Performance on the economic program supported by an Extended Credit Facility (ECF) has been uneven
IMF Executive Board consideration of the 5th and 6th reviews of the program could take place in December
Liberia’s GDP growth is projected to recover to about 3 percent in 2017
An International Monetary Fund (IMF) mission led by Mr. Carlo Sdralevich, visited Monrovia from October 12-26, 2016 to conduct discussions on the combined fifth and sixth reviews of the authorities’ economic program supported by the IMF under an Extended Credit Facility (ECF) arrangement.
At the end of the visit, Mr. Sdralevich issued the following statement:
“Discussions during the mission focused on recent economic developments, policies for 2016-17 and beyond, performance under Liberia’s ECF-supported program, the one-off augmentation of ECF access of about $18 million and the authorities’ request for an extension of the ECF arrangement to November 2017. The additional Fund financing would support the government budget in the current difficult circumstances, while the extension would allow the Fund to continue its engagement with Liberia to support macroeconomic stability in the run-up to the October 2017 elections.
“Despite the successful elimination of the Ebola Virus Disease, the economy is still not recovering. GDP in 2016 is now projected to contract by 0.5 percent, mainly due to continued weakness of commodity exports, including lower-than-expected gold production, and the impact of United Nations Missions in Liberia (UNMIL) withdrawal. Inflation is also rising due mainly to the pace of depreciation of the Liberian dollar in the past months, and is expected to reach almost 9 percent on average this year.
“The macroeconomic outlook is set to remain challenging as commodity prices, especially iron ore and rubber, remain low. GDP growth is projected to recover to about 3 percent in 2017 buoyed by the expansion in gold production and a rebound in agriculture and services as electricity availability improves thanks to the finalization of important projects, notably the Mount Coffee hydropower plant.
“The government is facing fiscal pressures. Revenues for FY2015/16 were lower than budgeted mainly due to the weakness in the natural resource sector, against the background of a decline in donor support for the budget. Revenue weakness is set to continue in FY2017 amid exceptional expenditures in the run up to the 2017 general and presidential elections, including for the organization of the elections and the take-over of security from UNMIL. Despite significant additional donor assistance, including from the Fund, further revenue and spending measures will be needed to maintain fiscal sustainability while safeguarding essential expenditures, particularly for health, education, and security.
“The Central Bank of Liberia (CBL) has taken steps to strengthen the banking sector. Key measures include the closure of First International Bank and the adoption of measures to improve the CBL’s capacity to address problems in the financial sector. However, banks continue to be weighed down by a large volume of non-performing loans, even though credit growth is set to recover this year.
“Program performance has been uneven. The government met all indicative targets for end-December 2015 and end-June 2016 but missed the performance criteria for government revenues and net foreign exchange reserves of the central bank for both test dates. Implementation of structural reforms, particularly in public financial management, is progressing but the pace has been slow, due partly to capacity constraints.
“The mission and the authorities reached agreement ad referendum on a set of economic policies detailed in an updated Memorandum of Economic and Financial Policies. The next phase of the program focuses on the execution of the FY2017 National Budget, the preparation of the FY2018 National Budget, and further actions to improve public financial management, rebuild international reserves, and strengthen financial regulation and supervision.
“These staff level understandings are subject to approval by the IMF’s Management and Executive Board. Provided that performance remains strong, Board consideration of the combined fifth and sixth reviews of Liberia’s IMF-supported program under the ECF and the request for augmentation of access and extension of the program could take place in December. Upon approval, SDR 27.69 million (about US$38 million) would be made available to Liberia.
“During its visit, the mission met with President Ellen Johnson-Sirleaf, Minister of Finance and Development Planning Boima S. Kamara, Central Bank of Liberia Executive Governor Milton A. Weeks, other high-level government officials, representatives of the private sector, and the donor community. The team expresses its deep appreciation to the authorities and technical staff for their cooperation and the quality of the policy dialogue.”