while making clear it regards the job as half done.

Three per cent of GDP is simply not being collected

The review estimates Liberia’s tax gap at about 3% of GDP. That is the difference between what the tax system should yield and what it does.

Crucially, the Bank does not recommend raising rates. It points to compliance and enforcement, digital tools and the rationalising of tax expenditures, meaning the exemptions written into concession agreements and investment incentives.

Those exemptions are the politically hard part. They were granted to attract the mining and agricultural investors that the economy now depends on.

Spending quality is the other half

Fiscal space is not only about revenue. Money that leaks through poor procurement, unbudgeted commitments or loss-making state enterprises never reaches a road or a clinic.

Managing fiscal risks is named explicitly in the review’s framework. In Liberia those risks sit largely in state-owned entities and in the electricity sector.

Why an investor should read a public finance review

Sovereign risk in a small frontier economy is mostly a question of whether the state can fund itself. A credible route to 5% of GDP in extra room is the difference between a country that services its debt and one that reschedules it.

It also matters for anyone negotiating with the government. A state that expects to close its tax gap will negotiate concession terms differently from one that does not.

The review’s numbers are projections, not commitments. They describe what reform could yield, not what will happen.

Tax exemptions are the hardest line to cut

Liberia’s concession agreements with mining, rubber and palm oil investors carry exemptions negotiated when the country was desperate for any investment at all. They are contracts, not policies, and cannot simply be repealed.

Renegotiation is possible when agreements come up for review, and several are approaching that point. It is slow, adversarial work.

The World Bank’s language about rationalising tax expenditures is a polite description of exactly this fight.

The maritime registry is the quiet exception

Liberia operates one of the world’s largest ship registries by tonnage, administered offshore, and it produces fee income rather than tax. It is stable, dollar-denominated and unaffected by domestic compliance.

It is also a reminder that not all of Liberia’s revenue problems are domestic. Some of its best income never touches the local economy at all.

Why timing favours the government

Reforms of this kind are easiest early in a term and hardest before an election. Liberia is closer to the first position than the second.

A stable macroeconomic backdrop also helps. Falling inflation and a narrowing deficit make it possible to argue about the composition of revenue rather than its adequacy.

Comparisons that put the tax gap in context

A tax gap near 3% of GDP is not unusual in West Africa, where informality is high and administrative capacity thin. Several of Liberia’s neighbours carry larger ones.

What differs is the starting level. Liberia collects a comparatively small share of output, so closing the gap moves the total further than it would in a higher-revenue economy.

That is the arithmetic behind the World Bank’s headline range, and it is also why the projection sounds more dramatic than the reforms behind it.

What to watch next

The first signal is whether the government adopts the review’s recommendations in the next budget, particularly on tax expenditures. The second is the audited domestic revenue figure for this fiscal year.

The third is whether the deficit stays near 2% of GDP once election-cycle spending begins.

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