## 1lbrea2020001

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### EXECUTIVE SUMMARY — Context, Request, and Immediate Response
- Date of report: June 1, 2020.
- Context highlights:
  - Authorities requested a four-year arrangement under the Extended Credit Facility (ECF) in December 2019 to restore macroeconomic stability and address governance weaknesses.
  - Pre-pandemic weaknesses: economic slowdown, high inflation, volatile exchange rate movements.
- Request for Fund support:
  - Authorities request financial support amounting to 14 percent of quota (SDR36.176 million; US$49.1 million; 1.7 percent of GDP) under the Rapid Credit Facility (RCF).
  - Staff supports the request.
- Immediate policy measures taken by authorities:
  - Quarantine requirements and a nation-wide lockdown (announced on March 22).
  - Secured a US$3 million emergency response budget.
  - Gathering all available domestic resources into the government consolidated account.
  - Reallocating non-essential spending to emergency food aid.
  - Improving monitoring and control of spending.
  - Safeguarding scarce foreign exchange reserves.
  - Ensuring wages for health workers despite anticipated revenue shortfalls.
- Development partners increasing role in delivering emergency and cash assistance due to institutional weaknesses and limited administrative capacity.
- Urgent disbursement under the RCF portrayed as critical to address the balance of payments need and keep the budget fully funded.

### Impact of the Pandemic — Key Findings and Projections
- Growth and macro projections:
  - GDP growth for 2020 is projected at -2.5 percent, a 3 percentage-point downward revision from the pre-COVID baseline.
  - Pre-pandemic 2020 forecast had been 0.5 percent real GDP growth.
  - Inflation projected to close 2020 at 15 percent (pre-pandemic projection).
- Distributional and health-system risks:
  - The poorest are expected to be hit hardest due to little or no social safety net and food-security concerns for those relying on daily income.
  - Health care system is underdeveloped and likely to be overwhelmed if cases rise substantially.
- Sectoral impacts:
  - Large decline in hotel and transportation services (which make up 16 percent of GDP) due to social distancing and restricted cross-border travel.
  - Airlines cancelled all flights to Liberia until further notice.
  - Downward revision of iron ore prices likely to reduce mining growth.
- Balance of payments and fiscal impacts:
  - An urgent BOP gap of US$150 million (5.1 percent of GDP) in 2020.
  - A tax revenue shortfall projected at US$119 million for 2020 (this assumes the introduction of excise tax on fuel).
  - Without the excise tax, the revenue shortfall from a decline in GDP (US$98 million from pre-COVID-19 baseline) would be US$148 million assuming tax buoyancy of 1.5.
- Monetary and reserves developments:
  - LD banknote shortage at end-2019 led to higher FX intervention as depositors shifted from LD to USD deposits.
  - The CBL sold US$10 million of USD cash to commercial banks; additional USD liquidity assistance of US$7 million extended to the banking sector.
  - Net international reserves (NIR) declined by US$26.4 million for those two reasons.
- Other macro numbers:
  - Debt relief from the Debt Service Suspension Initiative (DSSI) amounts to $1.2M and is incorporated in the macro framework and the DSA.

### Banking Sector, Financial Stability, and Liquidity Measures
- Banking sector vulnerabilities:
  - Some banks facing U.S. dollar liquidity challenges.
  - Nonperforming loans remain high, reaching 30 percent for some banks.
  - Regulatory and supervisory framework dates from 2005; despite updates in 2012, remains inadequate.
  - Current bank resolution framework provides CBL limited powers to intervene in distressed banks.
- CBL and liquidity actions:
  - CBL sold US$10 million cash to commercial banks and extended US$7 million liquidity assistance.
  - CBL temporarily suspended fees and charges for transfers, suspended processing fees at point-of-sale outlets used by merchants, and increased allowable limits for transfers to ease electronic payments and mobile-money options.
  - Banks required to suspend payment of dividends and bonuses within their current financial year; CBL to assess applications after six months on a case-by-case basis.
  - CBL to reinstate appropriate prudential standards for loan classification and provisioning; forbearance measures cover only facilities affected by COVID-19 that were current prior to the pandemic.

### Fiscal Performance, Revenue Measures, and Cash Management
- Revenue and budget context:
  - Total revenue envelope for FY2020 was projected at US$502 million before COVID-19, a shortfall of US$24 million from the approved budget.
  - The FY2020 recast budget was signed into law on March 23 with spending of US$505 million, including US$3 million for additional emergency spending.
- Fuel pricing and excise measure (Text Table 3 excerpted values preserved):
  - Retail Price 3.21 2.95   3.10‐3.5 (U.S. dollar per gallon; unless otherwise indicated)
  - Fuel spot price 1.16 0.46   0.75
  - Fiscal revenue 0.70 0.70   1.00
  - Import duties 0.25 0.25   0.25
  - GST 0.20 0.20   0.20
  - Road Fund 0.25 0.25   0.25
  - Excise tax ......   0.30
  - Profit margin 1.35 1.79   1.35
  - Revenue Millions of USD 104.4
  - Percent of GDP 3.5 1.2
  - Revenue yield 72.5 2.3
- Legislative and revenue measures:
  - Introduction of a 30 cent per gallon excise tax on fuel effective immediately (prior action).
  - This tax is expected to yield 1.2 percent of GDP while being neutral with respect to retail prices.
  - By July 1, 2020, 100 percent of all revenues accruing to the Liberian Maritime Authority (LMA) and the Liberian Telecommunications Authority (LTA) will be collected by, and flow directly to, the Liberian Revenue Authority; operating and capital expenses for these institutions to be allocated in the FY2021 budget.
- Cash management and transparency measures:
  - Beginning July 1, 2020, all budgetary spending entities must utilize IFMIS for all their expenditure.
  - Ministry of Finance to begin publishing weekly spending reports including non-compliant institutions’ unreconciled spending amount on its website effective immediately (prior action).
  - Authorities committed to a GAC post-crisis audit of crisis spending within a year of RCF approval; results to be published within two weeks of finalization.
  - Procurement transparency: publish on the government’s website all procurement contracts paid from the budget in the remainder of FY2020 and all of FY2021 above thresholds:
    - above a value of US$200,000 for goods;
    - above US$400,000 for public works;
    - above $100,000 for services;
    - include names of companies awarded the contract, their beneficial owners, and validation of delivery.

### Financing for COVID-19 Response — Authorities’ Plan (selected exact figures)
- On-budget figures:
  - Approved on-budget revenue (FY2020 pre-COVID-19 recast): 526 (millions of U.S. dollars).
  - Domestic revenue (FY2020 pre-COVID-19 recast): 465 (millions of U.S. dollars).
  - COVID-19 response (on-budget) total indicated in table: 32.8 (millions of U.S. dollars); includes food aid 25.0 (millions of U.S. dollars).
- Off-budget projects — COVID-19 response total: 52.0 (millions of U.S. dollars), including:
  - World Bank - Health: 17.0 (millions of U.S. dollars).
  - COVID-19 fast track facility: 7.5 (millions of U.S. dollars).
  - World Bank - cash transfer program (existing program to be utilized): 8.0 (millions of U.S. dollars).
  - USAID - cash transfer program (existing program): 7.0 (millions of U.S. dollars).
  - United Nations - Global Humanitarian Response Plan (tentative): 10.0 (millions of U.S. dollars).
- IMF and prospective financing in authorities’ table:
  - Provisional RCF shown as 49 (millions of U.S. dollars); Prospective IMF listed as 38 (millions of U.S. dollars).
- RCF modalities:
  - RCF to be disbursed to the CBL, with 100 percent on-lent to the government.
  - A Memorandum of Understanding between the central bank and the government establishes responsibilities for servicing IMF obligations.
  - The MOU specifies that half of the disbursement (US$25 million) will be directed immediately to the WFP for emergency food aid implementation.

### Social Protection, Food Security, and Donor Coordination (Annex I highlights)
- Social protection baseline:
  - Liberia lacks a robust system; existing programs financed with foreign aid and mostly off-budget.
  - Access to social safety nets uneven; system underdeveloped and underfunded.
- Food insecurity response and program design:
  - WFP/CFSNS projection: about 1.4 million (about 280,000 households of 5 people each) people will be food insecure by the total lockdown in Montserrado and Margibi alone.
  - COVID-19 Household Food Support Program (COHFSP):
    - Target to cover 2.5 million people across all 15 counties for 30 days.
    - Operational control delegated fully to the WFP.
  - “Shelter-in-place” food security response:
    - Target: around 1.4 million inhabitants (280,000 households) in Montserrado and Margibi.
    - Nutrition-sensitive basket; estimated cost: around $15.3 million per month ($0.37 dollars per day per person).
  - Home-grown school feeding program (WFP):
    - Pre-crisis supports nearly 90,000 primary schoolchildren in Nimba and Maryland.
    - Shifted to take-home rations to sustain an estimated 45,000 vulnerable households; can scale to 335,000 vulnerable households with funding.
- Fiscal implications:
  - Humanitarian response could cost above $60 million depending on lockdown length and coverage.
  - Government allocated additional spending of $3 million in FY2020 and $5 million in FY2021 budgets.
  - Initial budget allocation of $35 million to guarantee food assistance for two months through the “shelter-in-place” program.

### Debt Sustainability, DSA Results, and Financing Strategy
- DSA risk ratings:
  - External DSA mechanical risk rating: Moderate.
  - Public DSA mechanical risk rating: High.
  - Overall assessment: DSA assesses Liberia at moderate risk of external debt distress and high risk of overall public debt distress.
- Key DSA indicators and selected exact values:
  - Real GDP growth (selected values): 0.4 (2017), 1.8 (2018), -0.6 (2019), -2.5 (2020), 0.7 (2021), 4.2 (2022), 4.7 (2023), 5.2 (2024), 5.4 (2025), 5.3 (2030).
  - Public sector debt (percent of GDP): 33.9 (2017), 36.6 (2018), 51.1 (2019), 59.5 (2020), 65.6 (2021), 66.7 (2022), 65.2 (2023), 63.5 (2024), 61.9 (2025), 51.7 (2030).
  - PV of PPG external debt-to-GDP (memorandum): 19.6 (2020), 23.9 (2021), 27.7 (2022), 29.4 (2023), 29.2 (2024), 28.9 (2025), 28.6 (2026), 23.9 (2030).
  - PPG debt service-to-exports ratio: 1.5 (2017), 3.3 (2018), 4.3 (2019), 5.6 (2020), 3.6 (2021), 5.2 (2022), 9.8 (2023), 9.2 (2024), 7.2 (2025), 9.3 (2030).
- Financing strategy and recommendations:
  - Use concessional financing (RCF, World Bank, AfDB) and donor grants to fill additional financing needs in FY2020 and FY2021.
  - Authorities will request debt service suspension under the DSSI; $1.2m of debt service will be suspended under DSSI (reflected in macro framework and DSA).
  - Staff guidance: refrain from non-concessional borrowing in near term and avoid risky collateralized agreements; ensure transparent contracting and consider absorption capacity limits.
  - DSA notes potential benefit of CCRT debt relief; macro-framework assumes CCRT relief through April 2022.

### Quantitative Tables and Selected Time-Series (selected exact values)
- Gross international reserves (millions of U.S. dollars): 2018: 297; 2019: 292; 2020: 308; 2021: 336; 2022: 333; 2023: 401; 2024: 439; 2025: 471; 2026: 458; 2027: 453.
- CBL net international reserves (millions of U.S. dollars), selected: 2018: 70; 2019: 2754; 2020: -166; 2021: 328; 2022: 496; 2023: 376; 2024: 90.
- Consumer prices (annual average), selected: 2018: 21.2; 2019: 24.4; 2020: 21.3; 2021: 17.6; 2022: 13.5; 2023: 13.5; 2024: 11.0; 2025: 8.5; 2026: 7.0; 2027: 6.0.
- Broad money (M2/GDP), selected: 2018: 19.6; 2019: 20.9; 2020: 16.7; 2021: 22.0; 2022: 16.3; 2023: 22.3; 2024: 21.8; 2025: 21.8; 2026: 22.2; 2027: 22.3.
- Central government operations (total revenue and grants percent of GDP), selected: 2018: 25.9; 2019: 28.4; 2020: 29.9; 2021: 27.6; 2022: 29.8.
- Overall fiscal balance, including grants (percent of GDP), selected: 2018: -4.8; 2019: -6.3; 2020: -4.7; 2021: -6.0; 2022: -3.7.
- Public external debt (percent of GDP), selected: 2018: 26.0; 2019: 32.1; 2020: 38.0; 2021: 39.2; 2022: 42.7; 2023: 45.4.
- Current account balance (percent of GDP), including grants, selected: 2018: -22.4; 2019: -22.5; 2020: -21.4; 2021: -22.8; 2022: -21.9.
- Trade balance (millions of U.S. dollars), selected: 2018: -726; 2019: -609; 2020: -414; 2021: -541; 2022: -385.
- Exports, f.o.b. (millions of U.S. dollars), selected: 2018: 417; 2019: 424; 2020: 630; 2021: 456; 2022: 685.
- Imports, c.i.f. (millions of U.S. dollars), selected: 2018: -1,144; 2019: -1,033; 2020: -1,044; 2021: -997; 2022: -1,070.

### Policy Priorities, Contingency Plans, and Staff Appraisal
- Immediate priorities (selected):
  - Urgent disbursement under the RCF to address the BOP gap and keep the budget funded.
  - Close cooperation with development partners to procure and distribute medical supplies, ensure household access to food during lockdown, fund and execute the budget, and pay health worker wages.
  - Reallocate non-essential spending to emergency food aid and other pandemic response items.
  - Improve monitoring and control of emergency spending for transparency.
  - Safeguard external buffers and manage scarce FX reserves carefully.
  - Strengthen banking sector oversight and expand CBL resolution powers.
- Medium-term priorities:
  - Finalize COVID-19 preparedness plan with donor financing to support health, logistics, and social assistance.
  - Seek and coordinate additional donor support and debt-relief measures (including DSSI participation).
- Staff appraisal highlights:
  - COVID-19 likely to inflict a heavy economic toll while the economy was poised for recovery.
  - Passage of the agreed FY2021 budget with high-quality revenue measures is key.
  - Urges completion of comprehensive off-budget COVID-19 response plan with financing arrangements among authorities and development partners.
  - Welcomes steps to improve fiscal transparency and procurement disclosure and to procure additional local currency banknotes to stem reserve loss.
  - Concludes Liberia assessed as having a sustainable debt burden and adequate capacity to repay the Fund; updated DSA finds moderate risk of external debt distress.

*Source: IMF staff, EXECUTIVE SUMMARY, June 1, 2020.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- COVID-19 arrived when a consensus for broad-based reform had emerged but macroeconomic conditions remained challenging.
- Authorities requested a four-year arrangement under the Extended Credit Facility (ECF) in December 2019 to restore macroeconomic stability and address governance weaknesses.
- Pre-pandemic weaknesses included an economic slowdown, high inflation, and volatile exchange rate movements that had been affecting a broad range of the population for over two years.
- Date of report: June 1, 2020.

### Request for Fund Support and Macroeconomic Policy Response
- Authorities request financial support amounting to 14 percent of quota (SDR36.176 million; US$49.1 million; 1.7 percent of GDP) under the Rapid Credit Facility (RCF) to meet urgent balance of payments needs arising from the pandemic.
- Staff supports the request.
- Immediate policy measures taken by authorities:
  - Quarantine requirements and a nation-wide lockdown (announced on March 22).
  - Secured a US$3 million emergency response budget.
  - Putting all available domestic resources into the government consolidated account.
  - Reallocating non-essential spending to emergency food aid.
  - Improving monitoring and control of spending.
  - Safeguarding scarce foreign exchange reserves.
  - Ensuring wages for health workers despite anticipated revenue shortfalls.
- Development partners are increasing their role in delivering emergency and cash assistance due to institutional weaknesses and limited administrative capacity.
- Urgent disbursement under the RCF is portrayed as critical to address the balance of payments need and keep the budget fully funded.

### Impact of the Pandemic — Key Findings and Projections
- GDP growth for 2020 is projected at -2.5 percent, a 3 percentage-point downward revision from the pre-COVID baseline.
- The poorest are expected to be hit hardest due to little or no social safety net and food-security concerns for those relying on daily income.
- The health care system is underdeveloped and likely to be overwhelmed if cases rise substantially.
- Sectoral impacts:
  - Large decline in hotel and transportation services (which make up 16 percent of GDP) due to social distancing and restricted cross-border travel.
  - Airlines cancelled all flights to Liberia until further notice.
  - Downward revision of iron ore prices is likely to reduce mining growth.
- Balance of payments and fiscal impacts:
  - An urgent BOP gap of US$150 million (5.1 percent of GDP) in 2020.
  - A tax revenue shortfall projected at US$119 million for 2020 (this assumes the introduction of excise tax on fuel).
  - Without the excise tax, the revenue shortfall from a decline in GDP (US$98 million from pre-COVID-19 baseline) would be US$148 million assuming tax buoyancy of 1.5.
- Monetary and reserves developments noted before and during the pandemic:
  - A Liberian dollar (LD) banknote shortage at end-2019 led to higher foreign exchange intervention as depositors shifted from LD to U.S. dollar (USD) deposits.
  - The CBL sold US$10 million of USD cash to commercial banks; additional USD liquidity assistance of US$7 million was extended to the banking sector.
  - Net international reserves (NIR) declined by US$26.4 million for those two reasons.
- Other macro numbers highlighted:
  - Pre-pandemic 2020 forecast had been 0.5 percent real GDP growth.
  - Inflation projected to close 2020 at 15 percent (pre-pandemic projection).
  - Debt relief from the Debt Service Suspension Initiative (DSSI) amounts to $1.2M and is incorporated in the macro framework and the DSA.

### Banking Sector and Debt Sustainability Risks
- The banking sector is largely stable but faces significant risks:
  - Some banks are already facing U.S. dollar liquidity challenges.
  - Nonperforming loans remain high, reaching 30 percent for some banks.
- The regulatory and supervisory framework dates from 2005 and, despite updates in 2012, remains inadequate, leaving the system vulnerable to undetected risks.
- The current bank resolution framework provides the Central Bank of Liberia (CBL) with limited powers to intervene in distressed banks.
- IMF staff DSA indicates that two consecutive years of negative growth will reduce Liberia’s sustainable external borrowing by close to US$150 million over the medium term, constraining medium-term growth potential.

### Medium-Term Recovery and Risks
- Staff projects a rebound:
  - Return to growth of non-mining GDP in 2021 is expected to lift overall growth to 3.5 percent, 2.4 percentage points higher than the pre-pandemic estimate, though GDP level will not fully recover to pre-pandemic trend.
  - These estimates assume the spread of COVID-19 in Liberia will be contained.
- IMF response is expected to catalyze higher support from other development partners.
- Authorities plan a COVID-19 preparedness plan with donors focused on:
  - Support to health care workers; purchase and rehabilitation of health care equipment; procurement of drugs and other medical supplies; surge staffing for contact tracing and rapid response; training; laboratory staffing and equipping; logistical and supply support.

### Financing for COVID-19 Response (selected figures from authorities’ plan)
- Approved on-budget revenue (FY2020 pre-COVID-19 recast): 526 (millions of U.S. dollars).
- Domestic revenue (FY2020 pre-COVID-19 recast): 465 (millions of U.S. dollars).
- COVID-19 response (on-budget) total indicated in table: 32.8 (millions of U.S. dollars); includes food aid 25.0 (millions of U.S. dollars).
- OFF-BUDGET PROJECTS — COVID-19 response total: 52.0 (millions of U.S. dollars), including:
  - World Bank - Health: 17.0 (millions of U.S. dollars).
  - COVID-19 fast track facility: 7.5 (millions of U.S. dollars).
  - World Bank - cash transfer program (existing program to be utilized): 8.0 (millions of U.S. dollars).
  - USAID - cash transfer program (existing program): 7.0 (millions of U.S. dollars).
  - United Nations - Global Humanitarian Response Plan (tentative): 10.0 (millions of U.S. dollars).
- Provisional RCF shown as 49 (millions of U.S. dollars) in financing table; Prospective IMF listed as 38 (millions of U.S. dollars).

### Policy Priorities and Recommendations
- Immediate priorities:
  - Urgent disbursement under the RCF to address the BOP gap and keep the budget funded.
  - Close cooperation with development partners to procure and distribute medical supplies, ensure household access to food during lockdown, fund and execute the budget, and pay health worker wages.
  - Reallocate non-essential spending to emergency food aid and other pandemic response items.
  - Improve monitoring and control of emergency spending for transparency.
  - Safeguard external buffers and manage scarce foreign exchange reserves carefully.
  - Strengthen banking sector oversight and expand CBL resolution powers to manage bank fragility risks.
- Medium-term priorities:
  - Finalize a COVID-19 preparedness plan with donor financing to support health, logistics, and social assistance components.
  - Seek and coordinate additional donor support and debt-relief measures (including DSSI participation).

*Source: IMF staff, EXECUTIVE SUMMARY, June 1, 2020.*

### 15.      Downside risks to the outlook are high. Medium-term growth would suffer from a more

### 15.      Downside risks to the outlook are high. Medium-term growth would suffer from a more

### Downside risks and fiscal vulnerabilities
- Downside risks to the outlook are high from:
  - a more prolonged duration of virus-related economic disruptions;
  - a greater impact on the domestic economy;
  - deterioration of terms-of-trade from higher imported food prices or oil price recovery.
- Fiscal risks:
  - tight fiscal situation and looming senatorial elections in late 2020 imply possible slippage from rising spending pressures;
  - political concerns could delay implementation of needed high-quality revenue measures;
  - possible need to provide additional ELA to the banking sector would threaten NIR levels.
- Contingency: bringing the IMF-supported ECF program back on track is included in contingency plans.

### Policy objective of IMF support and government contributions
- Main objective: provide funds to cushion the immediate impact of the crisis with help of development partners despite a major revenue shortfall.
- Disbursement under the RCF will be a lifeline.
- Liberian authorities’ contributions include:
  - gathering all available domestic resources to the government consolidated account;
  - reallocating non-essential spending to emergency food aid;
  - improving monitoring and control of overall expenditure as well as the emergency response spending;
  - safeguarding foreign exchange reserves.

### Gathering all domestic resources — revenue performance and measures
- Revenue performance and budget figures:
  - Total revenue envelope for FY2020 was projected at US$502 million before COVID-19, a shortfall of US$24 million from the approved budget.
  - The FY2020 recast budget was signed into law on March 23 with spending of US$505 million, including US$3 million for additional emergency spending.
- Fuel pricing and excise measure (Text Table 3 excerpted values preserved):
  - Retail Price 3.21 2.95   3.10‐3.5 (U.S. dollar per gallon; unless otherwise indicated)
  - Fuel spot price 1.16 0.46   0.75
  - Fiscal revenue 0.70 0.70   1.00
  - Import duties 0.25 0.25   0.25
  - GST 0.20 0.20   0.20
  - Road Fund 0.25 0.25   0.25
  - Excise tax ......   0.30
  - Profit margin 1.35 1.79   1.35
  - Revenue Millions of USD 104.4
  - Percent of GDP 3.5 1.2
  - Revenue yield 72.5 2.3
- Legislative actions:
  - Introduction of a 30 cent per gallon excise tax on fuel effective immediately (prior action).
  - This tax is expected to yield 1.2 percent of GDP while being neutral with respect to retail prices.
  - Resolution to gather additional domestic resources: by July 1, 2020, 100 percent of all revenues accruing to the Liberian Maritime Authority (LMA) and the Liberian Telecommunications Authority (LTA) from all sources will be collected by, and flow directly to, the Liberian Revenue Authority; operating and capital expenses for these institutions to be allocated in the FY2021 budget.

### Reallocating non-essential spending to emergency food aid
- Lockdowns and food security:
  - Stay-at-home restrictions announced April 8 in Montserrado, Margibi, Nimba, and Grand Kru; intention to expand to a total lockdown.
  - WFP/CFSNS projection: about 1.4 million (about 280,000 households of 5 people each) people will be food insecure by the total lockdown in Montserrado and Margibi alone.
- COVID-19 Household Food Support Program (COHFSP):
  - Conceived in early April; evolved into a nation-wide feeding program.
  - Steering Committee formed April 18 to oversee the program.
  - Program coverage decisions:
    - cover a total of 2.5 million people;
    - cover all 15 counties;
    - feed the targeted population for 30 days.
  - Operational control delegated fully to the WFP.
  - Authorities and Legislature passed second recast budget to create necessary fiscal space.
- Poverty and food insecurity benchmarks cited:
  - 2016 HIES: about 2.2 million Liberians or 50.9 percent of the population of 4.2 million classified as poor.
  - WFP estimates (2018 CFSNS): 3.5 million people are food insecure.

### Safeguarding external buffers and reserve losses
- Key actions to reduce vulnerability and stem reserve loss:
  - Hired a firm (with USAID support) to print local currency; delivery expected in the first week of July (failure to procure risks further losses to net international reserves and financial sector stability).
  - Progress in reaching ECF-supported program benchmarks to address heightened U.S. dollar liquidity needs in the banking sector.
- Rationale: plugging leaks that led to substantial loss of reserves under the ECF program is key to balance of payments viability and returning the ECF-supported program on track.

### Improving transparency and control of emergency spending
- Cash management and expenditure control:
  - Authorities kept spending within available resource envelope despite revenue shortfalls using strong allotment control.
  - Central weakness: some institutions not required to spend through IFMIS.
  - PFMA requires autonomous agencies and special funds receiving advance funding to report monthly spending to the Ministry of Finance; guidance is to report in IFMIS before next funding disbursed—non-compliance persists for some institutions.
- New requirements and publication commitments (prior action and effective dates preserved):
  - Beginning July 1, 2020, all budgetary spending entities must utilize the IFMIS for all their expenditure.
  - Ministry of Finance will begin publishing weekly spending reports including non-compliant institutions’ unreconciled spending amount on its website effective immediately (prior action) (Annex II).
  - Authorities committed to a GAC post-crisis audit of crisis spending within a year of the date of approval of the RCF disbursement; results to be published within two weeks of finalization.
  - Procurement transparency: publish on the government’s website all procurement contracts paid from the budget in the remainder of FY2020 and all of FY2021 above specified thresholds:
    - above a value of US$200,000 for goods;
    - above US$400,000 for public works;
    - above $100,000 for services;
    - include names of companies awarded the contract, their beneficial owners, and validation of delivery.

### Preserving a sound banking system and financial sector measures
- Regulatory and prudential measures:
  - Additional measures needed to maintain adequate capital and liquidity given CBL flexibility to assist illiquid but solvent borrowers.
  - Banks required to suspend payment of dividends to shareholders and bonuses to staff within their current financial year; CBL will assess applications after six months on a case-by-case basis.
  - CBL to reinstate appropriate prudential standards for loan classification and provisioning; forbearance measures cover only facilities affected by COVID-19 that were current prior to the pandemic.
  - Staff will work with authorities on loan reporting requirements, particularly for restructured loans, and consider additional prudential measures for capital and liquidity buffers.
  - CBL urged to monitor compliance with other prudential limits including reserve requirements and banks’ FX positions.
- Payments and liquidity measures:
  - CBL temporarily suspended fees and charges for transfers, suspended processing fees at point-of-sale outlets used by merchants, and increased allowable limits for transfers to ease use of electronic payments and mobile-money options.

### Modalities of IMF support and financing details
- Requested support:
  - Authorities are requesting support equivalent to 14 percent of quota (SDR 36.176 million) under the RCF exogenous shock window.
  - Access of 14 percent of quota (US$49 million) is within normal access limits under the PRGT.
  - Existing ECF arrangement approved on December 11, 2019, with an access level of 60 percent of quota.
- Eligibility and debt assessment:
  - Liberia meets RCF eligibility: urgent BOP and fiscal financing need; ECF augmentation not feasible timely; assessed as having sustainable debt and capacity to repay (updated DSA finds moderate risk of external debt distress, especially with CCRT support).
  - Liberia commits not to introduce actions that would compound existing BOP problem and will pursue appropriate economic policies.
- Relative metrics and financing gap:
  - Proposed RCF access equals 1.7 percent of GDP (noted as above sub-Saharan Africa average of 1.3 percent of GDP).
  - Liberia’s repayments to the Fund eligible for debt relief under the CCRT in the next two years is 1.5 percent of GDP (second highest CCRT debt relief among Fund membership as a percent of GDP).
  - Proposed access of 14 percent of quota is about 32.7 percent of the estimated financing gap (US$150 million) for CY2020.
  - Remaining needs expected to be filled by bilateral donors and development partners (US$63 million), prospective Fund support (US$38 million), and policy adjustment.
  - A second RCF request to help fill the FY21 financing gap is expected once FY21 fiscal plans are clarified.
- Disbursement and safeguards:
  - RCF will be disbursed to the CBL, with 100 percent on-lent to the government.
  - A Memorandum of Understanding between the central bank and the government establishes responsibilities for servicing IMF obligations.
  - The MOU specifies that half of the disbursement (US$25 million) will be directed immediately to the WFP for emergency food aid implementation.

### Staff appraisal — economic impact and policy priorities
- Economic toll and sectoral impact:
  - COVID-19 likely to inflict a heavy economic toll while the economy was poised for recovery.
  - Confirmed COVID-19 cases remain below 200 at time of text; prevention and containment measures and travel disruptions likely impose a large toll.
  - Hotels and related businesses particularly vulnerable due to lack of foreign arrivals from suspended major international flights.
- Staff welcomes authorities’ efforts but emphasizes further actions:
  - Passage of the agreed FY2021 budget with high-quality revenue measures is key to addressing the crisis and supporting emergency response.
  - Urges completion of comprehensive off-budget COVID-19 response plan with financing arrangements among authorities and development partners.
- Transparency and fiscal management priorities:
  - Strong steps to improve fiscal transparency to safeguard on-lent resources are welcomed.
  - Crucial to follow through on IFMIS use for institutions with poor track record of ex post expenditure reporting.
  - Transferring LMA and LTA revenue collection to LRA and funding them through the budget will help preserve revenue base.
  - Regular weekly fiscal reports on detailed revenue and expenditure and publication of the GAC post-crisis audit will advance public confidence and spending efficiency.
- Reserve and liquidity measures supported:
  - Procuring additional local currency banknotes and assessing options for addressing banking sector liquidity will help stem reserve loss and preserve foreign-currency resources for crisis priorities.
- Debt conclusion:
  - Liberia assessed as having a sustainable debt burden and adequate capacity to repay the Fund; updated DSA finds moderate risk of external debt distress.

*Source: IMF staff report excerpt (Liberia).*

### 36.      Staff supports the authorities’ request for a disbursement under the Rapid Credit

### 36.      Staff supports the authorities’ request for a disbursement under the Rapid Credit

### Disbursement recommendation
- Staff supports the authorities’ request for a disbursement under the Rapid Credit Facility in the amount of SDR 36.176 million (14 percent of quota) to be on-lent to the government as budget support.

### Foreign exchange and reserves developments
- Exchange rate:
  - "The exchange rate appreciated rapidly in November 2019... in response to recent tightening of macroeconomic policies and a shortage of Liberian dollar banknotes."
- Gross international reserves and CBL operations:
  - "Gross international reserves continue to decline, as much reduced volume of remittance inflows (surrenders) to the CBL remain low, while the CBL’s operational expenses and the CBL credit to the government remain high."
- Gross official reserves (millions of U.S. dollars), selected values from tables:
  - 2018: 297
  - 2019: 292
  - 2020: 308
  - 2021: 336
  - 2022: 333
  - 2023: 401
  - 2024: 439
  - 2025: 471
  - 2026: 458
  - 2027: 453
- Months of next year's imports (selected):
  - 2018: 2.3
  - 2019: 2.4
  - 2020: 2.3
  - 2021: 2.7
  - 2022: 2.4
  - 2023: 3.2
  - 2024: 3.4
  - 2025: 3.5
  - 2026: 3.2
  - 2027: 2.9
- CBL's net international reserves (millions of U.S. dollars), selected values:
  - 2018: 70
  - 2019: 2754
  - 2020: -166
  - 2021: 328
  - 2022: 496
  - 2023: 376
  - 2024: 90

### Monetary and inflation environment
- Inflation:
  - "In March 2020, inflation decreased slightly to 21 percent reflecting a modest exchange rate depreciation."
  - Consumer prices (annual average), selected values:
    - 2018: 21.2
    - 2019: 24.4
    - 2020: 21.3
    - 2021: 17.6
    - 2022: 13.5
    - 2023: 13.5
    - 2024: 11.0
    - 2025: 8.5
    - 2026: 7.0
    - 2027: 6.0
  - Consumer prices (end of period), selected values:
    - 2018: 28.5
    - 2019: 20.3
    - 2020: 15.0
    - 2021: 15.0
    - 2022: 12.0
    - 2023: 12.0
    - 2024: 10.0
    - 2025: 7.0
    - 2026: 7.0
    - 2027: 5.0
- Monetary aggregates and liquidity:
  - "In this highly inflationary environment, the growth of monetary aggregates sharply slowed because of the shortage of the stock of banknotes."
  - Broad money (M2/GDP), selected values:
    - 2018: 19.6
    - 2019: 20.9
    - 2020: 16.7
    - 2021: 22.0
    - 2022: 16.3
    - 2023: 22.3
    - 2024: 21.8
    - 2025: 21.8
    - 2026: 22.2
    - 2027: 22.3
  - Money multiplier (M2/M0), selected values:
    - 2018: 2.7
    - 2019: 3.0
    - 2020: 2.9
    - 2021: 3.0
    - 2022: 2.9
    - 2023: 3.1
    - 2024: 3.2
    - 2025: 3.4
    - 2026: 3.6
    - 2027: 3.9
  - Credit to private sector:
    - "Credit to the private sector has continued to decline in light of an economic slowdown."
    - Credit to private sector (percent of GDP), selected values:
      - 2018: 16.3
      - 2019: 15.3
      - 2020: 17.3
      - 2021: 15.9
      - 2022: 17.8
      - 2023: 16.5
      - 2024: 16.3
      - 2025: 16.5
      - 2026: 16.7
      - 2027: 17.0
    - Credit to private sector (annual percent change), selected values:
      - 2018: 4.1
      - 2019: -11.3
      - 2020: 1.3
      - 2021: -1.1
      - 2022: 3.7
      - 2023: 4.6
      - 2024: 5.4
      - 2025: 6.9
      - 2026: 7.3
      - 2027: 9.0

### Recent economic activity indicators
- Data constraints: "Data to capture recent economic activity are limited in Liberia, but there are a few leading indicators."
- Trade and imports:
  - "The tax base on international trade in the first half of 2019 came in lower than previous years."
  - "imports of staple goods declined sharply the second half of 2019"
  - "fuel imports seem to be stable with a slight increase in import volume relative to 2018."
- Production indicators:
  - "other indicators of the economy such as production of cement and beverages seem to indicate that consumption or construction may be holding up."

### Fiscal performance and public finances
- Revenue and grants:
  - "Revenue collection in the first half of FY2020 underperformed significantly, picked up towards the end of December and January primarily after collections of one-off measures and PIT, and is set to underperform in FY2020Q4 as the economy is affected by the COVID-19 pandemic..."
  - Central government operations (percent of GDP), selected values:
    - Total revenue and grants: 2018: 25.9; 2019: 28.4; 2020: 29.9; 2021: 27.6; 2022: 29.8; 2023: 27.7; 2024: 28.9; 2025: 28.2; 2026: 27.4; 2027: 26.5
    - Total revenue: 2018: 12.9; 2019: 14.4; 2020: 14.9; 2021: 13.1; 2022: 15.9; 2023: 13.7; 2024: 16.1; 2025: 16.7; 2026: 17.2; 2027: 17.5
    - Grants: 2018: 13.0; 2019: 14.0; 2020: 15.1; 2021: 14.5; 2022: 13.9; 2023: 14.0; 2024: 12.8; 2025: 11.5; 2026: 10.3; 2027: 9.0
- Expenditure composition:
  - "Expenditure in FY2020 has remained within available resources, but tight... and the size of the capital expenditure is inadequate to support economic growth..."
  - Central government expenditure (percent of GDP), selected values:
    - Total expenditure: 2018: 30.8; 2019: 34.7; 2020: 34.6; 2021: 33.6; 2022: 33.5; 2023: 33.2; 2024: 31.8; 2025: 30.5; 2026: 29.9; 2027: 29.2
    - Current expenditure: 2018: 21.3; 2019: 23.6; 2020: 22.7; 2021: 22.6; 2022: 22.0; 2023: 22.0; 2024: 19.8; 2025: 19.5; 2026: 19.5; 2027: 20.0
    - Capital expenditure: 2018: 9.5; 2019: 11.1; 2020: 11.9; 2021: 11.0; 2022: 11.5; 2023: 11.2; 2024: 10.9; 2025: 10.7; 2026: 10.4; 2027: 10.4
- Fiscal balances:
  - Overall fiscal balance, including grants (percent of GDP), selected values:
    - 2018: -4.8
    - 2019: -6.3
    - 2020: -4.7
    - 2021: -6.0
    - 2022: -3.7
    - 2023: -5.6
    - 2024: -2.9
    - 2025: -2.3
    - 2026: -2.4
    - 2027: -2.8
  - Overall fiscal balance, excluding grants (percent of GDP), selected values:
    - 2018: -17.8
    - 2019: -20.2
    - 2020: -19.7
    - 2021: -20.5
    - 2022: -17.6
    - 2023: -19.5
    - 2024: -15.7
    - 2025: -13.8
    - 2026: -12.7
    - 2027: -11.8
- Public debt:
  - Public external debt (percent of GDP), selected values:
    - 2018: 26.0
    - 2019: 32.1
    - 2020: 38.0
    - 2021: 39.2
    - 2022: 42.7
    - 2023: 45.4
    - 2024: 48.3
    - 2025: 48.6
    - 2026: 48.5
    - 2027: 48.1
  - Public domestic debt (percent of GDP), selected values:
    - 2018: 10.6
    - 2019: 19.0
    - 2020: 19.1
    - 2021: 20.3
    - 2022: 18.4
    - 2023: 20.2
    - 2024: 18.3
    - 2025: 16.5
    - 2026: 15.0
    - 2027: 13.8

### Balance of payments and external financing
- Current account balance (percent of GDP), selected values:
  - Including grants:
    - 2018: -22.4
    - 2019: -22.5
    - 2020: -21.4
    - 2021: -22.8
    - 2022: -21.9
    - 2023: -20.2
    - 2024: -19.4
    - 2025: -20.2
    - 2026: -20.1
    - 2027: -19.0
  - Excluding grants:
    - 2018: -37.1
    - 2019: -36.7
    - 2020: -35.9
    - 2021: -37.3
    - 2022: -35.5
    - 2023: -33.8
    - 2024: -31.6
    - 2025: -31.1
    - 2026: -29.7
    - 2027: -28.1
- Trade balance (millions of U.S. dollars), selected values:
  - 2018: -726
  - 2019: -609
  - 2020: -414
  - 2021: -541
  - 2022: -385
  - 2023: -486
  - 2024: -500
  - 2025: -520
  - 2026: -532
  - 2027: -545
- Exports and imports (millions of U.S. dollars), selected values:
  - Exports, f.o.b.: 2018: 417; 2019: 424; 2020: 630; 2021: 456; 2022: 685; 2023: 463; 2024: 482; 2025: 510; 2026: 546; 2027: 583
  - Imports, c.i.f.: 2018: -1,144; 2019: -1,033; 2020: -1,044; 2021: -997; 2022: -1,070; 2023: -949; 2024: -982; 2025: -1,030; 2026: -1,078; 2027: -1,128
- Current transfers (millions of U.S. dollars), selected values:
  - 2018: 606
  - 2019: 564
  - 2020: 626
  - 2021: 512
  - 2022: 605
  - 2023: 536
  - 2024: 523
  - 2025: 509
  - 2026: 469
  - 2027: 479

### External financing requirements and donor support
- Total Financing Requirement (millions of U.S. dollars), selected values:
  - 2017: -1,341
  - 2018: -1,146
  - 2019: -1,128
  - 2020: -1,135
  - 2021: -1,064
  - 2022: -1,033
  - 2023: -1,067
  - 2024: -1,038
  - 2025: -1,061
- Total Sources (millions of U.S. dollars), selected values:
  - 2017: 1,341
  - 2018: 1,146
  - 2019: 1,128
  - 2020: 985
  - 2021: 1,064
  - 2022: 1,033
  - 2023: 1,067
  - 2024: 1,038
  - 2025: 1,061
- Expected disbursements (official), selected values:
  - 2017: 740
  - 2018: 537
  - 2019: 574
  - 2020: 571
  - 2021: 512
  - 2022: 479
  - 2023: 471
  - 2024: 442
  - 2025: 449
- Grants (millions of U.S. dollars), selected values:
  - 2017: 664
  - 2018: 479
  - 2019: 439
  - 2020: 423
  - 2021: 402
  - 2022: 382
  - 2023: 363
  - 2024: 340
  - 2025: 346
- Financing gap and prospective assistance:
  - Financing gap entries in tables show "000-15000000" and program notes list "Proposed RCF 0008700000", "Prospective IMF 00038 0000", "Other sources 0006300000" indicating planned contingency and donor sources (as presented in the source tables).

### Indicators of capacity to repay the IMF and Fund obligations
- Staff presents Fund obligations and outstanding Fund credit projections (SDR millions and US$ equivalents).
- Fund obligations based on existing credit (repayment of principal, SDR millions), selected values:
  - 2019: 10.5
  - 2020: 5.6
  - 2021: 0.0
  - 2022: 18.4
  - 2023: 27.3
  - 2024: 24.4
  - 2025: 18.3
  - 2026: 20.4
  - 2027: 21.7
  - 2028: 25.6
  - 2029: 31.0
- Total obligations based on existing and prospective credit (in millions of US$), selected values:
  - 2019: 14.5
  - 2020: 23.9
  - 2021: 0.0
  - 2022: 25.5
  - 2023: 38.0
  - 2024: 33.9
  - 2025: 28.1
  - 2026: 33.7
  - 2027: 35.5
  - 2028: 40.8
  - 2029: 50.3
- Outstanding Fund credit (in millions of SDRs and US$), selected values:
  - SDRs: 2019: 162.6; 2020: 195.7; 2021: 206.8; 2022: 214.5; 2023: 221.2; 2024: 213.8; 2025: 193.6; 2026: 169.4; 2027: 143.9; 2028: 114.6; 2029: 78.4
  - US$: 2019: 226.2; 2020: 272.2; 2021: 287.6; 2022: 298.3; 2023: 307.6; 2024: 297.4; 2025: 269.3; 2026: 235.6; 2027: 200.1; 2028: 159.3; 2029: 109.1
- Memorandum items:
  - Exports of goods and services (in millions of US$), selected values:
    - 2019: 662
    - 2020: 653
    - 2021: 703
    - 2022: 725
    - 2023: 756
    - 2024: 795
    - 2025: 840
    - 2026: 954
    - 2027: 1,017
    - 2028: 1,212
    - 2029: 1,311
  - Debt service (in millions of US$), selected values:
    - 2019: 28.7
    - 2020: 40.6
    - 2021: 57.2
    - 2022: 64.3
    - 2023: 74.1
    - 2024: 73.2
    - 2025: 60.8
    - 2026: 70.4
    - 2027: 86.7
    - 2028: 102.6
    - 2029: 122.0

*Source: Liberia — IMF staff report (excerpts as provided).*

### Annex I. Social Spending in Liberia (Update from the

### Annex I. Social Spending in Liberia (Update from the 2019 Article IV)

### Overview of social protection context
- Liberia lacks a robust system to protect its most vulnerable population from the health and economic consequences of COVID-19.
- Existing social safety net programs are financed with foreign aid in the form of off-budget projects, mostly from the World Bank, USAID, World Food Program (WFP), and UNICEF.
- These programs are limited, and the social protection system remains underdeveloped and underfunded.
- Access to social safety nets remains uneven across the population, partly due to lack of coordination among donors and the government.

### Donor coordination and scale-up needs
- Donor community and authorities are working to scale up existing projects amid the pandemic, but greater coordination is needed.
- Timely and effective response requires:
  - Consistent coordination with donors and relevant line Ministries.
  - Strengthened partnerships at national, subnational and community levels.
  - Increased staffing capacity and extension of geographical presence across the country.
- Rapid scale up of food distribution and cash transfer programs depends on:
  - Food availability, procurement capacity, market functionality, penetration of mobile money, liquidity constraints, and security considerations.

### Food insecurity response (priority measures)
- Addressing food insecurity during the lockdown is the most urgent task and requires a combination of in-kind food distribution and cash-transfers.
- Key scaled-up interventions described:
  - “Shelter-in-place” food security response:
    - Target: around 1.4 million inhabitants (280,000 households) estimated to fall into food insecurity in Montserrado and Margibi counties.
    - Nutrition-sensitive, balanced food basket comprising rice, beans, vegetable oil and salt.
    - Estimated cost: around $15.3 million per month ($0.37 dollars per day per person), depending on food basket and area coverage.
  - Home-grown school feeding program (WFP):
    - Pre-crisis: supports nearly 90,000 primary schoolchildren in Nimba and Maryland.
    - With school closures, modality shifted from direct school meals to take-home rations of in-kind food to sustain an estimated 45,000 vulnerable households.
    - With funding, can be rapidly scaled up to reach a total of 335,000 vulnerable households in the country.

### Fiscal implications and financing needs
- Humanitarian response would be costly and fiscal stance is expected to deteriorate further without greater grant support.
- Donors are reallocating resources from existing projects to urgent interventions, but additional resources may be needed as Liberia’s borrowing space is very limited.
- Government of Liberia (GOL) fiscal actions and allocations:
  - Allocated additional spending of $3 million in FY2020 and $5 million in FY2021 budgets.
  - Made reductions in non-essential primary expenditure.
  - Initial budget allocation of $35 million to guarantee food assistance for two months through the “shelter-in-place” program.
  - Depending on lockdown length and geographical coverage, cost could increase above $60 million, requiring additional resources to finance it.

### Major donor-operated social safety net programs (summary observations)
- Multiple donor-managed programs target varying groups including: children under five, children aged 6-23 months, schoolchildren, adolescent girls at risk, food-insecure households, smallholder farmers, youth ages 15-35 years, extremely poor and food insecure households in seven food-insecure counties, patients living with HIV/AIDS, and smallholder rural women farmers.
- Program modalities include: in-kind food distribution, school feeding (including girls’ take-home rations and home-grown school feeding pilots), conditional and unconditional cash transfers, social cash transfer randomized control trials, household food fortification, nutrition interventions conditional on clinic attendance, community grain reserves, social registries, cash transfers with accompanying nutrition education, pre-employment support, small business support, and productive public works.

*Source: Annex I. Social Spending in Liberia (Update from the 2019 Article IV).*

### 6.      We are also in the process of implementing a number of policy measures that are

### 6.      We are also in the process of implementing a number of policy measures that are

### Policy measures to mitigate projected revenue shortfall
- The government views the actions as appropriate to the difficult economic situation and expects implementation will "help significantly to safeguard and augment scarce resources" and "provide the Fund with assurance that its resources will be used appropriately."
- Measures include:
  - Ensuring proper monitoring and control of all expenditure by mandating that all advance-reporting agencies revert to using the government’s Integrated Financial Management Information System (IFMIS) for all purchases beginning July 1, 2020.
  - Publishing weekly spending reports and non-compliant institutions’ unreconciled spending amounts on the MFDP website effective immediately.
  - Safeguarding additional revenues by enacting legal arrangements so that, beginning with the FY2021 fiscal year, 100 percent of all revenues accruing to:
    - the Liberian Maritime Authority (LMA), and
    - the Liberian Telecommunications Authority (LTA)
    from all sources are collected by, and flow directly to, the Liberian Revenue Authority, with the sole funding source of all operating and capital expenses of the LMA and LTA in FY2021 restricted henceforth to formal lump sum allocations in the FY2021 national budget.
  - Preserving the revenue base by enacting in May 2020 a 30 cent per gallon excise tax on fuel products; given the recent decline in the world oil prices, the measure is expected to yield 1.2 percent of GDP of additional revenue "without necessitating an increase in the retail price of fuel."
- The government will submit a budget for FY21 consistent with these measures and other understandings reached with IMF staff.

### Transparency, accountability, and procurement disclosure
- Post-crisis audit:
  - The General Audit Commission will conduct a post-crisis audit of all crisis response spending within a year of the approval of the RCF disbursement.
  - The audit results will be published online within two weeks of finalization.
- Procurement transparency:
  - The government will publish on its website all procurement contracts paid from the budget in the remainder of FY2020 and all of FY2021 above specified thresholds:
    - above US$200,000 for goods,
    - above US$400,000 for works,
    - above US$100,000 for services.
  - Published information will include the names of the companies awarded the contract, their beneficial owners, and validation of delivery of the goods and services specified in the contracts.

### Commitment to ECF-supported program and conditionality
- The government remains committed to the goals and policies contained in the ECF-supported program and looks forward to completing the first review once the COVID-19 situation eases.
- Short-term focus: "short-term macroeconomic and fiscal stability and crisis response."
- The government has identified actions, in consultation with IMF staff, necessary to bring the ECF-supported program back on track and intends to continue seeking donor assistance to support the Pro-Poor Agenda for Prosperity and Development.
- The government covenants:
  - Not to introduce measures or policies that worsen the balance-of-payments position.
  - Not to impose new or intensify existing restrictions on the making of payments and transfers for current international transactions, trade restrictions for balance of payments purposes, or multiple currency practices, or enter into bilateral payments agreements inconsistent with Article VIII of the IMF’s Articles of Agreement.
- If adopted measures prove insufficient, the government will take additional measures necessary to achieve objectives and will consult with the IMF prior to any revision.
- The government will provide Fund staff with all information required to monitor the economic situation on a regular and timely basis, including continuing to provide all the data stipulated in the Technical Memorandum for the ECF-supported program (IMF Country Report No. 19/381), and will share, as far as practical, any other information necessary to evaluate and understand the economic situation.

### Authorization to publish and signatures
- The government authorizes the IMF to publish this document, the related staff report, data tables, and debt sustainability analysis report on its website and other media once the RCF disbursement is approved.
- Signed by:
  - Hon. Samuel D. Tweah, Jr., Minister, Ministry of Finance and Development Planning
  - Hon. J. Aloysius Tarlue, Jr., Executive Governor, Central Bank of Liberia

### Prior actions and macroeconomic note excerpts
- Table 1 excerpted prior actions for RCF, 2020 (selected items from the table text):
  - Passage of a credible FY2020 recast budget consistent with understandings reached with IMF staff. The recast budget was passed by the Legislature on May 22, 2020.
  - Begin publishing weekly spending reports, including unreconciled spending amount, on the MFDP’s website. MFDP started publishing weekly reports on May 31.
- Debt and macroeconomic risk characterization (text excerpts):
  - Risk of external debt distress: Moderate
  - Overall risk of debt distress: High
  - Granularity in the risk rating: Limited space to accommodate shocks
  - Application of judgment: No
- Macroeconomic projections excerpt:
  - "With the impact of COVID-19, growth for 2020 is now projected at -2.5 percent for 2020, 3 percentage points below the pre-COVID baseline, largely due to lockdowns at home and abroad."

*Source: Letter and accompanying sections from the Government of Liberia to the IMF (excerpts as provided).*

### 5.3 percent of GDP, partly due to a sharp decline in service sector exports and

### 1lbrea2020001 - 5.3 percent of GDP, partly due to a sharp decline in service sector exports and

### Macroeconomic impact and financing needs
- Growth outlook and balance of payments:
  - Real GDP growth: projections include -2.5 percent for 2020, 0.7 percent for 2021, 4.2 percent for 2022, 4.7 percent for 2023, 5.2 percent for 2024, 5.4 percent for 2025, and 5.3 percent for 2030.
  - Nominal dollar GDP growth: -5.3 percent in 2020, -2.2 percent in 2021, 3.8 percent in 2022, 6.2 percent in 2023, 5.9 percent in 2024, 6.7 percent in 2025, and 8.6 percent in 2030.
  - The terms-of-trade shock is positive since fuel import prices declined more than the prices of key exports (iron ore, rubber, and gold).
  - The BOP need also stems from a sharp decline in revenue and an increase in COVID-19 response spending on health and social programs.
- Fiscal impact:
  - The fiscal deficit is projected to increase to 5.1 percent of GDP in 2020.
  - Government revenues (excluding grants) in percent of GDP: 14.3 (2017), 12.9 (2018), 14.4 (2019), 13.1 (2020), 13.7 (2021), 16.1 (2022), 16.7 (2023), 17.2 (2024), 17.5 (2025), 17.0 (2030).
  - Primary deficit and related projections: primary deficit that stabilizes the debt-to-GDP ratio: -2.3 (2017), 1.5 (2018), -9.4 (2019), -3.4 (2020), -1.5 (2021), 0.8 (2022), 2.8 (2023), 3.2 (2024), 4.9 (2025), 5.1 (2030).

### Financing strategy
- Additional financing sources:
  - Additional financing needs are filled by the RCF, other multilateral institutions (i.e., World Bank and African Development Bank), and donor grants in FY2020 and FY2021.
  - Authorities will request the debt service suspension under the Debt Service Suspension Initiative (DSSI).
  - $1.2m of debt service will be suspended under DSSI; this suspension is reflected in the macro framework and the DSA, reducing debt service pressure in 2020.
- Staff guidance on borrowing:
  - Authorities should refrain from non-concessional borrowing in the near term and risky collateralized agreements at all times, while ensuring that new debt is contracted transparently.
  - Due consideration should be given to the country’s absorption capacity, which remains low.

### Debt sustainability assessment and risk ratings
- Overall assessment:
  - The Debt Sustainability Analysis (DSA) assesses Liberia at moderate risk of external debt distress and high risk of overall public debt distress.
  - Public debt is assessed to be sustainable because (i) both the PV of public debt-to-GDP and PV of debt-to-revenue ratios are projected to be on a downward trend and (ii) the high PV of public debt ratios largely reflect debt to the central bank, for which the interest rate is relatively low but is not discounted in the PV calculations.
  - Staff projects a high likelihood that Liberia will be able to meet all of its current and future financial obligations.
- Mechanical risk ratings:
  - Mechanical risk rating under the external DSA: Moderate.
  - Mechanical risk rating under the public DSA: High.
- Vulnerabilities:
  - Very limited space to accommodate shocks and an extended breach of the PV of public debt-to-GDP ratio.
  - Tension between near-term borrowing to minimize the COVID-19 impact and the need for medium-term borrowing space for post-COVID-19 recovery.
  - Potential benefit of debt relief from the Catastrophe Containment Relief Trust (CCRT); the DSA and macro-framework assume CCRT debt service relief through April 2022, with the last 18 months subject to availability of CCRT resources.

### Realism tools and flagged indicators
- Realism tools flagged:
  - Large unexpected change in public debt in the last 5 years.
  - 3-year primary balance adjustment greater than 2.5 percentage points of GDP.
- Residuals and exceptional financing:
  - Residuals reported in external DSA Table 1: -10.8 (2017), -10.1 (2018), -8.6 (2019), -8.4 (2020), -5.8 (2021), -6.8 (2022), -9.0 (2023), -9.7 (2024), -8.7 (2025), -16.7 (2030).
  - Exceptional financing included: -0.7 (2020), -1.1 (2021), -0.4 (2022) in the residuals line.

### Stress tests, scenarios, and indicators (selected)
- Categorization and tests:
  - The most extreme stress test is defined as the test that yields the highest ratio in or before 2030; the one-off breach treatment is described in figure notes.
  - Commodity price shock magnitudes based on the IMF research department commodity prices outlook.
- Selected sustainability indicators and projected values (external DSA, baseline):
  - External debt (nominal) as percent of GDP: 22.7 (2017), 26.0 (2018), 32.1 (2019), 39.2 (2020), 45.4 (2021), 48.3 (2022), 48.6 (2023), 48.5 (2024), 48.1 (2025), 40.8 (2030), 31.6 (2040).
  - PV of PPG external debt-to-GDP ratio (memorandum): 19.6 (2020), 23.9 (2021), 27.7 (2022), 29.4 (2023), 29.2 (2024), 28.9 (2025), 28.6 (2026), 23.9 (2030), 21.4 (2040).
  - PV of PPG external debt-to-exports ratio: 93.8 (2020), 110.2 (2021), 115.8 (2022), 123.8 (2023), 125.2 (2024), 124.7 (2025), 124.7 (2026), 93.6 (2030), 98.2 (2040).
  - PPG debt service-to-exports ratio: 1.5 (2017), 3.3 (2018), 4.3 (2019), 5.6 (2020), 3.6 (2021), 5.2 (2022), 9.8 (2023), 9.2 (2024), 7.2 (2025), 9.3 (2030).
  - PPG debt service-to-revenue ratio: 2.1 (2017), 5.1 (2018), 6.2 (2019), 9.3 (2020), 6.3 (2021), 7.6 (2022), 13.7 (2023), 12.4 (2024), 9.5 (2025), 13.9 (2030).
  - Gross external financing need (Million of U.S. dollars): 509.9 (2017), 456.6 (2018), 462.3 (2019), 461.6 (2020), 372.2 (2021), 375.0 (2022), 428.8 (2023), 466.4 (2024), 441.8 (2025), 1043.5 (2030), 1455.1 (2040).

### Key macroeconomic assumptions (selected exact values)
- Growth and price assumptions:
  - Real GDP growth: 0.4 (2017), 1.8 (2018), -0.6 (2019), -2.5 (2020), 0.7 (2021), 4.2 (2022), 4.7 (2023), 5.2 (2024), 5.4 (2025), 5.3 (2030), 5.3 (2040), 3.3 (average), 4.0 (projection average).
  - GDP deflator in US dollar terms (change in percent): 1.3 (2017), -0.9 (2018), -2.4 (2019), -2.8 (2020), -2.9 (2021), -0.4 (2022), 1.4 (2023), 0.7 (2024), 1.2 (2025), 3.1 (2030), 2.1 (2040), 2.7 (average), 1.0 (projection average).
  - Effective interest rate (percent): 0.9 (2017), 1.3 (2018), 1.0 (2019), 1.6 (2020), 1.2 (2021), 1.2 (2022), 1.2 (2023), 1.1 (2024), 0.6 (2025), 0.8 (2030), 1.3 (2040), 1.1 (average), 0.9 (projection average).
- Trade and capital flow assumptions:
  - Growth of exports of G&S (US dollar terms, in percent): 0.1 (2017), -1.2 (2018), 0.0 (2019), -1.4 (2020), 7.6 (2021), 3.2 (2022), 4.3 (2023), 5.2 (2024), 5.7 (2025), 6.4 (2030), 4.8 (2040), 5.8 (average), 7.1 (projection average).
  - Growth of imports of G&S (US dollar terms, in percent): -18.3 (2017), -12.0 (2018), -8.1 (2019), -6.5 (2020), 0.6 (2021), 2.0 (2022), 4.3 (2023), 3.1 (2024), 4.5 (2025), 4.9 (2030), 5.0 (2040), 1.3 (average), 4.8 (projection average).
  - Net FDI (negative = inflow, percent of GDP): -7.4 (2017), -8.7 (2018), -7.9 (2019), -7.6 (2020), -8.1 (2021), -8.5 (2022), -9.3 (2023), -8.8 (2024), -9.0 (2025).

### Public sector debt outlook (selected)
- Public sector debt (percent of GDP): 33.9 (2017), 36.6 (2018), 51.1 (2019), 59.5 (2020), 65.6 (2021), 66.7 (2022), 65.2 (2023), 63.5 (2024), 61.9 (2025), 51.7 (2030), 42.9 (2040), 26.8 (historical average), 60.0 (projection average).
- PV of public debt-to-GDP ratio (selected): 38.6 (2020), 44.2 (2021), 47.9 (2022), 47.7 (2023), 45.8 (2024), 43.9 (2025), 42.4 (2030), 34.8 (2040), 32.8 (projection end).
- Debt service-to-revenue and grants ratio: 2.4 (2017), 3.6 (2018), 6.0 (2019), 8.8 (2020), 9.8 (2021), 11.1 (2022), 12.8 (2023), 11.7 (2024), 10.0 (2025), 14.4 (2030), 14.3 (2040).
- Gross financing need (percent of GDP): 5.2 (2017), 5.2 (2018), 6.9 (2019), 7.4 (2020), 7.3 (2021), 5.0 (2022), 4.9 (2023), 4.7 (2024), 5.8 (2025), 7.4 (2030), 5.3 (2040).

### Selected policy implications and recommendations
- Near-term:
  - Utilize concessional financing (RCF, World Bank, AfDB) and donor grants to fill additional financing needs in FY2020 and FY2021.
  - Implement DSSI participation and reflect $1.2m DSSI suspension in macro framework to reduce 2020 debt service pressure.
- Medium-term:
  - Avoid non-concessional and risky collateralized borrowing in the near term.
  - Ensure transparent contracting of any new debt and consider country absorption capacity constraints.
  - Pursue debt relief opportunities (e.g., CCRT) to preserve medium-term borrowing space for post-COVID-19 recovery.

*Source: IMF staff estimates and projections, Liberia Debt Sustainability Analysis and related DSA tables and figures (June 1, 2020; June 5, 2020).*

### Introduction

### Introduction

### Immediate request and context
- Authorities requested emergency financial assistance under the Rapid Credit Facility (RCF) in the amount of SDR 36.2 million (14 percent of quota) to meet urgent balance of payments needs.
- The RCF is viewed by the authorities as crucial in catalysing donor support from other development partners.
- Liberia has pursued a broad-based reform agenda under the Pro-poor Agenda for Prosperity and Development (PAPD 2018-23).
- To anchor reforms, the authorities requested an Extended Credit Facility (ECF) arrangement, approved in December 2019.
- In parallel, the authorities are exploring debt service relief under the G-20 Debt Service Suspension Initiative (DSSI).

### Transparency, accountability, and fiscal management actions
- All crisis-related expenditures will be audited by the General Auditing Commission and published within two weeks of the finalization of the audit.
- The authorities agreed to publish on the government’s website procurement contracts within established timeframes and thresholds, including details of beneficiaries.
- As part of prior actions for the RCF, the authorities have begun publishing weekly expenditure reports on the government’s website, including COVID-19 related expenditures.
- Starting in the new fiscal year, all spending entities will be required to utilize the Integrated Financial Management Information System (IFMIS) for stronger expenditure management.

### Program performance under the Extended Credit Facility (ECF)
- Authorities remain committed to implementing reforms under the ECF program.
- Most end-December 2019 fiscal targets and structural benchmarks were met; the monetary program faced some challenges.
- Corrective actions are being taken to address missed performance targets, including hiring a firm to print local currency and ensuring liquidity needs are addressed promptly.
- Authorities plan to resolve all outstanding issues in time for the first review.

### Impact of the COVID-19 Pandemic
- Since the first case was reported in March 2020, the number of confirmed COVID-19 cases has continued to increase to more than 300, including 28 fatalities.
- The number of cases is expected to rise as testing capacity and tracing improve, exerting pressure on the fragile health care system.
- Hotel and transportation services make up 16 percent of GDP and are particularly threatened by containment measures.
- FY 2019/2020 growth rate revised downwards to -2.5 percent, from the pre-COVID-19 projection of 0.5 percent.
- Revenue performance is now expected to decline by close to 1 percent of GDP, amid pressures for additional emergency financing.
- A cumulative fiscal gap of close to 3.5 percent of GDP is projected for fiscal years 1920/2020 and 20/21.
- The balance of payments gap is expected to widen by 5.1 percentage points of GDP in 2020 due to a sharp contraction in foreign funding for infrastructure projects, decline in remittance inflows, and drop in services receipts.
- Depressed iron ore prices and possible decline in mining production could impact growth, revenue, and the external position going forward.

### Policy responses to the pandemic
- Public health and containment measures:
  - Declaration of a state of emergence.
  - Restrictions on movement and gatherings.
  - Temporary closure of all schools, places of worship, and non-essential services.
  - Establishment of an Executive Committee on Coronavirus (ECOC) to coordinate the national response with development partners.
- Preparedness and health sector support:
  - With international support, a COVID-19 preparedness plan is at an advanced stage and will mostly incorporate support to the health sector.
  - Authorities are leveraging experience from the Ebola crisis, including surveillance and contact tracing.
- Social protection and fiscal reprioritization:
  - Revised FY 2019/2020 budget to allocate resources to augment the COVID-19 Household Food Support Program (COHFSP); purchase medical supplies; settle utility bills for households in affected communities; and implement a cash transfer program for small informal traders, including women.
  - Government prioritizing clearance of outstanding domestic expenditure arrears to support the private sector.
  - Working with the Fund to provide resources in their fiscal program to buy back bonds issued to banks in lieu of arrears due to customers who undertook government contracts, to inject liquidity into the banking system.
- Monetary and financial sector measures:
  - Priorities: improve availability of Liberia dollar banknotes and slowly build up reserves to stabilize the exchange rate and inflation.
  - Partial dollarization limits scope for an effective monetary policy response.
  - Central Bank of Liberia (CBL) temporary measures to ease liquidity conditions include:
    - Flexible restructuring of borrowing terms by banks to benefit solvent borrowers in hard-hit sectors.
    - Suspension of fees at point of sale outlets.
    - Increasing allowable transfer limits on mobile money transactions.
  - CBL has stepped up on-site supervision at systemic financial institutions and intensified monitoring to ensure compliance with prudential requirements.
  - CBL will continue to assess impacts and introduce additional measures when warranted.

### Post-crisis measures and medium-term policies
- Authorities reiterate commitment to reforms under the ECF to stabilize macroeconomic conditions and lay the foundation for inclusive and durable growth.
- Once the crisis subsides, authorities will resume fiscal consolidation to support debt sustainability, including domestic revenue mobilization and rationalization of expenditures, and improve cash management.
- As part of revenue mobilization, the National Legislature has approved an increase in the excise on fuel beginning FY 2020/2021 — a measure expected to yield about 1.2 percent of GDP in additional revenue, with no impact on retail prices.
- To maintain debt sustainability, financing of development expenditure will be limited mostly to grants and highly-concessional resources.
- Authorities continue to implement recommendations of the Action Plan on the Kroll Report, including internal reorganization within internal audit and banking departments.
- Priorities include finalization of amendments to the Financial Institutions Act and enhancement of the AML CFT framework in line with FATF recommendations.

### Conclusion and outlook
- Authorities seek Executive Directors’ support for disbursement under the RCF to help contain the fallout of the pandemic and support recovery.
- They are committed to pursuing medium-term policies as articulated in their Memorandum of Economic and Financial Policies (MEFP) under the ECF arrangement to strengthen public institutions, improve the business environment, and support growth.
- Authorities look forward to continued Fund engagement and technical support.

*Source: Introduction, 1lbrea2020001 - Introduction*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1lbrea2020001.pdf_