## 1lbrea2021003 ## Source details **Canonical URL:** [1lbrea2021003](https://www.imf.org/-/media/files/publications/cr/2021/english/1lbrea2021003.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2021/english/1lbrea2021003.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2021/english/1lbrea2021003.pdf.json) --- ### Program status and key financial actions - Completion of the third review enables immediate disbursement of SDR 17 million (US$23.64 million), bringing total disbursements under the arrangement to SDR 68 million (US$94.8 million). - On August 23, 2021, Liberia received SDR 247.7 million (US$345.3 million) in the context of the general SDR allocation. - The Executive Board granted: - A waiver of nonobservance of the end-December 2020 quantitative performance criterion on net internal reserves on the basis of corrective action. - A waiver of nonobservance of the continuous performance criterion on external arrears of the central government based on its minor nature. - Staff supports completion of the third review and disbursement of SDR 17 million (6.58 percent of quota). ### Macroeconomic performance and outlook - Growth: - Real GDP: contracted by 3.0 percent in 2020; expected to grow 3.6 percent in 2021. - Medium-term projections: 4.1 percent (2022), 4.7 percent (2023), 4.9 percent (2024), 5.7 percent (2025), 5.6 percent (2026). - Staff and authorities project real GDP growth to reach 4.7 percent in 2022 (Box 1). - Inflation (consumer prices): - Annual average: 17.0 (2020), 9.8 (2021), 8.4 (2022), 7.0 (2023), 11.5 (2024), 8.3 (2025), 5.4 (2026), 5.0 (beyond listed years). - End of period: 13.1 (2020), 8.0 (2021), 9.7 (2022), 6.0 (2023), 12.3 (2024), 6.4 (2025), 5.0 (2026 and beyond). - External sector and reserves: - Gross official reserves (millions of U.S. dollars): 358 (2020), 403 (2021), 716 (2022), 429 (2023), 719 (2024), 769 (2025), 779 (2026), 811, 846 later. - Months of next year’s imports: 2.3 (2020), 2.9 (2021), 4.4 (2022), 3.0 (2023), 4.2 (2024), 4.3 (2025), 4.2 (2026), 4.2, 4.2, 3.8 later. - CBL's net int'l reserves (millions of U.S. dollars): 0 (2020), 70 (2021), 392 (2022), 75 (2023), 362 (2024), 401 (2025), 444 (2026), 504, 575 later. - Current account (percent of GDP): - including grants: -16.3 (2020), -22.2 (2021), -17.9 (2022), -22.6 (2023), -18.9 (2024), -19.9 (2025), -19.9 (2026). - excluding grants: -23.7 (2020), -36.1 (2021), -23.7 (2022), -34.8 (2023), -24.1 (2024), -24.2 (2025), -24.6 (2026). ### Fiscal outcomes and projections - Overall fiscal balance (percent of GDP): - Including grants: -4.2 (2020), -3.0 (2021), -2.4 (2022), -2.4 (2023), -4.0 (2024), -2.1 (2025), -1.7 (2026), -1.5, -1.4 later. - Excluding grants: -19.6 (2020), -16.9 (2021), -15.3 (2022), -14.5 (2023), -15.8 (2024), -12.6 (2025), -12.8 (2026), -12.0, -11.2 later. - Revenue and expenditure (percent of GDP): - Total revenue and grants: 31.2 (2020), 29.2 (2021), 30.7 (2022), 28.8 (2023), 28.9 (2024), 28.0 (2025), 28.5 (2026), 28.2, 27.7 later. - Total revenue: 15.8 (2020), 15.3 (2021), 17.8 (2022), 16.6 (2023), 17.2 (2024), 17.4 (2025), 17.4 (2026), 17.7, 17.9 later. - Grants: 15.3 (2020), 13.9 (2021), 12.9 (2022), 12.2 (2023), 11.7 (2024), 10.5 (2025), 11.1 (2026), 10.5, 9.8 later. - Total expenditure: 35.4 (2020), 32.2 (2021), 33.1 (2022), 31.2 (2023), 32.9 (2024), 30.0 (2025), 30.2 (2026), 29.6, 29.1 later. - Current expenditure: 25.1 (2020), 21.2 (2021), 22.6 (2022), 19.9 (2023), 21.2 (2024), 19.5 (2025), 18.5 (2026), 18.0, 17.8 later. - Capital expenditure: 10.3 (2020), 11.1 (2021), 10.5 (2022), 11.3 (2023), 11.7 (2024), 10.5 (2025), 11.7 (2026), 11.7, 11.3 later. - Public debt (percent of GDP): - Total public debt: 61.8 (2020), 62.0 (2021), 56.1 (2022), 63.5 (2023), 59.0 (2024), 59.4 (2025), 56.2 (2026), 53.2, 50.1 later. - Public external debt: 40.9 (2020), 42.8 (2021), 38.3 (2022), 45.2 (2023), 38.1 (2024), 38.7 (2025), 37.4 (2026), 36.8, 36.3 later. - Public domestic debt: 20.9 (2020), 19.2 (2021), 17.9 (2022), 18.4 (2023), 20.9 (2024), 20.6 (2025), 18.8 (2026), 16.4, 13.9 later. ### Program performance, reforms, and policy commitments - Program performance: - Four out of six performance criteria met and three out of five indicative targets met; overall performance described as mixed. - Positive achievements: favorable fiscal outturn, good revenue performance, prudent budget execution, better public financial management, more transparent central bank operations. - Shortfalls/delays: delays in bank recapitalization and bank restructuring; breach of reserve accumulation target; government payment arrears; delayed currency printing/changeover operational challenges; incomplete audits of government accounts. - Authorities’ commitments and corrective actions: - Use the SDR allocation to strengthen reserve position, increase spending on vaccination, support high-quality development projects, and retire expensive debt. - Fiscal reforms to focus on containing the wage bill, enhancing domestic revenue mobilization, improving quality of public spending, and operationalizing a Treasury Single Account (TSA). - Commitment to refrain from monetary financing of the budget and non-concessional external borrowing. - Timely publication of public procurement information and audits of government Annual Financial Statements prioritized. - Monetary policy: accommodative stance to improve liquidity and support recovery; Central Bank lowered policy interest rates by 500 bps in May 2020 and again in August 2021 to 20 percent. - Currency changeover decision: complete changeover to a new family of banknotes and coins to address LD banknote shortages; operational risks require a time-bound implementation plan. - Financial sector priorities: bank restructuring, bolstering supervisory toolkit, addressing high levels of non-performing loans, strengthening the AML/CFT regime. - Governance priorities: fight corruption, enhance transparency and governance framework, accelerate structural reforms to improve business climate. ### Risks and staff recommendations - Key risks: - A flareup of the pandemic. - Operational challenges with the currency changeover (handling around one billion currency pieces; high costs of the operation 1.3 percent of GDP). - Headwinds to reform implementation in the runup to the 2023 elections. - Staff supports authorities’ requests for: - (i) waivers for the non-observance of performance criteria, - (ii) adjustors to performance criteria, - (iii) completion of the third program review, - (iv) disbursement of SDR 17 million (6.58 percent of quota). ### Box 1 — Evolution of the COVID-19 Pandemic and Policy Responses - Pandemic evolution: - First COVID-19 case mid-March 2020. - Total cases grew to 2,114 through May 2021; new wave in June 2021. - Total cases: 5,800 (1,113 per million) by reporting; reported death count: 286. - Limited testing focused on travelers; absence of widespread hospitalizations noted. - Containment measures: - Late March–early April 2020: stringent social distancing and hygiene, mandatory face masks, closure of international airport, suspension of in-person school classes, administrative leave for non-essential public sector workers. - Most measures lifted starting late July 2020; temporary measures reinstated for June 2021 wave; by end-summer daily cases declined to almost zero. - Economic and fiscal policy responses: - CBL actions: reduced policy rate by 500 bps; regulatory forbearance for three months for hard-hit sectors; suspended charges for most electronic and point-of-sale payments. - Import procedures simplified. - Public spending rose by 5.6 percent of GDP in FY2020 and FY2021 combined, focused on healthcare, food aid, and cash transfers. - IMF Rapid Credit Facility disbursement (June 2020) allowed allocating US$25 million to food distribution (delivery delays noted). - World Bank: US$17 million project aid (March–April 2020); AfDB: US$14 million in budget support; additional bilateral support from U.S. and Japan with UN agencies. - COVID-related public spending (US$ millions and percent of GDP, FY2020 and FY2021 entries as presented): - Health: 12.3 / 0.4 ; 40.0 / 0.0 - Social: 46.0 / 1.5 ; 40.4 / 1.3 - incl. food distribution: 25.0 / 0.8 - Other Covid-related spending: 18.4 / 0.6 ; 55.9 / 1.8 - Covid prevention, containment and mgmt: 9.2 / 0.3 ; 18.6 / 0.6 - Transfers to HHs: 3.1 / 0.1 ; 31.1 / 1.0 - Transfers to businesses, SOEs, gov.entities: 6.1 / 0.2 ; 6.2 / 0.2 - Vaccination progress, targets, and costs: - WHO targets: vaccinate 40 percent by end-December 2021 and 70 percent in 2022. - COVAX target: vaccinate 30 percent of population (1.5 million). - Delivered: 192,000 AZ doses; 302,400 J&J (with U.S. support). - Expected deliveries by end-year: additional 96,000 AZ and 183,000 Pfizer expected; option of obtaining 137,000 Pfizer. - AVAT pledged 386,000 J&J; 108,000 received in September. - Authorities’ initial estimate: vaccinating 11 percent by August 2021; actual by mid-October: 230,000 people vaccinated (4.7 percent). - Government allocation for vaccinations in 2022 budget: US$10 million (0.3 percent of GDP). - Costs to vaccinate (percent of GDP): - Vaccine (two doses) and transportation: 0.69 (first 30%), 0.92 (next 40%), 1.61 (70%). - Climate-sensitive cold chain: 0.03, 0.05, 0.08. - Supply chain (in country): 0.06, 0.08, 0.14. - Service delivery (in country): 0.15, 0.20, 0.34. - Total costs to vaccinate: 0.93 (first 30%), 1.24 (next 40%), 2.17 (70%). - Costs to vaccinate initial 30%: 0.9 percent of GDP, to be financed by COVAX; reaching 70% requires additional financing equivalent to 1.2 percent of GDP. ### Monetary policy, currency changeover, and financial sector - Currency changeover: - Reprinting existing currency was preferable, but authorities decided on a new banknote family; operation longer, more costly, operationally challenging. - Small emergency order for one denomination placed for November; requests for proposals issued for remaining banknotes and coins. - Roughly half of pieces to be delivered in second half of 2022; rest arriving in Liberia in 2024 (Legislature disallowed deliveries in election year 2023). - Co-circulation of old and new currency allowed until end-2024. - CBL’s Board of Governors to adopt a time-bound implementation plan as a prior action for the review. - Cost of operation noted as 1.3 percent of GDP; handling ~one billion currency pieces is a key operational risk. - Monetary stance: - Recent interest rate cuts justified by pandemic shock and rapid disinflation; policy rate lowered to 20 percent in August 2021. - Cash in circulation remains a powerful driver of price developments; a moderate rise in inflation likely as cash crunch is alleviated. - Once changeover underway, CBL agreed to unify required reserve ratios for US$ and LD deposits. - Use of CBL bills should be strictly reserved for adjusting monetary policy. - Financial sector: - Banking system broadly compliant with prudential capital and liquidity requirements but some banks require enhanced supervision. - System NPL ratio: 23 percent in June 2021 (down from 27 percent in March 2021). - CBL actions: asset quality reviews, training on underwriting standards, scrutiny of NPL resolution strategies, strengthened supervisory toolkit. - Revised Financial Institutions Act to introduce comprehensive resolution regime; draft to be submitted to Legislature by end-February 2022 (proposed SB reset from end-June 2021). - Operational guidelines for resolution regime by end-April 2022; organizational unit for resolution strategies by end-May 2022; risk-based supervision guidelines by end-April 2022 (all proposed SB resets). ### Governance, PFM, and structural reforms - Governance and anti-corruption: - Drafts of Whistleblower and Witness Protection Act, the LACC Act, and amendments to the Code of Conduct passed by the Legislature’s lower chamber; authorities commit to adoption no later than end-January 2022 (proposed SB reset). - Draft LACC Act gives LACC first-tier prosecutorial powers and charge of asset declaration system. - PPCC published large FY2020 procurement contracts; posting FY2021 underway; commitment to publish beneficial ownership information and pilot e-procurement in late 2022. - FY2018 and FY2019 audits published; FY2020 draft under review and expected to be published by end-November 2021 (proposed SB reset). - PFM measures: - Compile full tax expenditure report annexed to 2023 budget (proposed SB end-June 2022). - LRA to establish Statistical and Data Analysis Unit with IMF TA; intensify tax audits; introduce more secure excise tax stamps. - MFDP to issue circular making IFMIS-generated purchase orders mandatory (proposed SB end-December 2021). - Move to make TSA operational by closing MACs’ commercial bank accounts and transferring balances (proposed SB end-December 2021; continued actions into 2022). - Government committed to avoid recurrence of arrears on debt service by issuing payment orders to CBL well in advance and authorizing use of resources outside the debt service account if necessary. ### SDR allocation, on-lending, and 2022 budget plans - SDR allocation: - SDR 247.7 million (10.5 percent of GDP) allocation received. - Authorities will not allow international reserve cover to drop below 4 months of imports. - CBL may on-lend up to US$80 million to the government in 2022 while maintaining reserve cover; on-lending governed by an MoU; reimbursement of any IMF interest charges on on-lent part by government. - Program targets accommodate on-lending only to the extent it goes toward priority areas; fiscal balance target tightens one-to-one with underspending in these areas. - Planned uses of on-lent SDR proceeds: - Up to US$10 million for COVID-19 vaccines and administration. - Retire up to US$35 million in treasury bonds held by banks (LD 6 billion approximate) to save on high interest costs and foster bank lending. - Augment public investment by US$35 million to reach US$98 million (2.7 percent of GDP), excluding US$23 million for the road fund and US$35 million for 2023 elections. - Implied overall fiscal deficit: 0.8 percent of GDP, financeable without recourse to direct credit from the CBL other than SDR on-lending. - 2022 budget framework: - Resource envelope of US$780 million, including US$635 million from domestic revenues. - Wage bill kept flat in nominal terms at some US$300 million. - Set aside US$10 million as government contribution to currency changeover costs. - Primary deficit excluding grants estimated at US$29 million (0.8 percent of GDP). - Mining concession signing secured government payments of US$65 million (1.9 percent of GDP), of which US$30 million (0.9 percent of GDP) disbursed this year. ### Debt vulnerabilities, DSA, and financing - Debt vulnerabilities: - Debt distress indicators for external debt do not cross high-risk thresholds, but external borrowing space is limited. - Present value of total public debt relative to GDP is high; risks of debt distress deemed high. - Authorities reaffirm commitment to refrain from central bank borrowing, non-concessional external borrowing, and non-transparent budget financing. - Authorities committed to debt transparency under IMF’s Debt Limit Policy. - Decomposition of public debt (selected, 2022): - Total debt stock end of period: 1,877,317,966 (100.0 percent total debt). - External: 1,241,127,354 (66.1 percent total debt). - Multilateral creditors subtotal: 1,128,447,605 (60.1 percent total debt) — IMF: 288,161,700 (15.3 percent total debt); World Bank: 546,654,618 (29.1 percent total debt). - Bilateral creditors subtotal: 112,679,748 (6.0 percent total debt) — Non-Paris Club: 112,679,748 (6.0 percent total debt); China EXIM Bank: 49,538,553 (2.6 percent total debt); Government of Saudi Arabia: 36,903,708 (2.0 percent total debt). - Domestic: 636,190,612 (33.9 percent total debt) — Bonds: 543,387,627 (28.9 percent total debt); T-Bills: 35,000,000 (1.9 percent total debt). - Capacity to repay IMF and exposure: - Total outstanding credit to the Fund accounts for some 20 percent of total external public debt and projected to peak in 2022 at 8.7 percent of GDP (89.6 percent of quota). - Debt service to the Fund as share of total obligations will peak in 2022 at 61 percent. - Staff supports disbursement of SDR17 million (US$24.1 million). - Stress tests: multiple scenarios presented (historical, commodity price shock, natural disaster, combined CL, tailored tests); all additional financing needs generated by shocks assumed covered by PPG external MLT debt in external DSA. ### ECF disbursement schedule and IMF financing (selected) - Schedule of disbursements under ECF arrangement, 2019–23 (Millions of SDR): - December 11, 2019: 17.0 (6.58% of Quota) — Executive Board Approval of four-year ECF arrangement. - December 21, 2020: 34.0 (13.16% of Quota). - June 1, 2021: 17.0 (6.58% of Quota) — Observance of performance criteria for December 31, 2020, and completion of third review. - December 1, 2021: 17.0 (6.58% of Quota). - June 1, 2022: 17.0 (6.58% of Quota). - December 1, 2022: 17.0 (6.58% of Quota). - June 1, 2023: 18.0 (6.97% of Quota). - November 15, 2023: 18.0 (6.97% of Quota). - Total for the ECF arrangement: 155.0 (60.0% of Quota). - Indicators of capacity to repay the IMF (selected, as of March 2021): - Fund obligations based on existing credit (Repayment of principal, in millions of SDRs): 23.0 (2021), 26.3 (2022), 27.3 (2023), 24.4 (2024), 20.2 (2025), 25.9 (2026), 20.4 (2027), 17.4 (2028), 17.4 (2029), 10.4 (2030), 0.0 (2031). - Outstanding Fund credit (millions of SDRs): 198.9 (2021), 231.5 (2022), 240.2 (2023), 215.8 (2024), 195.6 (2025), 169.7 (2026), 142.5 (2027), 109.7 (2028), 71.4 (2029), 40.2 (2030), 19.4 (2031). - Gross International Reserves (millions of US$) — memorandum projections: 716 (2021), 699 (2022), 749 (2023), 759 (2024), 791 (2025), 826 (2026), 869 (2027), 916 (2028), 963 (2029), 1,019 (2030), 1,072 (2031). ### Monitoring framework, performance criteria, and reporting - Program monitored by quantitative performance criteria (QPCs), structural benchmarks (SBs), indicative targets (ITs), and semi-annual reviews (Tables 1–5 and TMU). - Selected QPCs and outcomes (examples preserved exactly): - Floor on primary fiscal balance, excluding grants (Millions of U.S. dollars): Sep. 2021 PC: -15.0; Prel. Status: -9.9; Outcome: Met. - Ceiling on new external arrears of the central government (continuous): target 0.0; Mar. 2022 Prel. Status 3.3 — Not met. - Floor on change in CBL’s NIR (Millions of U.S. dollars): Sep. 2021 PC: -13.5; Prel. Status: -24.2; Outcome: Not met. - Adjustment provisions: - 2022 floors adjusted down by amount of foreign currency on-lending by the CBL to the GOL of the SDR allocation, capped at US$80 million. - 2022 floors adjusted up by sum of shortfalls in investment spending and shortfalls in spending on COVID-19 vaccines and administration; adjustor not negative and capped at US$45 million. - Reporting requirements: - MFDP monthly reports within three weeks after end of month; weekly cash plan within five days after end of week. - CBL monthly and weekly reporting: monthly sweeping reports within three weeks; weekly cash and budget outturn within five days; daily reporting of NIR within five days. - Detailed templates and data transmission channels specified (electronic to IMF Resident Representative and local IMF economist). ### Structural benchmarks, implementation record, and prior actions - Structural benchmarks performance (third review): - Out of ten SBs for the third ECF review only two were met; four implemented with delay; audits of government annual financial statements for FY2021 not yet ready for publication. - Prior action for third review: CBL Board to adopt a time-bound currency changeover implementation plan (listed as prior action). - Common SBs reset with new target dates into 2022 (examples): - Establishment of TSA (reset to end-December 2021 / end-March 2022). - Submission of Financial Institutions Act to Legislature (reset to end-February 2022). - Destruction of unfit banknotes (reset). - Issuance of risk-based supervision guidelines (reset to end-April 2022). - Implementation pattern: - Several SBs met (tax exemption inventory; FX withdrawal reporting; methodology for forecasting banknote demand; CBL Act amendments). - Several SBs not met or delayed (FY2020 audit publication; dual control security strategy; semi-annual FX audits implemented with delay). ### Staff appraisal and policy advice (selected) - Performance and outlook: - Program performance mixed; further progress in entrenching macroeconomic stability; favorable fiscal revenue performance and payroll cleanup notable. - Structural reform implementation slower than planned, notably in governance and financial sector restructuring. - Economy recovering from COVID-19; activity expected to reach pre-pandemic levels in 2021 and expand robustly in 2022 on government and mining investment. - Policy advice: - Support partial use of SDR allocation for high-quality investment, COVID-19 vaccinations, and retiring expensive public debt, subject to keeping reserve cover above 4 months of imports. - Contain the public wage bill and strengthen domestic revenue mobilization for medium-term fiscal sustainability. - Accelerate bank restructuring, tackle high NPLs, and implement the Financial Institutions Act to strengthen resolution framework. - Advance governance agenda: enact and enforce anti-corruption legislation and revamp anti-corruption agency; prioritize business environment reforms. *Source: IMF staff report — LIBERIA: THIRD REVIEW OF THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA (November 9, 2021).* ### 2019. Completion of the third review enables the immediate disbursement of SDR 17 million ### 2019. Completion of the third review enables the immediate disbursement of SDR 17 million ### Program status and key financial actions - Completion of the third review enables immediate disbursement of SDR 17 million (US$23.64 million), bringing total disbursements under the arrangement to SDR 68 million (US$94.8 million). - On August 23, 2021, Liberia received SDR 247.7 million (US$345.3 million) in the context of the general SDR allocation. - The Executive Board granted: - A waiver of nonobservance of the end-December 2020 quantitative performance criterion on net internal reserves on the basis of corrective action. - A waiver of nonobservance of the continuous performance criterion on external arrears of the central government based on its minor nature. ### Macroeconomic performance and outlook - Pandemic impact and near-term rebound: - Real GDP contracted by 3.0 percent in 2020 and is expected to grow 3.6 percent in 2021. - Staff and authorities expect the economy to rebound strongly in 2022 and beyond; medium-term projections include growth of 4.1 percent (2022), 4.7 percent (2023), 4.9 percent (2024), 5.7 percent (2025), and 5.6 percent (2026). - Inflation: - Consumer prices (annual average): 17.0 (2020), 9.8 (2021), 8.4 (2022), 7.0 (2023), 11.5 (2024), 8.3 (2025), 5.4 (2026), 5.0 (beyond projected years listed). - Consumer prices (end of period): 13.1 (2020), 8.0 (2021), 9.7 (2022), 6.0 (2023), 12.3 (2024), 6.4 (2025), 5.0 (2026 and beyond). - External sector and reserves: - Gross official reserves (millions of U.S. dollars): 358 (2020), 403 (2021), 716 (2022), 429 (2023), 719 (2024), 769 (2025), 779 (2026), 811, 846 in later projections. - Months of next year’s imports: 2.3 (2020), 2.9 (2021), 4.4 (2022), 3.0 (2023), 4.2 (2024), 4.3 (2025), 4.2 (2026), 4.2, 4.2, 3.8 in later projections. - CBL's net int'l reserves (millions of U.S. dollars): 0 (2020), 70 (2021), 392 (2022), 75 (2023), 362 (2024), 401 (2025), 444 (2026), 504, 575 in later projections. - Current account (percent of GDP): - including grants: -16.3 (2020), -22.2 (2021), -17.9 (2022), -22.6 (2023), -18.9 (2024), -19.9 (2025), -19.9 (2026). - excluding grants: -23.7 (2020), -36.1 (2021), -23.7 (2022), -34.8 (2023), -24.1 (2024), -24.2 (2025), -24.6 (2026). ### Fiscal outcomes and projections - Fiscal balances (percent of GDP): - Overall fiscal balance, including grants: -4.2 (2020), -3.0 (2021), -2.4 (2022), -2.4 (2023), -4.0 (2024), -2.1 (2025), -1.7 (2026), -1.5, -1.4 in later projections. - Overall fiscal balance, excluding grants: -19.6 (2020), -16.9 (2021), -15.3 (2022), -14.5 (2023), -15.8 (2024), -12.6 (2025), -12.8 (2026), -12.0, -11.2 later. - Revenue and expenditure (percent of GDP): - Total revenue and grants: 31.2 (2020), 29.2 (2021), 30.7 (2022), 28.8 (2023), 28.9 (2024), 28.0 (2025), 28.5 (2026), 28.2, 27.7 later. - Total revenue: 15.8 (2020), 15.3 (2021), 17.8 (2022), 16.6 (2023), 17.2 (2024), 17.4 (2025), 17.4 (2026), 17.7, 17.9 later. - Grants: 15.3 (2020), 13.9 (2021), 12.9 (2022), 12.2 (2023), 11.7 (2024), 10.5 (2025), 11.1 (2026), 10.5, 9.8 later. - Total expenditure: 35.4 (2020), 32.2 (2021), 33.1 (2022), 31.2 (2023), 32.9 (2024), 30.0 (2025), 30.2 (2026), 29.6, 29.1 later. - Current expenditure: 25.1 (2020), 21.2 (2021), 22.6 (2022), 19.9 (2023), 21.2 (2024), 19.5 (2025), 18.5 (2026), 18.0, 17.8 later. - Capital expenditure: 10.3 (2020), 11.1 (2021), 10.5 (2022), 11.3 (2023), 11.7 (2024), 10.5 (2025), 11.7 (2026), 11.7, 11.3 later. - Public debt (percent of GDP): - Total public debt: 61.8 (2020), 62.0 (2021), 56.1 (2022), 63.5 (2023), 59.0 (2024), 59.4 (2025), 56.2 (2026), 53.2, 50.1 later. - Public external debt: 40.9 (2020), 42.8 (2021), 38.3 (2022), 45.2 (2023), 38.1 (2024), 38.7 (2025), 37.4 (2026), 36.8, 36.3 later. - Public domestic debt: 20.9 (2020), 19.2 (2021), 17.9 (2022), 18.4 (2023), 20.9 (2024), 20.6 (2025), 18.8 (2026), 16.4, 13.9 later. ### Program performance, reforms, and policy commitments - Program performance: - Four out of six performance criteria met and three out of five indicative targets met; overall performance described as mixed. - Positive achievements: favorable fiscal outturn, good revenue performance, prudent budget execution, better public financial management, more transparent central bank operations. - Shortfalls and delays: delays in bank recapitalization and bank restructuring, breach of reserve accumulation target, government payment arrears, delayed currency printing/changeover operational challenges, and incomplete audits of government accounts. - Authorities’ commitments and corrective actions: - Use the SDR allocation to strengthen reserve position, increase spending on vaccination, support high-quality development projects, and retire expensive debt. - Fiscal reforms to focus on containing the wage bill, enhancing domestic revenue mobilization, improving the quality of public spending, and operationalizing a Treasury Single Account. - Commitment to refrain from monetary financing of the budget and non-concessional external borrowing. - Timely publication of public procurement information and audits of the government’s Annual Financial Statements prioritized. - Accommodative monetary policy stance to improve liquidity and support recovery; Central Bank lowered policy interest rates by 500 bps in May 2020 and again in August 2021 to 20 percent. - Authorities decided on a complete currency changeover to a new family of banknotes and coins to address LD banknote shortages; operational risks require a time-bound implementation plan. - Financial sector priorities: bank restructuring, bolstering supervisory toolkit, addressing high levels of non-performing loans, and strengthening the AML/CFT regime. - Governance priorities: fight corruption, enhance transparency and governance framework, and accelerate structural reforms to improve the business climate for private sector development. ### Risks and staff recommendations - Key risks: - A flareup of the pandemic. - Operational challenges with the currency changeover. - Headwinds to reform implementation in the runup to the 2023 elections. - Staff supports authorities’ requests for: - (i) waivers for the non-observance of performance criteria, - (ii) adjustors to performance criteria, - (iii) completion of the third program review, - (iv) disbursement of SDR 17 million (6.58 percent of quota). ### Selected operational and outcome figures from FY2021 table (US$ million) - Total revenue including grants: 233 (Jul.-Dec. 2020), 257 (Jul. 2020 - Jun. 2021 Est.), 267 (Jan.-Jun. 2021 Est.), 327, 500, 584 (columns in table). - Domestic revenue: 197, 230, 241, 293, 438, 522. - Tax revenue: 158, 187, 194, 236, 352, 423. - Grants (budget support): 36, 27, 26, 34, 62, 62. - Expense: 220, 256, 266, 299, 486, 555. - Compensation of employees: 143, 146, 149, 154, 292, 300. - Interest payment: 14, 16, 14, 10, 27, 27. - Net operating balance (+surplus/-deficit): 132, 128, 142, 9 (columns per table). - Overall balance = net lending/borrowing: 71, -52, 52, 25 (columns per table). - Financing: 70, -52, 52, 25. - External (net): 46, 32, 13, 28, 60, 60. - Disbursement: 51, 38, 20, 33, 71, 71. - Repayment: -4, -6, (table notes varying amounts including -7, -5, -11, -11). - Jan.-Jun. 2021 estimate includes US$11.9 million bank restructuring costs; Jan.-Jun. 2021 estimate includes US$3.5 million bank restructuring costs in a separate line. *Source: IMF staff report — LIBERIA: THIRD REVIEW OF THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVERS OF NONOBSERVANCE OF PERFORMANCE CRITERIA (November 9, 2021).* ### Box 1. Liberia: Evolution of the COVID-19 Pandemic and Policy Responses ### Box 1. Liberia: Evolution of the COVID-19 Pandemic and Policy Responses ### Pandemic evolution and containment measures - First COVID-19 case reported in mid-March 2020. - Total cases grew to 2,114 through May 2021 before a new wave in June 2021. - Currently, total cases stand at 5,800, or 1,113 per million. - Reported death count: 286. - Limited testing focused on travelers may partly explain low case load; absence of widespread hospitalizations noted. - Containment measures (late March–early April 2020): stringent social distancing and hygiene, mandatory face masks, closure of the international airport, suspension of in-person school classes, administrative leave for non-essential public sector workers. - Most measures were lifted starting late July 2020; temporary measures reinstated promptly for the June 2021 wave and proved effective — by end-summer daily cases declined to almost zero. ### Economic and fiscal policy responses to the pandemic - Central Bank of Liberia actions: - Reduced the monetary policy rate by 500 bps. - Allowed regulatory forbearance for three months on asset classification, provisioning, and lending policies for hard-hit sectors. - Suspended charges for most electronic and point-of-sale payments. - Import procedures simplified. - Public spending rose by 5.6 percent of GDP in FY2020 and FY2021 combined, focused on healthcare, food aid, and cash transfers. - IMF Rapid Credit Facility disbursement (June 2020) allowed allocating US$25 million to food distribution implemented by the World Food Program (delivery delays noted). - World Bank provided US$17 million in project aid (March–April 2020) for health sector and regional disease surveillance. - African Development Bank provided US$14 million in budget support as part of multi-country COVID-19 response. - Additional bilateral support noted from the governments of the U.S. and Japan in partnership with UN agencies. - Government seeking further support from the World Bank. ### COVID-related public spending (table entries from source) - FY2020 FY2021 - US$ millions Percent of GDP US$ millions Percent of GDP - Health12.30.40.00.0 - Social46.01.540.41.3 - incl. food distribution25.00.8 - Other Covid-related spending18.40.655.91.8 - Covid prevention, containment and mgm - t9.20.318.60.6 - Transfers to HHs3.10.131.11.0 - Transfers to businesses, SOEs, gov.entities6.10.26.20.2 ### Vaccination progress, targets, and costs - WHO targets: vaccinate 40 percent of the population by end-December 2021 and 70 percent in 2022. - COVAX targets vaccinating 30 percent of the population (1.5 million). - Delivered under COVAX and partners: - 192,000 doses of Astra Zeneca (AZ). - 302,400 of J&J (with U.S. support). - Expected/anticipated deliveries by end-year noted: - additional 96 thousand of AZ and 183 thousand of Pfizer expected, with additional option of obtaining 137 thousand of Pfizer vaccines. - AVAT pledged 386 thousand doses of J&J, of which 108 thousand were received in September. - Initial authorities’ estimate: vaccinating 11 percent of the population by August 2021. - Actual by mid-October: 230 thousand people vaccinated (4.7 percent of the population) due to supply delays and vaccine hesitancy. - Government allocation for vaccinations in 2022 budget: US$10 million (0.3 percent of GDP). - Liberia: Costs of Vaccination of Population (in percent of GDP) - First 30 percent of population; Next 40 percent of population; 70 percent of population - Vaccine (two doses) and transportation0.69 0.92 1.61 - Climate-sensitive cold chain0.03 0.05 0.08 - Supply chain (in country)0.06 0.08 0.14 - Service delivery (in country)0.15 0.20 0.34 - Total costs to vaccinate0.93 1.24 2.17 - Note: Based on average costs for each component. - Note: To be covered under the COVAX Initiative (first 30 percent). - Estimated financing needs: - Costs of vaccinating the initial 30 percent of the population: 0.9 percent of GDP, to be financed by COVAX. - Reaching the 70-percent vaccination target would require additional financing equivalent to 1.2 percent of GDP. - Authorities hope donor coverage; allocating US$10 million (0.3 percent of GDP) in 2022 budget. ### Outlook and risks - Staff and authorities project real GDP growth to reach 4.7 percent in 2022. - Domestic drivers: major investments to expand iron ore extraction, artisanal gold boom, expansionary fiscal policy with sharply raised investment, planned buyback of treasury bonds held by banks, expected confidence boost from currency changeover ending cash shortages and retiring unfit banknotes. - Medium-term potential: with good policies, Liberian economy could grow by more than 5 percent; population growth of 2.5 percent contributes to growth; iron ore mining project will span three years of heavy investment followed by eventual tripling of production. - Downside risks: - Uncertain course of the COVID-19 pandemic globally and locally; slow vaccine rollout in sub-Saharan Africa. - Risk of disorderly currency changeover if operational capacities are overwhelmed. - Reform momentum could slow or face setbacks around elections. ### Program performance (ECF program) - Mixed performance against performance criteria (PCs), indicative targets (ITs), and structural benchmarks (SBs). - Quantitative and continuous PCs: - Three out of four quantitative PCs for end-December 2020 met. - One out of two continuous PCs for the third review met. - Targets met for primary fiscal balance and government borrowing from the CBL due to favorable revenue performance. - CBL stayed within limits for operational and capital expenditures. - Government refrained from non-concessional external borrowing. - Accumulation of net international reserves (NIR) fell short due to delays in bank recapitalization and delays in LD banknote production. - Government incurred external payment arrears in second quarter of 2021 due to a clerical error. - Indicative targets: - Three out of five ITs for the third review observed: fiscal revenues exceeded program floor; low base money growth kept CBL’s net domestic assets (NDA) well below permissible amount; social spending was sufficiently strong. - Capital spending was well below target; government incurred domestic payment arrears during 2021 servicing debt late, breaching continuous IT. - Structural benchmarks: - Out of ten SBs for the third ECF review only two were met: compilation of a tax exemption inventory; furnishing of compliance reports on foreign-currency withdrawals to the CBL’s Board of Governors. - Four SBs implemented with delay: salary suspensions for government employees without biometric ID; external audits of CBL’s foreign exchange position; upgrading vault security at the CBL; preparations for establishment of a Treasury Single Account (TSA). - Considerable progress toward two SBs related to vault security and strengthening anti-corruption legislation. - Audits of government annual financial audit reports for FY2021 not yet ready for publication; production of compliance reports for CBL’s board awaits establishment of institutional arrangements. - Bank restructuring and LD banknote printing: - Bank recapitalization and reform plans have not advanced to deem all major banks durably sound. - Plans to reprint LD currency changed to a full-fledged currency changeover — longer, more costly, and operationally challenging for the CBL. - End-June 2021 assessment (preliminary): - Fiscal targets all met except for the floor on capital spending. - Domestic arrears accumulated in early 2021 cleared by the test date. - PC on NIR missed; corrective actions (bank recapitalization and currency changeover) expected to gain traction toward end-2021. - Four SBs delayed and proposed to be reset: establishment of the TSA; submission of the Financial Institutions Act to the Legislature; destruction of unfit banknotes; issuance of guidelines for risk-based supervision guidelines. ### Policy discussions and fiscal strategy - Main discussion focus areas: prudent budgets for remainder of 2021 and 2022 and use of the SDR allocation; mitigating risks of currency changeover while ensuring timely cash injection; strengthening financial stability; addressing governance issues and obstacles to durably strong growth. A. Fiscal policies and use of SDR allocation - Legislature approved a special budget for July–December 2021 to align fiscal and calendar years from 2022 onward; budget is achievable and free of monetary financing. - New mining concession signing secured government payments of US$65 million (1.9 percent of GDP), of which US$30 million (0.9 percent of GDP) will be disbursed this year. - Government will push for higher dividend payments from SOEs, especially Liberian Maritime, Telecom, and Port Authorities. - Special budget will draw down government deposits at the CBL to compensate for lack of budget support; allows substantial increase in capital spending, contribution to currency changeover costs, and some relaxation of tight operational budgets. - Wage bill kept flat in nominal terms; planned increase of sales tax rate left pending. - Envisaged overall balance—and a small deficit of 0.3 percent of GDP when bank recapitalization costs included—is considered achievable. - MFDP committed to keep budget execution aligned with available resources. - SDR allocation use and terms: - SDR 247.7 million (10.5 percent of GDP) allocation. - Enough retained at the CBL to keep reserve cover at a minimum of 4 months of imports. - US$80 million (2.2 percent of GDP) could be on-lent to the government in 2022, with possible additional tranches in subsequent years depending on reserve developments. - On-lending governed by a Memorandum of Understanding (MoU) between CBL and government; on-lending to occur quarterly. - CBL to be reimbursed from the budget for any interest charges by the IMF for on-lent part of allocation. - Program targets accommodate on-lending only to the extent it goes toward priority areas; fiscal balance target tightens one-to-one with underspending in these areas. - Planned 2022 budget and use of on-lent SDR proceeds: - MFDP plans a 2022 budget sharply raising investment and allowing a small deficit made possible by SDR allocation. - On-lending allows: - setting aside up to US$10 million for purchase of COVID-19 vaccines and administration; - retiring up to US$35 million in treasury bonds currently held by banks to save on high interest costs and foster more bank lending; - augmenting public investment by US$35 million to reach US$98 million (2.7 percent of GDP). - IMF staff to work with authorities to ensure capital spending quality. - Implied overall fiscal deficit: 0.8 percent of GDP, financeable without recourse to direct credit from the CBL other than SDR on-lending. B. Revenue mobilization and public financial management (PFM) - Revenue mobilization: - Authorities compiled a tax exemption inventory; an ad-hoc inter-ministerial committee produced a tax expenditure report for border taxes. - MFDP to enhance reporting for all tax expenditures and compile a full tax expenditure report annexed to 2023 budget (proposed SB for end-June 2022). - LRA establishing a Statistical and Data Analysis Unit with IMF TA to improve taxpayer mapping and capacity to fight tax evasion. - LRA intensified tax audits; more secure excise tax stamps to enter market in coming months. - MFDP publicly announced that value added taxes would replace sales taxes by 2025. - Public financial management improvements and planned actions: - Resumption of regular meetings of the Liquidity Management Committee and the Treasury Management Committee. - Financial budgets to be better aligned with available resources; cleanup of public payroll; wider use of IFMIS; move to quarterly reconciliation. - Government committed to avoid recurrence of arrears on debt service by issuing payment orders to the CBL well in advance and authorizing use of resources outside the debt service account if necessary. - MFDP to issue circular making IFMIS-generated purchase orders mandatory for government contracts (proposed SB for end-December 2021). - Move to make TSA fully operational by finalizing account structure and closing commercial bank accounts of relevant ministries, agencies, and commissions (MACs) and transferring balances to TSA (proposed SB for end-December 2021). - Authorities working toward integrating finances of the Liberian Telecom Authority and the Liberian Maritime Authority into central government budget and seeking higher dividend payments in the interim. *International Monetary Fund — Box 1, Liberia: Evolution of the COVID-19 Pandemic and Policy Responses* ### 16. Debt vulnerabilities are similar to those identified in the December 2020 Debt ### 16. Debt vulnerabilities are similar to those identified in the December 2020 Debt ### Debt sustainability and vulnerabilities - Debt distress indicators for external debt do not cross thresholds that would indicate high-risk, but external borrowing space is limited. - Total public debt is found to be sustainable given the authorities’ commitment to prudent fiscal policy going forward and because much of it is owed to the CBL at reasonable interest rates. - The present value of total public debt relative to GDP is high and risks of debt distress accordingly deemed high. - The authorities reaffirmed their commitment to: - refrain from central bank borrowing, - refrain from non-concessional external borrowing, - refrain from non-transparent modes of budget financing, such as advance payments from large taxpayers. - The authorities remain committed to debt transparency, in line with the new requirements under the IMF’s Debt Limit Policy. ### Text Table 1 — Statement of Budgetary Central Government Operations (CY2021, US$ million) - Total revenue including grants: 327 318 645 - Domestic revenue: 293 318 610 - Tax: 236 229 465 - Non-tax: 568 9145 - Grants (budget support): 340 34 - Expense: 299 284 583 - Compensation of employees: 154 150 305 - Interest payment: 101 930 - Goods and services: 105 661 71 - Subsidies and grants: 1 294 372 - Social benefits: 156 - Net operating balance (+surplus/-deficit): 283 462 - Gross investment in nonfinancial assets: 230 32 - Overall balance = net lending/borrowing: 254 29 - excl. grants: -94 -5 - Primary balance: 362 459 - excl. grants: 124 25 - Financing: 254 29 - Transactions in Financial assets: 0 -35 -35 - Deposits: 0 -35 -35 - Loans (policy lending): 000 - Transactions in liabilities: -25 -39 -64 - External (net): 28 -16 12 - Disbursement: 33 0 33 - Repayment: -5 -16 -21 - Domestic (net): -27 -23 -50 - Domestic borrowing: 000 - Repayment: -27 -23 -50 - Accounts payable: -260 -26 Notes: - Jan.-Jun. 2021 estimate includes US$11.9 million bank restructuring costs. - Jan.-Jun. 2021 estimate includes US$3.5 million in bank restructuring costs. The approved special budget includes US$15.6 million in bank restructuring costs. - Jan.-Jun. 2021 / Jul.-Dec. 2021 / Jan.-Dec. 2021 columns reflected in table. ### Text Table 2 — Decomposition of Public Debt and Debt Service by Creditor, 2022 (selected items) - Total (debt stock end of period): 1,877,317,966 (100.0 percent total debt) - External: 1,241,127,354 (66.1 percent total debt) - Multilateral creditors (subtotal): 1,128,447,605 (60.1 percent total debt) - IMF: 288,161,700 (15.3 percent total debt) - World Bank: 546,654,618 (29.1 percent total debt) - ADB/AfDB/IADB: 177,852,446 (9.5 percent total debt) - Other Multilaterals: 115,778,842 (6.2 percent total debt) - European Investment Bank: 49,310,645 (2.6 percent total debt) - Arab Bank for Economic Development in Africa: 26,726,022 (1.4 percent total debt) - Bilateral creditors (subtotal): 112,679,748 (6.0 percent total debt) - Non-Paris Club: 112,679,748 (6.0 percent total debt) - China EXIM Bank: 49,538,553 (2.6 percent total debt) - Government of Saudi Arabia: 36,903,708 (2.0 percent total debt) - Domestic: 636,190,612 (33.9 percent total debt) - Held by residents, total: 636,190,612 (33.9 percent total debt) - T-Bills: 35,000,000 (1.9 percent total debt) - Bonds: 543,387,627 (28.9 percent total debt) - Loans: 57,802,985 (3.1 percent total debt) - Nominal GDP (memo): 3,037,255,511 / 3,037,255,511 / 3,426,123,521 / 3,698,409,066 (periods presented in table) ### Stress tests and public debt indicators (figures summary) - Indicators presented include debt service-to-revenue ratio, PV of debt-to-exports ratio, PV of debt-to-GDP ratio, debt service-to-exports ratio, PV of Debt-to-Revenue Ratio, Debt Service-to-Revenue Ratio, PV of Debt-to-GDP Ratio, for 2021-2031 under baseline and alternative stress scenarios. - Notes on stress tests: - The most extreme stress test is the test that yields the highest ratio in or before 2031. - The historical scenario, commodity price shock, natural disaster, combined CL, and other tailored stress tests are referenced. - All additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA. - Default terms of marginal debt are based on baseline 10-year projections. ### B. Monetary Policies - Addressing LD cash shortages is program critical but a comprehensive currency changeover is risky. - Risks highlighted: - handling around one billion currency pieces in a low-capacity environment, - delays in bringing additional cash to market, - high costs of the operation (1.3 percent of GDP). - Alternatives and decisions: - Reprinting the existing currency was preferable but the decision in favor of a new banknote family is irreversible. - A small emergency order for one denomination of the new banknote family in November has been placed. - Requests for proposals for remaining banknotes and coins have been issued. - Roughly half of these pieces will be delivered in the second half of 2022, with the rest arriving in Liberia only in 2024 (the Legislature disallowed deliveries in the election year 2023). - Co-circulation of old and new currency allowed until end-2024. - CBL’s Board of Governors to adopt a time-bound implementation plan as a prior action for this review. - Monetary stance and operations: - Recent interest rate cuts were justified by the pandemic shock and rapid disinflation. - Cash in circulation remains a powerful driver of price developments; a moderate rise in inflation is likely as the cash crunch is alleviated while medium-term disinflation trend remains intact. - Once changeover is underway, CBL agreed to unify required reserve ratios for US$ and LD deposits. - Use of CBL bills should be strictly reserved for adjusting monetary policy. ### C. Financial Sector Policies - Banking system status: - The banking system as a whole is compliant with prudential capital and liquidity requirements, but some institutions are falling short and should remain under enhanced supervision. - Updated restructuring plans should be implemented expeditiously. - Staff encouraged consistent application of penalties for violations of reserve requirements and welcomed the waiving of levies on mobile money transactions. - Regulatory improvements: - Revised Financial Institutions Act to introduce a comprehensive resolution regime; authorities committed to submit it to the Legislature at end-February 2022 (proposed SB reset from end-June 2021). - Operational guidelines for the resolution regime by end-April 2022 (proposed SB reset from end-June 2021). - Organizational unit for resolution strategies to be established by end-May 2022 (proposed SB reset from end-June 2021). - Risk-based supervision guidelines to be issued by end-April 2022 (proposed SB reset from end-June 2021). - Non-performing loans: - System NPL ratio stood at 23 percent in June 2021. - Trade, services, and construction sectors disproportionately affected. - CBL actions: asset quality reviews for most banks, training on underwriting standards, scrutiny of NPL resolution strategies, requests for strengthened recovery plans, and close monitoring of implementation. - AML/CFT: - New legislation prepared in collaboration with regional and international partners to be passed by the Legislature before year-end. - Legislation will establish a National Coordination Committee for implementation and oversight. - Updated National Risk Assessment published in September. - CBL developing risk-based AML/CFT supervisory tools with IMF technical support. ### D. Governance Issues - Authorities reaffirm commitment to enhance governance framework; progress made in PFM and transparency but some reforms behind schedule. - Specific legislative and institutional reforms: - Drafts of the Whistleblower and Witness Protection Act, the Liberia Anti-Corruption Commission (LACC) Act, and amendments to the Code of Conduct passed by the Legislature’s lower chamber; authorities commit to adoption no later than end-January 2022 (proposed SB reset from end-March 2021). - Draft LACC Act gives LACC first-tier prosecutorial powers, puts it in charge of running the asset declaration system, and authorizes it to recommend sanctions for non-compliance. - Amendments to the Code of Conduct provide for access to declarations by court order, with rulings guided by the Freedom of Information Act. - Public Procurement and Concessions Commission (PPCC) published all large public procurement contracts awarded in FY2020 and key information on winning companies and their legal owners. - Posting of contracts and key information for FY2021 underway. - PPCC committed to collect and publish beneficial ownership information from firms bidding on public procurement contracts and provide beneficial ownership information on past contracts to the extent feasible. - An e-procurement system envisaged to become operational in late 2022. - Since January 2021, 21 compliance audits, including on procurement procedures, have been completed. - Publication of audits of government Annual Financial Statements progressing but behind schedule: - FY2018 and FY2019 audits published. - FY2020 draft statement under review at MFDP and expected to be published by end-November 2021 (proposed SBs reset from end-March 2021). - Electronic Document Management System launched to improve report quality for FY2021. - CBL governance and transparency: - Improvements include quality of monetary data, operational oversight and security in currency management, and adherence to procedures for opening/closing government accounts. - External audits of CBL’s foreign exchange reserves for end-December 2020 and end-June 2021 finalized; CBL following up on findings. - Authorities committed to addressing safeguards assessment issues over the next 6-12 months, including making the compliance function operational, enhancing internal audit reporting, and implementing new accounting/reconciliation policies. - Compliance reports to the Board of Governors starting from the first quarter of 2022 (proposed SB, reset from the fourth quarter of 2020). - Semi-annual external audits of foreign exchange reserves, co-sourcing of internal audit, and monitoring of the CBL’s budget should continue. - External audit report of CBL’s financial statements for 2020 submitted to CBL management for review; an interim audit for the period ended September 2021 is underway. *Source: Liberia authorities; and IMF staff estimates and projections as presented in the referenced chapter.* ### 25. Staff expressed concerns that despite the stronger governance framework ### 25. Staff expressed concerns that despite the stronger governance framework ### Governance and Anti-corruption - Staff noted that despite a stronger governance framework, improvement on the ground is slow. - The PAPD aims to achieve an improved country ranking by Transparency International but Liberia is sliding back. - Local and foreign non-government sources report widespread corruption. - Authorities are moving to revamp the LACC: - The position of the chair has been filled. - Nominations for two other vacancies on the board are imminent. - Staff recommended: - Swift enactment and firm enforcement of the package of new anti-corruption legislation. - Revamping the anti-corruption agency to strengthen implementation. ### Inclusive Growth and Public Investment - Authorities and staff agreed that macroeconomic stability is necessary but not sufficient for development; closing infrastructure gaps and addressing human capital deficits are also required. - Staff advocated drawing up a cohesive Public Investment Program encompassing: - the 10 percent of GDP in donor-financed investment, and - domestically-financed capital spending, which currently accounts for less than one percent of GDP. - Expanding the investment envelope requires: - mobilizing more domestic tax revenues, - securing additional donor financing, and - keeping a tight rein on the wage bill. - There is scope to achieve a more growth-friendly spending composition by reallocating resources across MACs. - Business environment reforms (low-cost to implement compared with infrastructure) should be prioritized: - Evidence from the 2019 business climate conference and a recent special session on the judiciary identifies obstacles including protracted registration procedures, excessive inspections, undue road check points, lack of e-filing of taxes, bottlenecks in obtaining construction permits and registering property, complicated port procedures, and lack of a modern credit bureau. - The MFDP is committed to synthesize these insights and establish a log frame with concrete priority actions, milestones, and entities in charge of their implementation (proposed SB for end-March 2022). ### Program Modalities and Waivers - Staff supports the following requests by the authorities: - A waiver for the nonobservance of the floor on the change in the CBL’s NIR in December 2020 on the basis of corrective action. Bank recapitalization and currency changeover, which suffered delays that resulted in the breach, are now being implemented. NIR have meanwhile surpassed the levels targeted for end-December 2020. - A waiver for the nonobservance of the ceiling on external arrears of the central government, as the breach was minor. It was due to clerical errors in the processing of external debt service payments. At less than US$3 million, the breach was very small, and arrears have meanwhile been cleared. - Introduction of adjustors to the PCs on the primary fiscal balance, NIR, and direct credit of the CBL to the government to accommodate budgetary use of the IMF’s SDR allocation to Liberia by up to US$80 million in 2022. - Introduction of an adjustor to the PC on the CBL’s operational and capital expenses to accommodate outlays for the currency changeover reimbursed by the government. - The modification of SBs pertaining to the establishment of the TSA, the submission of the Financial Institutions Act to the Legislature, the destruction of unfit banknotes, and the issuances of guidelines for risk-based supervision guidelines. ### Debt, Fund Exposure, and Financing - Liberia’s capacity to repay the Fund remains adequate, but exposure to Fund resources is high and program risks are significant: - Total outstanding credit to the Fund accounts for some 20 percent of total external public debt and is projected to peak in 2022 at 8.7 percent of GDP (89.6 percent of quota). - Debt service to the Fund as a share of total obligations will peak in 2022 at 61 percent. - The program remains fully financed with firm commitments for the next 12 months, and prospects are favorable for the remainder of the program. - Staff supports the disbursement of SDR17 million (US$24.1 million). - PCs, ITs, and SBs through the first half of 2022 are set out in Tables 1, 4 and 5 of the MEFP. ### Capacity Development - Liberia is an intensive user of TA. - The capacity development strategy supports the authorities’ development agenda and the ECF-supported program, focusing on: - domestic revenue mobilization; - strengthening bank supervision; - cash management; - improving macroeconomic statistics; - currency management; and - monetary policy operations. ### Staff Appraisal: Performance, Outlook, and Policy Advice - Program performance has been mixed: - Further progress has been made with entrenching macroeconomic stability. - A favorable fiscal revenue performance and further cleanup of the government payroll are considerable achievements. - Structural reform implementation is taking longer than planned, notably in governance and financial sector restructuring. - Economic outlook: - The economy is recovering from the COVID-19 setback. - Economic activity should reach pre-pandemic levels this year and expand robustly in 2022 on the back of sharp increases of investment by the government and in the mining sector. - Payoffs from the government’s reform program should carry growth over the medium term. - Currency changeover: - Planned currency changeover will put an end to disruptive cash shortages but comes with downside risks. - Prospective delivery of additional currency from late November is welcomed; it will strengthen financial sector confidence, foster de-dollarization, and facilitate accumulation of international reserves. - Staff notes that reprinting existing currency could have achieved similar outcomes without exchanging the entire currency stock, and that the chosen approach gives rise to immense operational challenges. - The CBL is developing a time-bound implementation plan envisaging a gradual, highly managed exchange relying on existing institutional arrangements where possible. - Fiscal policy and SDR use: - Staff supports the government’s fiscal policy for the rest of 2021 and 2022, provided medium-term objectives are kept in sight. - Subject to keeping Liberia’s international reserve cover above 4 months of imports, it is appropriate to partly use the IMF’s SDR allocation to Liberia for strengthening high-quality investment, supporting COVID-19 vaccinations, and retiring expensive public debt. - The government’s commitment to contain the public wage bill and strengthen domestic revenue mobilization is important for medium-term fiscal sustainability. - Financial sector: - Financial sector development and stability remain a work in progress. - Authorities should capitalize on the currency changeover, accelerate bank restructuring, deal aggressively with high non-performing loans, and further strengthen the supervisory framework by adopting and implementing the new Financial Institutions Act. - Governance and private sector development: - Progress in strengthening the governance framework is welcome but has yet to translate into improvements on the ground. - Public financial management and central bank governance have been decisively upgraded since 2019. - Authorities should advance the broader governance agenda and strengthen implementation, including by enacting and enforcing anti-corruption legislation and revamping the anti-corruption agency. - More emphasis should be placed on private sector development; shortcomings in the business environment are well understood and the government is committed to systematically address deficiencies by implementing concrete reform measures. *Source: IMF staff report content provided in the supplied document.* ### 39. Staff supports the completion of the third review of the ECF-supported program and ### 39. Staff supports the completion of the third review of the ECF-supported program and the disbursement of fourth tranche ### Program review and financing actions - Staff supports the completion of the third review of the ECF-supported program and the disbursement of fourth tranche in the amount of SDR 17 million. - Staff supports granting waivers for the non-observance of the performance criteria on net international reserves and on external payment arrears. - Staff supports modification of SBs and adjustments to the TMU, notably to accommodate partial on-lending of the SDR allocation by the CBL to the government. ### Recent economic developments (high-level findings from Figures 3–6) - Services sector: - The services sector was hard hit by the COVID-19 pandemic and dragged the economy into recession. - Commodity exports: - Commodity exports benefitted from the recovery of international prices in the second half of 2020. - Exchange rate and inflation: - The exchange rate appreciated sharply in late 2020 due to an acute shortage of LD banknotes. - The LD banknote shortage also accelerated disinflation, together with a decline in import prices. - Reserves and monetary aggregates: - Excess dollar reserves and outstanding CBL bills increased steadily while LD reserves have fallen. - Rising donor support and stronger net remittances improved reserves from late 2019 with the SDR allocation providing a major boost in August 2021. - Growth of monetary aggregates slowed sharply because of LD banknote shortages and a tight monetary policy stance. - Private sector credit started to expand again in 2020. ### Fiscal performance (summary of Figure 6 and Tables 2–5) - Revenue and expenditure: - Revenue collection in 2020 showed improvements after a poor showing in 2019, reflecting the introduction of a fuel excise tax, a rebound of trade taxes late in the year, and some one-off effects. - Trade taxes in 2020 fared much better than in 2019 and came close to matching the 2018 performance. - Expenditure remained under control considering the pandemic-related spending needs. - On-budget expenditure remains low and is grossly inadequate for capital outlays. - Recent progress with deficit reduction is encouraging, although partly due to one-off factors. - Key fiscal projections and indicators (percent of GDP unless otherwise indicated) from Table 2 and Table 4b: - Total revenue and grants: 27.4 (CY2019), 31.2 (CY2020), 29.2 (CY2021), 30.7 (CY2022), 28.8 (CY2023), 28.9 (CY2024), 28.0 (CY2025), 28.5 (CY2026), 28.2, 27.7. - Total revenue: 13.9 (CY2019), 15.8 (CY2020), 15.3 (CY2021), 17.8 (CY2022), 16.6 (CY2023), 17.2 (CY2024), 17.4 (CY2025), 17.4 (CY2026), 17.7, 17.9. - Grants: 13.5 (CY2019), 15.3 (CY2020), 13.9 (CY2021), 12.9 (CY2022), 12.2 (CY2023), 11.7 (CY2024), 10.5 (CY2025), 11.1 (CY2026), 10.5, 9.8. - Total expenditure: 32.2 (CY2019), 35.4 (CY2020), 32.2 (CY2021), 33.1 (CY2022), 31.2 (CY2023), 32.9 (CY2024), 30.0 (CY2025), 30.0 (CY2026), 29.6, 29.1. - Overall fiscal balance, including grants: -4.8 (CY2019), -4.2 (CY2020), -3.0 (CY2021), -2.4 (CY2022), -2.4 (CY2023), -4.0 (CY2024), -2.1 (CY2025), -1.7 (CY2026), -1.5, -1.4. - Overall fiscal balance, excluding grants: -18.3 (CY2019), -19.6 (CY2020), -16.9 (CY2021), -15.3 (CY2022), -14.5 (CY2023), -15.8 (CY2024), -12.6 (CY2025), -12.8 (CY2026), -12.0, -11.2. - Total public debt (percent of GDP): 48.9 (CY2019), 61.8 (CY2020), 62.0 (CY2021), 56.1 (CY2022), 63.5 (CY2023), 59.0 (CY2024), 59.4 (CY2025), 56.2 (CY2026), 53.2, 50.1. - Public external debt (percent of GDP): 35.2 (CY2019), 40.9 (CY2020), 42.8 (CY2021), 38.3 (CY2022), 45.2 (CY2023), 38.1 (CY2024), 38.7 (CY2025), 37.4 (CY2026), 36.8, 36.3. - Fiscal tables also note: - Projections for 2022 include bank restructuring costs of 0.3 percent of GDP as expenditure (Table notes). ### External sector and balance of payments (Table 3 and Table 8 highlights) - Trade and current account: - Trade balance (millions of US$): -395 (2019), -390 (2020), -588 (2021), -430 (2022), -593 (2023), -399 (2024), -391 (2025), -391 (2026), -318, -209. - Current account balance (millions of US$): -605 (2019), -496 (2020), -689 (2021), -615 (2022), -734 (2023), -698 (2024), -764 (2025), -822 (2026), -861, -881. - Current account balance (percent of GDP, including grants): -19.6 (2019), -16.3 (2020), -22.2 (2021), -17.9 (2022), -22.6 (2023), -18.9 (2024), -19.9 (2025), -19.9 (2026), -19.3, -18.3. - Exports, f.o.b.: 539 (2019), 608 (2020), 462 (2021), 793 (2022), 485 (2023), 862 (2024), 911 (2025), 960 (2026), 1,084, 1,263. - Imports, f.o.b.: -934 (2019), -998 (2020), -1,050 (2021), -1,223 (2022), -1,078 (2023), -1,261 (2024), -1,302 (2025), -1,351 (2026), -1,402, -1,472. - Reserves and financing: - Gross official reserves (millions of US$): 292 (2019), 358 (2020), 403 (2021), 716 (2022), 429 (2023), 719 (2024), 769 (2025), 779 (2026), 811, 846. - Months of next year's imports: 2.2 (2019), 2.3 (2020), 2.9 (2021), 4.4 (2022), 3.0 (2023), 4.2 (2024), 4.3 (2025), 4.2 (2026), 4.2, 3.8. - Total Financing Requirement (Table 8, Millions of US$): -1,059 (2017), -882 (2018), -767 (2019), -785 (2020), -1,169 (2021), -894 (2022), -983 (2023), -1,028 (2024), -1,095 (2025), -1,117 (2026). - Total Sources (Table 8, Millions of US$): 1,059 (2017), 882 (2018), 767 (2019), 785 (2020), 1,169 (2021), 894 (2022), 983 (2023), 1,028 (2024), 1,095 (2025), 1,117 (2026). ### Monetary and financial indicators (Table 6 highlights) - Monetary aggregates and reserves: - Broad money (M2, millions of US$): 644 (2019), 775 (2020), 693 (2021), 842 (2022), 733 (2023), 873 (2024), 930 (2025), 1,001 (2026), 1,107, 1,162. - Monetary base (M0, millions of US$): 216 (2019), 261 (2020), 213 (2021), 263 (2022), 226 (2023), 270 (2024), 287 (2025), 309 (2026), 333, 359. - Net International Reserves (millions of US$): 270 (2019), 703 (2020), 927 (2021), 536 (2022), 240 (2023), 144 (2024), 450 (2025), 457 (2026), 5. - Credit and liquidity: - Credit to private sector (annual percent change): -11.3 (2019), 5.5 (2020), 4.0 (2021), 12.7 (2022), 5.1 (2023), 9.4 (2024), 7.9 (2025), 8.1 (2026), 8.2, 8.2. ### ECF disbursement schedule and IMF financing (Table 9 and Table 10) - Schedule of disbursements under ECF arrangement, 2019–23 (Millions of SDR): - December 11, 2019: 17.0 (6.58% of Quota) — Executive Board Approval of four-year ECF arrangement. - December 21, 2020: 34.0 (13.16% of Quota) — Executive Board Approval of the first and second reviews of the ECF arrangement. - June 1, 2021: 17.0 (6.58% of Quota) — Observance of performance criteria for December 31, 2020, and completion of third review. - December 1, 2021: 17.0 (6.58% of Quota) — Observance of performance criteria for June 30, 2021, and completion of fourth review. - June 1, 2022: 17.0 (6.58% of Quota) — Observance of performance criteria for December 31, 2021, and completion of fifth review. - December 1, 2022: 17.0 (6.58% of Quota) — Observance of performance criteria for June 30, 2022, and completion of sixth review. - June 1, 2023: 18.0 (6.97% of Quota) — Observance of performance criteria for December 31, 2022, and completion of seventh review. - November 15, 2023: 18.0 (6.97% of Quota) — Observance of performance criteria for June 30, 2023, and completion of eight review. - Total for the ECF arrangement: 155.0 (60.0% of Quota). - Indicators of capacity to repay the IMF (Table 10, selected figures, as of March 2021): - Fund obligations based on existing credit (Repayment of principal, in millions of SDRs): 23.0 (2021), 26.3 (2022), 27.3 (2023), 24.4 (2024), 20.2 (2025), 25.9 (2026), 20.4 (2027), 17.4 (2028), 17.4 (2029), 10.4 (2030), 0.0 (2031). - Total obligations based on existing and prospective credit (In millions of SDRs): 23.0 (2021), 26.3 (2022), 27.3 (2023), 24.4 (2024), 20.2 (2025), 25.9 (2026), 27.2 (2027), 32.8 (2028), 38.2 (2029), 31.2 (2030), 20.8 (2031). - Outstanding Fund credit (In millions of SDRs): 198.9 (2021), 231.5 (2022), 240.2 (2023), 215.8 (2024), 195.6 (2025), 169.7 (2026), 142.5 (2027), 109.7 (2028), 71.4 (2029), 40.2 (2030), 19.4 (2031). - Net use of Fund credit (in millions of SDRs): -6.0 (2021), 24.7 (2022), 8.7 (2023), -24.4 (2024), -20.2 (2025), -25.9 (2026), -27.2 (2027), -32.8 (2028), -38.2 (2029), -31.2 (2030), -20.8 (2031). - Memorandum items (projections): Exports of goods and services (in millions of US$): 1,047 (2021), 1,137 (2022), 1,205 (2023), 1,280 (2024), 1,417 (2025), 1,599 (2026), 1,809 (2027), 2,035 (2028), 2,246 (2029), 2,483 (2030), 2,722 (2031). - Gross International Reserves (in millions of US$): 716 (2021), 699 (2022), 749 (2023), 759 (2024), 791 (2025), 826 (2026), 869 (2027), 916 (2028), 963 (2029), 1,019 (2030), 1,072 (2031). *Source: IMF staff.* ### Appendix I. Letter of Intent ### Appendix I. Letter of Intent ### Introduction - Government of Liberia updates the IMF on progress under the economic program anchored in Liberia’s national development plan, the Pro-Poor Agenda for Prosperity and Development (PAPD), and supported by the IMF’s Extended Credit Facility (ECF). - Since the IMF Executive Board completed the combined first and second program review in December 2020, macroeconomic stability has been maintained and the economic outlook is described as favorable, with downside risks notably from a possible flareup of the COVID-19 pandemic. - IMF support noted: debt relief under the Catastrophe Containment and Relief Trust, budget support under the Rapid Credit Facility, and support in the context of the last ECF review. - The recent SDR allocation is described as providing a timely boost to Liberia’s international reserve position and opening fiscal space to jumpstart the economy and improve development prospects. ### Program performance and recent implementation - Quantitative performance (end-December 2020 and continuous PCs): - 4 out of 6 performance criteria were met. - The target for the Central Bank of Liberia’s (CBL) net international reserve (NIR) accumulation was missed. - External debt service arrears were incurred but have been cleared; amounts involved were described as marginal. - Institutional mechanisms are being bolstered to ensure timely payments of both external and domestic debt service. - Indicative targets: - 3 out of 5 indicative targets were observed. - Capital spending fell short of the targeted amount due to pandemic-related reprioritization of expenditure. - Domestic payment arrears arose when domestic debt was serviced with a delay. - Structural reform implementation: - Only 2 out of 10 structural benchmarks met by the reporting date; a further 4 meanwhile implemented. - Specific SBs implemented or progressed: - Compiled an inventory of tax and customs exemptions. - Enhanced compliance reports on foreign exchange withdrawals at the CBL submitted monthly to the Board of Governors (BOG) (reporting format needs improvement). - External semi-annual audits of the CBL’s foreign exchange reserves completed (some follow-up pending). - Continued to improve and clean the payroll registry; suspension of salary payments to staff without biometric ID took place at end-April 2021 after the deadline. - Security arrangements for the CBL’s vault upgraded with a delay. - Inventory and rationalization of public entities’ accounts at commercial banks and the CBL completed; TSA policies signed by the Minister of Finance and Development Planning after the deadline. - Audits of Annual Financial Statements for FY2018 and FY2019 submitted and published with delays; audit for FY2020 expected for end-November 2021. - Amendments to anti-corruption legislation submitted to the National Legislature and passed by the House; enactment likely before end-January 2022. - Quarterly reports to the CBL’s BOG on compliance with policies and procedures not submitted due to delays establishing a dedicated unit. - Dual control security strategy at the CBL experienced delays due to building limitations; interim alternative arrangements in place. ### Recent economic developments and key statistics - 2020: - Economic contraction contained to 3 percent last year (2020), helped by improved prospects in the industrial sector (iron ore and rubber). - Inflation reduced to 7 percent in August 2021 from almost 20 percent in early 2020. - Gross international reserves strengthened from 2.3 months of imports to currently 4.5 months of imports. - 2021: - Growth projected at 3.6 percent for the year. - End-December 2020 program performance: missed CBL NIR accumulation target by US$10.7 million (mainly due to delays in bank recapitalization and currency changeover). - End-June 2021 NIR target likewise missed because the currency changeover only started in December 2021. - Outlook: - In 2022, economic growth expected to pick up to 4.7 percent. - Temporary rise of inflation to some 12 percent in 2022 is expected as rollout of a new family of LD currency alleviates cash shortages, while underlying disinflation trend expected to remain intact. - International reserve cover expected to remain above 4 months of imports, even if the CBL on-lends part of SDR allocation to the government. - Risks and policy responses: - Downside risks predominantly from possible setbacks in vaccine deployment globally and potential new local infection waves; Liberia stepping up vaccination campaign to reach WHO goal of 70 percent of eligible population vaccinated by 2023, subject to vaccine availability for sub-Saharan Africa. - Planned currency changeover acknowledged to have multiple operational challenges; CBL adopted a time-bound implementation plan and committed to carry out the changeover with care to minimize operational risk. ### Requests to the IMF and program adjustments - Waivers requested for: - Nonobservance of the floor on the change in NIR for end-December 2020. - Nonobservance of the ceiling on new external payment arrears of the central government. - Requests to modify structural benchmarks (SBs) pertaining to: - Establishment of the Treasury Single Account (TSA). - Submission of the Financial Institutions Act to the Legislature. - Destruction of unfit banknotes. - Issuance of risk-based supervision guidelines. - Requests to modify the Technical Memorandum of Understanding (TMU): - Add adjustors to program targets for the primary fiscal balance, NIR and net domestic assets of the CBL, and direct CBL credit to the government to accommodate budgetary use of part of the SDR allocation. - Add adjustors to program targets for the CBL’s operational and capital expenditure to accommodate additional outlays for the currency changeover that are reimbursed from the budget. - Financing and program review request: - Requesting completion of the third review of the ECF-supported program and a disbursement of SDR 17 million (6.58 percent of quota). - Authorization: - Government authorizes the IMF to publish the staff report, this letter, the attached MEFP and the TMU on its website and other media once the IMF Executive Board approves the third review of the ECF-supported program. ### Fiscal policy and near-term budget measures - FY2021 fiscal performance: - Primary fiscal deficit excluding grants overperformed the program target by US$30 million (0.9 percent of GDP), allowing accumulation of government deposits at the central bank. - Revenues strengthened due to introduction of a fuel excise tax, changes in application of the personal income tax, robust border tax collection, and progress with revenue administration reforms. - Some fiscal space used for selected hiring of teachers, health workers, and prosecutors and for supporting critical SOEs. - Special budget for July-December 2021: - Approved by the National Legislature; budget is free of central bank borrowing and consistent with macroeconomic stability. - Funded by a US$30 million windfall from signing of a mining concession, draw-down of government deposits at the central bank, and continuation of robust recent revenue performance. - Allows marked expansion of capital spending and a US$10 million contribution for printing the new currency. - Wage bill remains flat; other spending rises only slightly faster than the economy. - Budget is broadly in balance and in a deficit to the tune of 0.4 percent of GDP if bank recapitalization costs are included. - Government reaffirms commitment to dual authorization system for cash releases by the Budget Department and the Fiscal Affairs Department while ensuring timely releases if funds available. - Measures to strengthen public finances and spending quality: - Circular discontinuing wage payments for public employees without biometric ID effective from end-April; detailed report on scope and impact provided to IMF staff. - Commitment to contain the wage bill and balance new hiring in priority areas with departures elsewhere over time. - With IMF technical assistance, a tax exemption inventory compiled; first tax expenditure report for border taxes produced by an ad-hoc inter-ministerial committee. - Commitment to enhance reporting system for tax expenditures and produce a full tax expenditure report for the 2023 budget and compile a list of concrete measures to streamline exemptions (SB for end-June 2022). - Progress on establishing TSA: - Reconciled inventory of accounts of ministries, agencies, and commissions (MACs) in commercial banks with MACs’ records. - Minister signed the TSA strategy. - SB reset for end-December 2021 to close MACs’ accounts in commercial banks, transfer balances to the CBL, and provide list of remaining accounts to IMF staff. - Commitment to transfer any remaining MACs’ accounts at commercial banks to the CBL and finalize the TSA’s new account structure at the CBL (SB for end-March 2022). - Expenditure control: - Government will issue a circular mandating that government contracts must be accompanied by IFMIS-generated purchase orders to be valid (SB for end-December 2021). - Debt service arrears prevention: - Government to authorize the CBL well in advance to make payments falling due and sweep funds from the consolidated revenue fund as needed. - An MOU between the CBL and the Ministry of Finance and Development Planning will establish operational modalities for this framework. - Improving spending quality: - Ministry to review existing allocations, develop analytical monitoring tool, and identify unproductive spending. - Legacy government payment arrears will be gradually paid down according to an arrears-payment strategy. - Revenue mobilization and administration: - Stepping up efforts to collect more dividends from the Liberian Telecom Authority and the Liberian Maritime Authority; modalities for full integration into the budget under discussion. - Introducing more tamper-proof excise tax stamps. - Project initiated to replace the general sales tax by a value-added tax over the next 2-3 years with a public announcement. *Source: Appendix I. Letter of Intent (Monrovia, November 9, 2021), Memorandum of Economic and Financial Policies, Technical Memorandum of Understanding.* ### 14. The Liberian authorities intend to redirect part of the SDR allocation to the 2022 ### 14. The Liberian authorities intend to redirect part of the SDR allocation to the 2022 ### SDR allocation, on-lending, and intended uses - The IMF’s SDR allocation was timely as resources and reserves are running low in the wake of the pandemic. - The authorities will not allow international reserve cover to drop below 4 months of imports. - The CBL may on-lend up to US$80 million to the government in 2022 while maintaining reserve cover; the reserve position will be reassessed toward end-2023 for potential additional on-lending scope in 2023. - On-lending modalities will be governed by a memorandum of understanding between the CBL and the government; all associated costs and risks for the CBL will be borne by the government. - Government commitment to draw on SDR resources only for designated priority policies with program targets designed accordingly: - Up to US$10 million for vaccines and their administration to strengthen resilience against COVID-19. - Retirement of all outstanding T-bonds currently held by banks in the amount of LD 6 billion (around US$35 million) to reduce the government’s interest bill and free resources for bank lending. - An additional US$35 million on high priority investment to supplement the public investment program and expand its envelope to US$98 million, excluding US$23 million for the road fund and US$35 million allocated for conducting the 2023 elections. - Key projects within the US$35 million investment package (Project — Costs (US$ millions)): - County projects: Construction of 500 pro-poor housing units, completion and upgrade of the Bong County Technical College, and construction of the Sanniquelle Hospital in Sekimpa. — 10 - Transformer project: Connecting additional households along the Monrovia - Kakata corridor, the Monrovia -Bomi corridor, and the Monrovia-RIA corridor to the electrical grid. — 2 - Resettlement Action Plan payment: Resettlement of affected persons in Ganta-Saclepea under the World Bank sponsored SECRAMP I road project and in Sanniquelle-Logatuo under the AfDB sponsored road projects. — 4 - Road project: Part-payment for expansion of the 44.5 km access road to Robert International Airport (RIA). — 10 - Road construction equipment: Procurement of dump trucks, bulldozers, frontend loaders, compactors, and excavators to increase the Ministry of Public Works’ capacity for rural road maintenance. — 3 - Other projects: Community water kiosks project; renovation of the University of Liberia Campuses; contribution to interconnecting Liberia to the regional electricity grid and the West African Power Pool. — 6 - Total — 35 ### 2022 budget framework and fiscal targets - The 2022 budget will be free from central bank borrowing, except for the SDR on-lending operation, and based on realistic revenue projections. - Continued efforts to mobilize domestic revenues. - Expenditure policy thrusts: - Keep the wage bill flat in nominal terms and rationalize goods and services spending while allowing judicious increases with productive impact. - Boost investment and substantially increase the allocation for capital spending. - Preliminary budget envelope and composition: - Resource envelope of US$780 million, including US$635 million from domestic revenues. - Wage bill kept flat in nominal terms at some US$300 million. - Set aside US$10 million as the government’s contribution to the costs of the currency change-over. - Provision for the October 2023 general elections (specific allocation elsewhere: US$35 million noted previously). - Fiscal outcome projection: - Primary deficit excluding grants is estimated at US$29 million (0.8 percent of GDP). ### Public debt outlook and DSA - Commitment to maintain Liberia’s moderate risk rating for external debt distress in the Debt Sustainability Analysis (DSA) and to be judicious in taking on domestic debt given the high-risk rating for overall public debt distress. - Supporting factors for debt dynamics: - Prudent medium-term fiscal framework. - IMF debt service relief under the Catastrophe Containment and Relief Trust (CCRT). - Commitment not to contract or guarantee new non-concessional external debt. - Participation in the Debt Service Suspension Initiative (DSSI) since March 2021; awaiting responses from creditors. - Projection: - Nominal public debt is projected to decline from 56 percent of GDP at end-2021 to 50 percent of GDP in 2026. ### Monetary policy stance and inflation - Good progress with bringing inflation down to single digits. - Central bank reduced its monetary policy rate by a further 500 bps to 20 percent in August 2021. - Acknowledgement that inflation may temporarily rise with the introduction of the new currency; commitment to remain vigilant and maintain a monetary policy stance geared toward containing inflation. - Harmonization of required reserve ratios for LD and USD deposits remains a medium-term objective. - CBL bills will remain a vehicle dedicated to fine-tuning monetary policy. ### Currency change-over implementation - Change-over objectives: (i) end periodic cash shortages, (ii) replace worn-out banknotes, (iii) retire previous banknote series to leave one unified family in circulation. - Emergency measures: - Emergency order through sole sourcing for a limited number of LD100 banknotes slated to arrive in late November to address immediate cash needs. - A request for proposals for printing remaining banknotes was issued in early October. - Implementation principles and timing: - Ensure first liquidity injection before the festive season to avoid renewed cash shortages. - Follow a gradual approach; denominations introduced sequentially and new currency made gradually available for exchange over the campaign. - All denominations will have been introduced over the course of the second semester of 2022 and about 60 percent of the new banknotes and coins will have arrived in Liberia. - The balance will be delivered in 2024 due to the National Legislature’s resolution that does not allow deliveries in the election year of 2023. - Allow a generous period where the old currency remains legal tender and can be exchanged. - Rely on existing channels and time-proven arrangements for exchange to avoid surprises and foster transparency. - Fully engage commercial banks to preserve CBL capacities. - Build flexibility and margins into the plan to deal with unforeseen developments. - A time-bound implementation plan will be adopted by the CBL’s Board of Governors as a prior action for this program review. ### Central Bank governance and operational reforms - Improvements already implemented: - External audits for cash recording and inventory management. - Improved quality of monetary data. - Reconciliation of vault positions. - Adherence to procedures for opening and closing government accounts. - Commitments over the next 6-12 months to complete outstanding reforms and address 2020 Safeguards Assessment recommendations: - Finalize and implement a comprehensive policy governing all financial accounting procedures and reconciliations. - Regularize timely completion of external audits and publication of annual financial accounts consistent with the Amended and Restated CBL Act; draft financial reports for 2020 were under management review in October 2021. - Newly appointed external auditors will conduct an interim audit for 2021 shortly to ensure next financial report is published in accordance with CBL Act deadlines. - Ensure highest level of accountability for FX reserves by: - Timely conducting semi-annual external audits on foreign exchange activity, as per the SB under the ECF arrangement. - Resolving outstanding audit items pertaining to foreign reserve assets. - Strengthening internal governance arrangements and developing an investment policy for FX reserves. - Enhancing reporting on foreign exchange activity to the BOG; furnishing of monthly reports remains an SB. - Strengthen management and Board oversight through enhancements to internal audit reporting and implementation of outstanding audit recommendations. - In line with the Enterprise Risk Management Policy, submit quarterly compliance reports to the BOG detailing deviations from CBL policies, procedures, and regulatory requirements; the BOG approved establishment of a compliance section under the Executive Governor with terms of reference to be finalized and the first quarterly compliance report envisaged for the first quarter of 2022 (reset SB). - Implement remaining security upgrades to support internal controls in cash currency management. (SB for end-December 2021, reset from end-December 2020) ### Financial sector supervision and NPLs - Supervisory and regulatory enforcement priorities: - Further buttress application of supervisory sanctions for banks with inadequate capitalization or in violation of reserve requirements. - Revise the Financial Institutions Act (FIA) to strengthen the regulatory environment, including supervision of non-bank financial institutions and funding in the event of resolution. - Submit the draft FIA to the National Legislature by end-February 2022 (reset SB from end-June 2021). - Introduce a Comprehensive Resolution Regime through the revised FIA to enable resolution of non-viable banks without systemic disruption or taxpayer burden. - Approve operational guidelines for the resolution regime by end-April 2022 (SB reset for end-September 2021). - Establish an organizational unit to develop and execute resolution strategies by end-May 2022 (SB reset from end-June 2021). - Issue revised Risk-Based Supervision Guidelines once the new FIA is approved (SB for end-April 2022 reset from end-June 2021). - Non-performing loans (NPLs): - System average NPLs ratio rose during the pandemic, declining from a peak of 27 percent in March to 23 percent in June 2021 against the 10-percent regulatory threshold. - CBL actions: - Conducting asset quality reviews and scrutinizing banks’ resolution strategies for NPLs. - Reviewing and recommending revisions to banks’ recovery strategies. - Enhancing credit standards by upgrading the CBL-managed credit registry drawing on a World Bank diagnostic review. ### Governance, anti-corruption, procurement, audits, and business climate reforms - Anti-corruption legislative and institutional measures: - Drafts of the Liberia Anti-Corruption Commission (LACC) Act, the Whistleblower and Witness Protection Act, and amendments to the Code of Conduct were submitted to the Legislature in May 2021. - House of Representatives approved drafts in August 2021; Senate expected to take up later in the year with government commitment to adoption by end-January 2022 (reset and modified SB, from end-March 2021). - Draft LACC Act grants the LACC first-tier prosecutorial powers, places it in charge of the asset declaration regime for senior public officials, and authorizes recommending sanctions for non-compliance. - Amended Code of Conduct would allow access to declarations by court order guided by the Freedom of Information Act and other legislation. - LACC’s annual report will include activities related to the asset declaration regime, including summary statistics. - Commit to expeditiously fill two remaining vacancies on the LACC board; corruption allegations against two LACC top officials referred to the Ministry of Justice for investigation with intent to make findings public. - Public Procurement and Concessions Commission (PPCC) transparency measures: - Contracts and contract award documents above thresholds are published on the PPCC website: US$200,000 for goods, US$400,000 for works, and US$100,000 for services. - Key information on missing FY2020 contracts (including legal ownership) was filled in May; FY2021 contract information is being posted. - Firms bidding on public contracts will be required to disclose beneficial ownership information, which will be published for winners; PPCC will try to obtain beneficial ownership information for past contract winners where feasible. - Ministry of Finance and Development Planning to put mechanisms in place to ensure timely submission of procurement documentation to PPCC. - PPCC plans to pilot an electronic procurement system in late 2022 to improve transparency and timeliness. - Government financial audits and accountability: - FY2018 and FY2019 audits completed and published. - Aim to submit the FY2020 report to the National Legislature by end-November 2021 (SB reset from end-February 2021); disclaimers primarily due to inadequate documentation. - Electronic Document Management System launched to help ensure timely provision of documentation to the General Auditing Commission (GAC). - GAC preparing policy options to prepare audit reports without excessive disclaimers going forward. - Special audit of Covid-related spending incurred in 2020 to be completed by end-December 2021. - Business environment reforms: - Establish a new framework to facilitate engagement with the private sector, develop a business and investment climate roadmap informed by judiciary-focused conference findings, and establish a log frame with priority actions, milestones, and implementation entities (SB for end-March 2022). - AML/CFT legal and institutional reforms: - Core AML/CFT legislation expected to be passed by the National Legislature by end-2021. - New law will establish a National Coordination Committee (NCC), chaired by the Minister of Finance and Development Planning and including the CBL, the Financial Intelligence Unit (FIU), and the Ministry of Justice to manage implementation and oversight of AML/CFT laws and regulations. - Interim structures will continue preparatory work for smooth transition to the new framework. - A new National Risk Assessment report was completed and published in September 2021. *Source: 1lbrea2021003.* ### 27. The program will be monitored by quantitative performance criteria, structural ### 27. The program will be monitored by quantitative performance criteria, structural ### Monitoring framework and review schedule - The program will be monitored by quantitative performance criteria (QPC), structural benchmarks, indicative targets (IT), and semi-annual reviews, as set out in Tables 1 to 5 and the attached technical memorandum of understanding. - The fourth, fifth and sixth reviews are expected to be completed on or after December 1, 2021, June 1, 2022, and December 1, 2022, respectively. ### Key quantitative performance criteria and indicative targets (selected) - Floor on primary fiscal balance, excluding grants (Millions of U.S. dollars): - Sep. 2021 PC: -15.0; Prel. Status: -9.9; Outcome: Met - Dec. 2021 IT: -25.0; Prel. Status: 4.0; Outcome: Met - Mar. 2022 PC: -33.4; Prel. Status: 3.3; Outcome: Met - Jun. 2022 IT: 8.4 - Sep. 2022 PC: -21.0 - Dec. 2022 IT: -29.2 - Ceiling on contracted new non-concessional external debt of the public sector (continuous basis): targets and preliminaries set at 0.0 across Sep. 2021–Dec. 2022; Status entries: Met where reported. - Ceiling on new external arrears of the central government (continuous basis): target 0.0; notable non-compliance: Mar. 2022 Prel. Status 3.3 — Not met. - Ceiling on the CBL’s operational and capital expenses (Millions of U.S. dollars): examples - Sep. 2021 PC: 24.2; Prel. Status: 24.1; Outcome: Met - Dec. 2021 Prel. Status: 12.8; Outcome: Met - Mar. 2022 Prel. Status: 20.6; Outcome: Met - Floor on the change in the CBL’s net international reserves (Millions of U.S. dollars): - Sep. 2021 PC: -13.5; Prel. Status: -24.2; Outcome: Not met - Dec. 2021 IT: 4.8; Prel. Status: 8.9; Outcome: Met - Mar. 2022 PC: 29.4; Prel. Status: 27.2; Outcome: Not met - Dec. 2022 IT: 35.1 (memorandum shows other period figures up to 369.3) - Ceiling on CBL's gross direct credit to central government (Millions of U.S. dollars): example targets 557.7 and 548.8; reported Prel. Status entries match targets and are marked Met. - Indicative target — Floor on total revenue collection of the central government (Millions of U.S. dollars): - Sep. 2021 IT: 197.1; Prel. Status: 229.9; Outcome: Met - Dec. 2021 IT: 328.5; Prel. Status: 353.8; Outcome: Met - Mar. 2022 IT: 438.0; Prel. Status: 522.5; Outcome: Met - Dec. 2022 IT: 634.9 - Indicative target — Ceiling on new domestic arrears/payables of the central government (continuous basis): target 0.0; Mar. 2022 Prel. Status 2.8 — Not met. - Indicative target — Floor on on-budget capital spending (Millions of U.S. dollars): multiple periods show targets and repeated Not met outcomes (e.g., Sep. 2021 target 6.1 Prel. Status 0.6 Not met). - Memorandum items: - Ceiling on disbursement of concessional external debt: examples Sep. 2021 Proposed 310.0; Sep. 2021 Dec. 2020 Prel. Status 232.2 Met; series through Dec. 2022 reaching 570.8. - Floor on wage bill of school teachers (Millions of U.S. dollars): Sep. 2021 Proposed 16.6; Prel. Status 16.5; Not met for some periods; Mar. 2022 Prel. Status 33.2 Met. - Floor on spending on home-grown school feeding program (Millions of U.S. dollars): small values reported (e.g., 0.01, 0.10, 0.21, 0.33) and marked Met where indicated. ### Adjustment provisions and standard continuous criteria (selected) - Numbers before July 2021 are cumulative from the beginning of the fiscal year (July-June); September 2021 and December 2021 targets are cumulative from July 2021; 2022 targets are cumulative from beginning of the calendar year. - 2022 floors shall be adjusted down by the amount of foreign currency on-lending by the CBL to the GOL of the SDR allocation, capped at US$80 million. - 2022 floors shall be adjusted up by the sum of shortfalls in investment spending and shortfalls in spending on COVID-19 vaccines and their administration; this adjuster shall not be negative and is capped at US$45 million. - Standard Continuous Performance Criteria include: (i) not to impose new or intensify existing restrictions on the making of payments and transfers for current international transactions; (ii) not to introduce new or intensify existing multiple currency practices; (iii) not to conclude bilateral payments agreements inconsistent with the IMF’s Articles of Agreement (Article VIII); and (iv) not to impose new or intensify existing import restrictions for balance of payments reasons. ### Prior action and structural benchmarks — status highlights - Table 2 — Prior Action for Third ECF Review: - Currency Changeover: The CBL board to adopt an implementation plan prepared in consultation with IMF staff that ensures timely availability of additional currency while not overwhelming operational capacities. Rationale: Guard against disorderly currency changeover. Status: (listed but no explicit Met/Not Met in the table excerpt). - Table 3 — Structural Benchmarks for the Third ECF Review (selected): - Tax Administration: Develop an inventory of tax exemptions by type and industry; End-December 2020; Rationale: Assess amount of revenue foregone. Status: Met. - Public Financial Management and Governance: - Submit audit reports for FY2018 and FY2019 budgets to the Legislature, and submit the audit report for FY2020 to the Legislature; End-December 2020 and End-February 2021; Status: Not Met, FY2018 and FY2019 reports submitted with delay; target date for FY2020 report reset for December 2021 (fourth review). - Improve and clean the civil service payroll registry: End-March 2021; Status: Not Met, implemented with delay; salary suspension applied from April 2021. - Complete inventory and rationalize bank accounts with the CBL and commercial banks: End-March 2021; Status: Not Met, implemented with delay. - Improve Governance at the Central Bank of Liberia: - Submit quarterly compliance reports to BOG in line with Enterprise Risk Management Policy: 30 days after each quarter beginning for 2020 Q4; Status: Not Met, reset to start from 2022 Q1 (fifth review). - Internal Controls of the CBL: - Enhance reporting practices on foreign exchange withdrawals through compilation of monthly reports: Starting with the report for November 2020; Status: Met. - Semi-annual external audits on the foreign exchange reserves of the CBL: Within six weeks after every six months starting from 2020; Status: Not Met, implemented with delay in April 2021 for December 2020 audit report. - Cash currency management: - Improve vault security and set up dual control security strategy: End-December 2020; Status: Not met for several elements; some reset dates provided. - Strengthen Anti-Corruption Measures: - Enact revised LACC Act with prosecutorial powers and asset declaration regime: End-March 2021; Status: Not met, modified and reset for end-January 2022 (fourth review). - Table 4 — Structural Benchmarks for the Fourth ECF Review (selected): - Public Financial Management and Governance: - Complete inventory and rationalize bank accounts (transfer MACs accounts to CBL and list remaining commercial bank accounts): End-December 2021; Status: In progress, target pushed back from June 2021. - Submit the audit report for the FY2020 budget to the Legislature: End-November 2021; Status: In progress, reset from February 2021 (third review). - Government circular to mandate IFMIS-generated purchase orders for contracts: End-December 2021; Rationale: Prevent emergence of arrears. - Internal Controls of the CBL — recurrent: - Semi-annual external audits on foreign exchange reserves; compilation of monthly FX withdrawal reports — marked Recurrent/In progress. - Bank Supervision: - Submit amendments to the Financial Institutions Act (FIA) of 1999 to anchor the CRR and provide the CBL with powers for dealing with distressed banks: End-February 2022; Status: Target date pushed back from July 2021. - Issue the Risk-Based Supervision (RBS) Guideline: End-June 2021; Status: Target date pushed back to April 2022 (fifth review). - Cash Currency Management: - Develop methodology for forecasting banknote demand by denomination: End-June 2021; Status: Met. - Destroy unfit notes to create space: End-November 2021; Status: Target date pushed back from June 2021 to align with currency changeover. - Strengthen Anti-Corruption Measures: - Adopt the Whistle Blower and Witness Protection Act: End-January 2022; Status: Reset from June 2021 (third review). - Adopt the Liberia Anti-Corruption Commission (LACC) Act and amendments to the Code of Conduct: End-January 2022; Status: Reset from June 2021 (third review) and modified. - Table 5 — Structural Benchmarks for the Fifth ECF Review (selected): - Public Financial Management and Governance: - Transfer all government accounts to the CBL and establish the account structure at the CBL: End-March 2022; Status: In progress. - Domestic Revenue Mobilization: - Prepare and annex to the CY2022 budget a full tax expenditure report and draw up measures to streamline exemptions: End-June 2022. - Improve Governance at the CBL: - Submit quarterly compliance reports to BOG beginning with report for 2022 Q1 (30 days after the end of the quarter); Status: In progress, reset from 2020 Q4 (third review). - Banking Supervision (selected): - Approve operational guidelines, policies, and manuals for the comprehensive resolution regime: End-April 2022; Status: Reset from September 2021 (fourth review). - Establish organizational unit for resolution strategies: End-May 2022; Status: Reset from December 2021 (fourth review). - Issue the Risk-Based Supervision (RBS) Guideline: End-April 2022; Status: Reset from June 2021 (fourth review). ### Central Bank of Liberia (CBL): Work Program (selected actions, due dates, and status) - Governance of the CBL: - Amendments to the CBL Act to be submitted to the Legislature by end-March 2020: Status Met. The draft amended Act with IMF staff comments was submitted to the National Legislature and enacted in October 2020. - Enhance annual and interim financial statement disclosures (starting with 2019 financial statement): Ongoing; additional notes included and month-end closing procedures formalized. End-December 2019 closing procedures: Met. - In line with Enterprise Risk Management Policy, submit quarterly compliance reports to BOG (30 days after quarter end beginning 2019 Q4): In progress; compliance section authorized and deputy director appointed. - Internal Controls of the CBL: - Enhance reporting on foreign exchange withdrawals: Ongoing, due within six weeks after every six-month period. Status: Met. Monthly reports submitted to Management and BOG; FX reports for June 2021 completed. - Strengthen internal audit capacity via co-sourced firm and quarterly risk-based auditing: In progress; external auditing firm furnished report for 2020 and services retained for another year. - Bank Supervision: - Complete on-site examinations of institutions with overdrawn CBL balances as of end-September 2019: End-November 2019 — Met. - Appoint external auditor to review on-site examination findings: End-December 2019 — Met. - Detailed assessment of credit underwriting standards across banks: End-December 2020 — In progress; AQ reviews completed for 8 banks, 1 remaining by end-2021; findings indicate gaps in underwriting standards and loan misclassification. - Incorporate U.S. Treasury TA findings into Final Resolution Plan and submit to IMF: End-March 2021 — Met. Implementation of components of the Final Resolution Plan: End-September 2021 — In progress. - Introduce a Comprehensive Resolution Regime (CRR) and submit amendments to the Financial Institutions Act to anchor the CRR: End-December 2021 / End-July 2021 for amendments — In progress; draft FIA at advanced stage but requires further strengthening. - Update risk-based framework, harmonize rating methodologies, and strengthen supervisory capacity: End-September 2021 — In progress; draft RBS Framework developed with consultations completed. - Cash currency management (selected): - Improve inventory management and daily recordkeeping of vault stocks by denomination and fitness: End-November/December 2019 — Met. - Develop methodology for forecasting banknote demand by denomination: End-June 2020 — Met (implemented with delay). - Destroy unfit notes: On-going starting end-December 2019 — In progress; destruction to be concluded ahead of currency changeover. - Transfer currency held at waterside reserve vault to CBL reserve vault: End-December 2019 — Met. - Enhance control of access to restricted areas (swiping devices): End-June 2020 — Met; devices need replacement targeted for end-December 2021. - Set up a dual control security strategy (two door lock-system): End-December 2020 — Not Met; judged not applicable at this time. - Submit emergency procurement request to Legislature for printing sufficient Liberian dollar banknotes: End-January 2020 — Met; Legislature approved printing of LD4 billion, delivered in July 2020. - Ensure open tender process for any subsequent design/printing: Continuous — Not Met; Legislature tasked CBL with comprehensive currency exchange operation and implementation plan under preparation. ### Implementation record and pattern - Multiple structural benchmarks and targets were met (examples: tax exemption inventory; FX withdrawal reporting; methodology for forecasting banknote demand; CBL Act amendments enacted October 2020). - Several important benchmarks were Not Met or implemented with delay (examples: audit reports for FY2018/FY2019 submitted with delay; civil service payroll cleaning; dual control security strategy; some semi-annual FX audits). - Several target dates were reset or pushed back from original dates to later reviews (notably FY2020 audit report reset to December 2021; governance and supervision-related benchmarks pushed to 2022 in multiple instances). *Sources: Liberian authorities and IMF staff estimates and projections.* ### 1. This memorandum sets out the understandings between the Liberian authorities and ### 1lbrea2021003 - 1. This memorandum sets out the understandings between the Liberian authorities and ### Overview - Memorandum sets out understandings between the Liberian authorities and the International Monetary Fund (IMF) on definitions of quantitative performance criteria (QPCs) and indicative targets (ITs) for the program supported by the Extended Credit Facility (ECF) arrangement, and related reporting requirements. - All QPCs and ITs are evaluated in terms of cumulative flows from the beginning of the period unless otherwise specified. - Authorities will consult the Fund before modifying measures in the letter or adopting measures that deviate from program goals and will provide necessary information for program monitoring. ### Program Exchange Rates - Program exchange rate: LD 211.50/US$ - Cross rates from IMF’s International Financial Statistics as of October 31, 2019 (Table 1): - US dollars: Currency Units Per SDR 1.38; Liberian Dollars Per Currency Unit 211.50; US dollars Per Currency Unit 1.00 - British Pound Sterling: Currency Units Per SDR 1.06; Liberian Dollars Per Currency Unit 274.09; US dollars Per Currency Unit 1.30 - Japanese Yen: Currency Units Per SDR 150.12; Liberian Dollars Per Currency Unit 1.94; US dollars Per Currency Unit 0.01 - Euro: Currency Units Per SDR 1.24; Liberian Dollars Per Currency Unit 235.90; US dollars Per Currency Unit 1.12 - SDR: Currency Units Per SDR 1.00; Liberian Dollars Per Currency Unit 291.74; US dollars Per Currency Unit 1.38 ### Definitions — Coverage and Measurement - Government (GoL): budgetary central government of Liberia; excludes extrabudgetary units, public nonfinancial corporations, public financial corporations, social security funds, and local government. - Budgetary central government: entities with budgets covered by the main budget controlled by the Ministry of Finance and Development Planning; coverage includes on-budget operations and off-budget transactions managed by these entities. - Revenue collection of the budgetary central government: all tax and non-tax receipts transferred into the GOL revenue accounts at the CBL for the relevant fiscal year, including income and transfers from state-owned enterprises and public institutions, as well as budget support loans and grants. - Tax revenue includes taxes on income, profits, capital gains, goods and services, international trade, and other taxes (including property tax and social contribution by foreign concessions). - Non-tax revenue includes property income (dividends and interest income, royalty and rent, and assets sales), administrative fees, fines, penalties and forfeits, and other non-tax revenue. - External loans and grants for off-budget projects managed by the budgetary central government are excluded unless otherwise stated. - Revenues retained by government agencies and not appropriated in the budget are not considered revenue for program purposes. - For program purposes, revenue is measured in U.S. dollars, with GOL revenue account receipts in Liberian dollars converted to U.S. dollars using the period average exchange rate. - Public sector: general government (central government, local government and social security funds), public nonfinancial corporations and public financial corporations. - Public external debt (concessional and non-concessional): debt of the central government owed to non-residents; includes commitments contracted or guaranteed for which value has not been received; considered contracted once all conditions for entry into effect met, including ratification if required; guaranteed when conditions for both debt and guarantee met. ### Quantitative Performance Criteria (QPCs) — Coverage and Timing - QPCs proposed for December 31, 2021, and June 30, 2022 with respect to: - Primary fiscal balance excluding grants (floor) - New arrears on public external debt (ceiling) - New non-concessional public external debt contracted or guaranteed (ceiling) - CBL’s operational and capital expenditure (ceiling) - CBL’s net international reserves (floor) - CBL’s gross direct credit to government (ceiling) ### Primary Fiscal Balance Excluding Grants - Floor applies to cumulative flow of primary fiscal balance excluding grants since the beginning of the fiscal year (fiscal year: July to December 2021 for the special budget, January to December thereafter). - Primary fiscal balance relates to revenue and expenditure of the budgetary central government (on-budget operations focus for monitoring). - Primary balance definition for monitoring: difference between revenue (excluding budget-support grants and loans) and expenditure net of interest payments (including on-budget gross investment in nonfinancial assets). - Revenue defined as all revenue collected by the LRA. Expenditure measured on a commitment basis: - Non-payroll expenditures: commitment when a purchase order is issued. - Payroll expenditures: commitment when the payment is approved. - Primary fiscal balance for debt sustainability analysis: calculated using revenue and expenditure of the budgetary central government including budget support grants and off-budget transactions related to donor support. ### Adjustors to Primary Balance Excluding Grants - If cumulative budget support grants and concessional budget support loans received up to the relevant quarter exceed amounts stated in Table 2, floor will be adjusted downward by excess. - If part of expenditure is for capital injections consistent with the financial sector reform plan adopted by the CBL Board in consultation with Fund staff, the floor will be adjusted downward by that amount. - The 2022 floors shall be adjusted up by the sum of shortfalls in investment spending and shortfalls in spending on COVID-19 vaccines and their administration. This adjustor shall not be negative and is capped at US$45 million. Shortfalls are relative to reference values shown in Table 2. - Table 2 (Adjustor to the Primary Balance Excluding Grants, 2020Q4-2022Q4; Millions of U.S. dollars, Cumulative) — selected cells presented as in source: - Budget support: 2020 Q4 = 72; 2021 Q1 = 0.0; 2021 Q2 = 46.0; 2021 Q3 = 46.0; 2021 Q4 = 0.0; 2022 Q1 = 0.0; 2022 Q2 = 40; 2022 Q3 = 40; 2022 Q4 = 65 - Investment Spending: 2021 Q4 = 35.0; 2022 Q1 = 46.0; 2022 Q2 = 64.0; 2022 Q3 = 98.0 - COVID-19 vaccine and administration: 2021 Q4 = 0.0; 2022 Q1 = 7.5; 2022 Q2 = 10.0; 2022 Q3 = 10.0 ### New Arrears on Public External Debt - Zero ceiling applies on payment arrears on public external debt (public external debt defined in paragraph 7). - External payment arrears accrue when undisputed payments (interest or amortization) on Government debts to non-residents are not made within contractual terms (accounting for grace periods). - Excludes arrears arising from renegotiated external payment obligations and arrears on debts in dispute. - Primary data source: Debt Management Unit of the Ministry of Finance and Development Planning; other fiscal and monetary sources used to reconcile gaps. - Monitored on a continuous basis. ### New Non-Concessional Public External Debt Contracted or Guaranteed - Continuous ceiling applies to contracting and guaranteeing by the public sector of new non-concessional external debt. - Concessional debt definition: debt with a grant element of at least 35 percent. - Grant element calculation: difference between NPV of debt and its nominal value, expressed as a percentage of the nominal value. - NPV calculated by discounting future debt service payments at a discount rate of 5 percent at time of contracting. - Loans from private entities are not considered concessional unless accompanied by a grant or grant element from a foreign official entity such that the combined grant element ≥ 35 percent. - Non-concessional public external debt: external debt not meeting concessionality definition; reported by Debt Management Unit and measured in U.S. dollars at current exchange rates. ### CBL’s Operational and Capital Expenditure - Ceiling applies on CBL’s operational and capital expenditure. - CBL’s operational and capital expenditure budget defined as sum of total accrual-based operating expenses and cash-based capital expenditure excluding interest paid on CBL instruments and facilities. - Budget measured in U.S. dollars; Liberian dollar expenditure converted at monthly period-average exchange rate. - Adjustor: ceiling adjusted up by transfers from the GOL to the CBL to help finance the currency changeover operation. 2022 targets adjusted up by any underspending in 2021. ### CBL’s Net International Reserves (NIR) - NIR defined as difference between gross official reserve assets and gross reserve liabilities; presented in U.S. dollars. - Valuation: assets and liabilities denominated in SDRs valued at a fixed rate of the U.S. dollar against SDR at the program exchange rate (Table 1); other currencies valued at cross rates using program exchange rates (Table 1). - Gross official reserve assets include: (i) monetary gold holdings; (ii) holdings of SDRs; (iii) reserve position in the IMF; (iv) foreign convertible currency holdings; (v) foreign currency denominated deposits held in central banks and other investment-grade banks and institutions abroad; (vi) loans to foreign banks of investment-grade redeemable upon demand; (vii) investment-grade foreign securities; (viii) other unpledged convertible liquid claims on non-residents. - Exclusions from gross official reserve assets: (i) foreign currency claims on residents; (ii) resident banks’ foreign currency assets held at the CBL; (iii) capital subscriptions in international institutions; (iv) foreign assets in nonconvertible currencies; (v) unfit foreign currency bank notes in vault and in transit; (vi) gross reserves encumbered or pledged (including assets blocked as collateral, assets lent not available before maturity and not marketable, assets blocked for letters of credit, assets ring-fenced under guarantees). - Gross reserve liabilities defined as sum of: (i) outstanding liabilities of the CBL to the IMF; (ii) all short-term foreign currency liabilities of the CBL to non-residents with original maturity up to and including one year; (iii) all foreign currency deposits of the government with the CBL. SDR allocations excluded from gross reserve liabilities. - For QPC on NIR, end-of-the-month foreign exchange numbers audited by the Internal Audit Department of the CBL used, except IMF accounts numbers (Reserve tranche position, SDR holdings, Use of Fund resources taken from IMF records). - Adjustors to QPC on NIR: - QPC floor on change in NIR adjusted down by difference between value of unfit U.S. dollar banknotes shipped to the Federal Reserve and value credited to the CBL’s account. - QPC on NIR adjusted up (down) by amount of debt relief provided under the CCRT above (below) projections in Table 3, converted to U.S. dollar at program exchange rate. - 2022 floors adjusted down by amount of foreign currency on-lending by the CBL to the GOL of the SDR allocation; adjustor capped at US$80 million. - Table 3 (Adjustor to the Floor on NIR, Dec. 2020 – December 2022; Millions of U.S. dollars) — selected values as in source: - CCRT* (Cumulative from beginning of year): 2020 Q4 = 31.5; 2021 Q2 = 15.8; 2021 Q3 = 15.8; 2021 Q4 = 20.1; 2022 Q1 = 11.0; 2022 Q2 = 11.0; 2022 Q3 = 11.0; 2022 Q4 = 11.0 - Deposits of unfit US$ banknotes by banks* (Cumulative): 2020 Q4 = 1.8; 2021 Q1 = 3.0; 2021 Q2 = 3.9; 2021 Q3 = 5.1; 2021 Q4 = 1.3; 2022 Q1 = 2.1; 2022 Q2 = 2.9; 2022 Q3 = 3.7 - Recognition of GOL deposits on test dates: deposits credited to CBL before or on test date but whose liability is recognized after test date are recognized as occurring on the test date for program purposes. ### CBL’s Gross Direct Credit to Government - Ceiling applies on CBL’s gross direct credit to the Central Government (as defined in paragraph 3). - CBL’s gross direct credit: sum of all claims on the government in local and foreign currency, including: - loans to the Government in local currency including all suspense accounts; - loans to the Government in foreign currency including all suspense accounts; - securities in local currency (other than shares); - securities in foreign currency (other than shares); - negative balances (overdrafts) on deposits of the central government in local currency including “other deposits”; - negative balances (overdrafts) on deposits of the central government in foreign currency including “other deposits”; - all other claims on the government in local currency. - Adjustment: 2022 ceilings adjusted up by amount of the SDR allocation on-lent by the CBL to the GOL; adjustor capped at US$80 million. ### Indicative Targets - Indicative targets set for December 31, 2021, and June 30, 2022 with respect to: - Total revenue collection of the budgetary central government (floor) - New domestic arrears/payables of the budgetary central government (ceiling) - Social and other priority spending (floor) - On-budget capital spending (floor) - Net domestic assets of the CBL (ceiling) ### Total Revenue Collection (Indicative Target) - Total revenue for the indicative target: revenue collection of the budgetary central government (as defined in paragraph 5) excluding budget support loans and grants. ### New Domestic Arrears/Payables (Indicative Target) - Ceiling applies on new domestic arrears of two types of government expenditure: - Payments to commercial contractors for goods and services or fixed assets: considered in arrears when “cash expenditure” is lower than “IFMIS expenditure” in expenditure code 22 (goods and services), code 23 (consumption of fixed capital) and code 31 (capital expenditures) reported in the final reconciled ECF report of the corresponding fiscal year. Processing period cannot be more than 90 days from the end of the fiscal year. - Payment of interest or principal on government debt: falls into arrears as soon as the scheduled date for payment has passed (subject to any applicable grace period). ### Social and Other Priority Spending - Social spending defined as education, health, and social development services. - Education, health, and social spending consist of cumulative payments from July to December 2021 for the special budget, and January to December thereafter, of the units listed in Table 3 (payment vouchers approved by the Ministry of Finance and Development Planning). *Source: 1lbrea2021003 - INTERNATIONAL MONETARY FUND.* ### 29. On-budget investment spending is defined as gross investment in nonfinancial assets ### 1lbrea2021003 - 29. On-budget investment spending is defined as gross investment in nonfinancial assets ### On-budget investment spending: definition and measurement - On-budget investment spending is defined as gross investment in nonfinancial assets as stated in the budgetary central government statement of operations table. - Investment spending is defined as set out in the Government Finance Statistics Manual 2014 under transactions in nonfinancial assets. - Scope and exclusions: - Broadly in line with what the GOL includes in its public sector investment program excluding transfers to the Road Fund and election related spending. - Excludes off-budget projects related to donor projects. - Indicative target measurement: - The indicative target is based on the annual gross investment. - For end-December 2021, it shall be assessed based on gross investment over the special budget for July-December 2021. - For June 2022, the target shall be assessed using cumulative spending from January to June. ### Net Domestic Assets of the CBL: definitions and components - Net domestic assets of the CBL are defined as monetary base expressed in U.S. dollars minus the net foreign assets of the CBL (converted into U.S. dollars at program exchange rates). - Monetary base expressed in U.S. dollars: - Defined as monetary base expressed in Liberian dollars divided by the Liberian dollar/USD exchange rate published by the CBL for the relevant test date. - Monetary base expressed in Liberian dollars: - Defined as the stock of Liberian dollars in circulation (including vault cash of ODCs in Liberian dollars) plus reserve deposits of ODCs at the CBL in both Liberian dollars and U.S. dollars. - Net foreign assets of the CBL (expressed in U.S. dollars): - Defined as foreign assets of the CBL minus foreign liabilities of the CBL. - Foreign assets of the CBL: - Defined as the sum of gross reserves (defined in paragraph 16) and other foreign assets. - Other foreign assets include but not limited to foreign currency trade credit/ advances of non-resident. - Foreign liabilities of the CBL: - Defined as the sum of short-term foreign liabilities and other foreign liabilities. - Short-term foreign liabilities include but are not limited to the use of Fund credit and loans. - Other foreign liabilities include but are not limited to other foreign currency loans to nonresidents and SDR allocation. ### Adjustment to the indicative target on the ceiling on the net domestic assets of the CBL - The 2022 ceilings shall be adjusted up by the amount of the SDR allocation on-lent by the CBL to the GOL. - The adjustor shall be capped at US$80 million. ### Data reporting: coordination and channels - The Ministry of Finance and Development Planning (MFDP) and the CBL will coordinate and regularly report the information requested in Tables 4-6 to the staff of the IMF. - Data transmission: - The above data and reports will be provided electronically to the IMF Resident Representative to Liberia, with copies to the local IMF economist, Mr. Deline (adeline@imf.org) for further transfer to the African Department of the IMF in Washington, D.C. - Additional commitments: - The authorities will provide the Fund with such information as the Fund requests in connection with the progress in implementing the policies and reaching the objectives of the program. - The CBL will also provide detailed balance sheet data to IMF staff when requested. ### Key reporting requirements and timing (high-level items from Table 4) - MFDP monthly and weekly reporting (examples): - Monthly: The report on the status of implementation of the performance criteria and structural benchmarks specified in [Tables 1, 3, and 4] of the MEFP — Within three weeks after the end of the month. - Monthly: Monthly fiscal reconciliation reports — Within three weeks after the end of the month. - Monthly: Detailed reports on monthly revenue and expenditure on both a cash and a commitment basis by budget line and a completed summary table on central government operations — Within three weeks after the end of the month. - Weekly: Weekly cash plan report detailing weekly revenue and expenditure cash flows and monthly cash plan for the remaining fiscal year — Within five days after the end of the week. - Weekly: Weekly fiscal report detailing summary of budget expenditure, detailed budget execution, cumulative revenue and expenditure by currency, expenditure by Ministries and Agencies — Within five days after the end of the week. - CBL monthly and weekly reporting (examples): - Monthly: Monthly sweeping reports showing the end of the month balances of the GoL accounts at the CBL and of all operations and other accounts at the CBL of the M&As — Within three weeks after the end of the month. - Monthly: The CBL’s claims on and liabilities to Central Government by account — Within three weeks after the end of the month. - Weekly: CBL cash and budget weekly outturn relative to forecast (Table 5 template) — Within five days after the end of the week. - Monthly: CBL commitment-based budget monthly outturn relative to forecast (Table 6 template) — Within three weeks after the end of the month. - Monthly: A full set of monthly Financial Soundness Indicators (FSIs) regularly calculated by the CBL — Within three weeks after the end of the month. - Weekly: Daily reporting of net international reserves and components — Within five days after the end of the week. - Weekly: Daily reporting of gross foreign exchange inflows and outflows and their components, and other memo items — Within five days after the end of the week. - Monthly: Amounts offered, demanded and placed in Government of Liberia Treasury bill/ Treasury bond auctions including minimum bid rate and amount, maximum bid rate and amount, and weighted average bid rates — Within one week after the end of month. - Monthly: Interest rates: average monthly interest rates on loans and deposits — Within three weeks after the end of month. - Monthly: A detailed report on liquidity forecasting up to 6 months ahead, including projected government’s cash flows, projected flows to the CBL’s net exchange position, and projected flows of Liberian dollar liquidity — Within three weeks after the end of month. - Balance of payments and external debt reporting (examples): - CBL monthly: Export volumes and values by major commodity, import values by SITC, import volumes of rice and petroleum products — Within three weeks after the end of the month. - CBL monthly: Remittance flows for money transfer operators (MTOs) and commercial bank wire — Within three weeks after the end of the month. - MFDP monthly: The amount of new external debt contracted or guaranteed by the Government, and projects in the pipeline or cancelled — Within three weeks after the end of the month. - MFDP monthly: A detailed report on monthly disbursement of external debt by loan, category and creditors; and distinguishing between loan and grant components — Within three weeks after the end of the month. - MFDP monthly: A detailed report on monthly payments of interest and principle on external debt by loan instrument, category and creditors and the stock of external debt — Within three weeks after the end of the month. ### Templates and reporting formats - Table 5: Reporting Requirements for the CBL’s Cash Budget (Template) — weekly budget vs. actual template with income (interest income o/w from GOL; other income), expenditure (current expenditure: personnel costs o/w in Liberian dollar; other expenses o/w in Liberian dollar; interest payments), capital expenditure (o/w currency printing; in Liberian dollar). - Table 6: Reporting Requirements for the CBL’s Cash Budget (Template) — monthly Budget / Committed / Actual template with similar line items as Table 5. ### Statement by Ms. Ita Mannathoko and Mr. Bernard Wleh Jappah: introduction and outlook (excerpt) - Introduction: - Authorities thank staff for constructive engagement during the third Review of the Extended Credit Fund (ECF) arrangement and share staff’s assessment of policy challenges and the economic outlook. - After two years of recession, the Liberian economy is exhibiting encouraging signs of a modest recovery with mining production resuming after the COVID-19 pandemic depressed economic activity in 2020. - Pandemic response diverted efforts and resources, undermining reform progress; authorities have renewed reform effort under the ECF to realize the Pro-Poor Agenda for Prosperity and Development (PAPD, 2018-2023). - Authorities have implemented prudent fiscal and monetary policies to help restore macroeconomic stability and are reframing structural reforms to support sustainable and inclusive growth. - Recent economic developments and outlook: - Real GDP growth is expected to rebound from a -3.0 percent in 2020 to 3.6 percent in 2021. - Growth drivers in 2021: improved iron ore and gold production on the back of favorable international commodity prices; increased activity in construction and hospitality sectors. - Growth projection: 4.7 percent in 2022 underpinned by further improvements in mining activity and increased public investments. - Risks: uncertain path of the pandemic locally and in key trading partners, inadequate access to affordable vaccines, and slow rollout of vaccination. - Vaccination goal: vaccinating 70 percent of the eligible population by 2023. - Authorities continue to pursue reforms to entrench macroeconomic stability and attain stronger growth returns. *Source: 1lbrea2021003 - 29. On-budget investment spending is defined as gross investment in nonfinancial assets* ### 4. Inflation has declined sharply to 7 percent in August 2021, from 20 percent in early 2020 ### 4. Inflation has declined sharply to 7 percent in August 2021, from 20 percent in early 2020 ### Inflation, currency reform, and external reserves - Inflation declined to 7 percent in August 2021, from 20 percent in early 2020. - In the medium term, inflation is expected to decline further, notwithstanding transitory pressures from the introduction of a new family of banknotes by end 2021 that would likely lead to a moderate rise in inflation as the cash crunch is alleviated. - International reserves strengthened from 2.6 months to 4.7 months of import cover, supported by increased external financial support and the general allocation of SDRs. - Currency changeover: - High-Level Currency Implementation Plan to roll-over a new family of banknotes between November 2021 and 2024. - Procurement of new banknotes initiated to replace legacy and mutilated banknotes. - Currency changeover will be phased to avoid overwhelming CBL operational capacity; authorities will monitor and counter risks that may disrupt the process. - Currency printing progress and currency changeover process have commenced. ### Program performance and implementation - Program context: - The pandemic hit Liberia several months after the end-2019 ECF program approval while the economy was already in recession. - GDP per capita dropped from US$620 in 2018 to US$554 in 2019 and US$527 in 2020. - Authorities undertook significant pro-cyclical fiscal consolidation in 2020; a more accommodative fiscal stance was taken at the last program review at end-2020. - Performance against program targets: - The authorities met four (4) out of the six (6) performance criteria (PCs). - For the two missed PCs: - Corrective measures taken on the target for Central Bank of Liberia’s net international reserves, impacted by delays in resolution of a troubled bank. - Actions include implementation of a restructuring plan for the troubled bank, significant progress in recruitment to replace two top executives, and completion of the recruitment of a new CEO by end December 2021. - Corrective measures taken for the target on external payment arrears which was missed marginally due to a clerical error; arrears cleared and work processes strengthened to avoid recurrence (payment instructions to be issued well in advance). - Three (3) out of five (5) indicative targets were met: - Fiscal revenue outperformed program targets. - Social spending was strong. - Net domestic assets remained confined due to cash shortages. - Missed targets: prioritization of pandemic-related expenditures restrained capital outlay; late service of domestic debt led to incurrence of arrears. - Structural benchmarks (SBs): - Implementation of all ten (10) SBs was adversely affected by domestic capacity constraints. - Authorities met six (6) out of the ten (10) SBs, albeit with delays for four (4) SBs. - Four outstanding SBs were reset due to institutional capacity challenges; technical assistance from the Fund and development partners is being provided. - PFM safeguards strengthened, including mandatory contractual claims supported by IFMIS-generated purchase orders and closing MAC accounts with commercial banks to transfer balances into the Treasury Single Account (TSA) at CBL. ### Fiscal policy, revenues, and debt sustainability - FY2021 outcomes and fiscal stance: - FY2021 primary fiscal deficit (excluding grants) outperformed the program target by close to 1 percent of GDP. - Strong revenue performance supported by introduction of an excise tax on fuel, changes to application of personal income tax, and dividends from revenue administration reforms. - Expenditures kept within the budget envelope; priority expenditures for COVID-19 and recruitment in education, health, and judiciary sectors accommodated. - Overall wage bill kept stable by discontinuation of wage payments to employees without biometric identification cards since end April 2021. - Any savings directed towards planned increases in infrastructure development. - Additional revenue and fiscal measures planned: - Steps to (i) replace the general sales tax (GST) with a value-added tax (VAT) by 2025, (ii) institutionalize tax expenditure reports beginning budget year 2023, (iii) intensify collection of tax arrears, (iv) streamline tax exemptions, and (v) increase dividends from state-owned enterprises (SOEs). - Authorities plan to implement (i) through (iii) in the coming fiscal year. - Budget and debt management: - 2021 special budget provides for allocation to public investment and contributes to currency reform. - FY 2022 budget will accommodate currency reform, acquisition of vaccines, and augmented public investment, with support from on-lent SDRs. - Authorities committed to paying down legacy bills in line with their arrears-payment strategy and will refrain from new borrowing from the central bank and from borrowing on non-concessional terms. ### Monetary and financial sector policies - Monetary stance and liquidity: - During the pandemic, the CBL maintained a tight monetary policy stance to help contain inflation. - CBL cut its policy rate from 25 to 20 percent to improve liquidity conditions and support recovery; monetary policy remains guided by developments. - Central bank governance and safeguards: - CBL implementing recommendations of the 2020 Safeguards Assessment to strengthen internal controls and governance. - CBL reinforcing internal processes and reporting arrangements to ensure timely reporting and auditing of transactions including on foreign exchange reserves. - A compliance unit approved by the CBL’s Board will be fully operational by Q1 2022. - Financial sector oversight and resolution framework: - With IMF support, amendments to the Financial Institutions Act (FIA) aimed at strengthening the regulatory environment have been completed and will be submitted to the National Legislature by its return to session at end February 2022. - A comprehensive resolution regime, including operational guidelines and revised risk-based supervision guidelines, will be rolled out by end April 2022 following passage of the amended FIA. - A dedicated unit will be established to manage resolution strategies for financial institutions; institutions falling short of regulatory requirements will remain under enhanced supervision. - Non-performing loans and bank supervision: - Authorities concerned at high rate of non-performing loans (NPLs). - CBL engaging local banks to aggressively pursue loan recovery in compliance with existing regulations. - CBL completed review of banks’ resolution strategies and recommended revisions; provided training on underwriting standards and is scrutinizing banks’ NPL resolution strategies under senior management. ### Governance, anti-corruption, and structural reforms - Legal and institutional reforms: - House of Representatives approved amendments to the anti-corruption Act and the Code of Conduct. - Amended anti-corruption Act will give the Liberia Anti-Corruption Commission (LACC) first tier prosecutorial powers and make the institution in charge of managing asset declaration regime of senior public officials. - Lower House approved the Whistleblower and Witness Protection Act; expected passage by the Liberian Senate later in 2021. - A new law to strengthen the Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) regime submitted to the Legislature for passage by end-2021. - Government convened a major judicial forum to develop a national business and investment climate strategy. - Accountability measures: - A special audit commissioned for COVID-related expenditures; findings to be made public after completion in December 2021. ### Conclusion and outlook - Authorities remain committed to implementing sound macroeconomic policies as articulated in the Memorandum of Economic and Financial Policies, aligned with objectives of the Extended Credit Facility (ECF) arrangement. - Authorities value the Fund’s technical and policy support and seek Executive Directors’ support in completion of the third ECF review and advocacy for access to vaccines to help strengthen Liberia’s economic development prospects. *Source: 1lbrea2021003 - 4. Inflation has declined sharply to 7 percent in August 2021, from 20 percent in early 2020* --- _Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1lbrea2021003.pdf_