## _cr07313

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---

### Government commitment and ownership
- Government took office on January 16, 2006, headed by President Ellen Johnson-Sirleaf.
- Liberia Reconstruction and Development Committee (LRDC), chaired by the President, guides the I-PRSP.
- Progress in the first year reflected in the 150-Day Action Plan, the Governance and Economic Management Assistance Program, and the IMF staff-monitored program (SMP).
- Government submitted the I-PRSP to IDA and the IMF on January 18, 2007.

### The participatory process
- Consultations began on May 12, 2006, involving administrative and technical personnel, elected officials, women and youth leaders, nongovernmental organizations, the private sector, and the donor community.
- Discussions conducted in Liberia’s 15 counties with county development superintendents, tribal chiefs, and clan chiefs.
- Process built on earlier consultations by the Governance Reform Commission and the Results Focused Transitional Framework.
- Staff recommendations:
  - Strengthen participation of marginalized and conflict-affected groups (returning refugees, youth, women, ex-combatants).
  - Consult extensively with the legislature and delineate committees/entities responsible for consultations to build agreement on policy interventions.
  - Continue building trust among civil society, government, and development partners.

### The strategy (I-PRSP) — overview and prioritization
- Timeframe: July 2006–June 2008.
- Strategic objective: facilitate rapid economic growth, job creation, poverty reduction, and progress toward the Millennium Development Goals by consolidating peace, enhancing justice, deepening democracy, ensuring food security, promoting human development, and steering toward sustainable growth and development.
- Four strategic pillars:
  - Enhancing national security
  - Revitalizing the economy
  - Strengthening governance and the rule of law
  - Rehabilitating infrastructure and delivering basic services
- Given capacity constraints and limited resources, prioritize which policy interventions are developed and costed within each pillar.

### Pillar I: Enhancing national security
- Identified as a top priority; addresses lack of professionalism, absence of democratic control, poor accountability, weak oversight, and inadequate resources in security forces.
- Focus on ensuring national security agencies can maintain functions after UN force departure.
- Government plans to finish demobilizing and reintegrating ex-combatants and provide training for at-risk youths.

### Pillar II: Revitalizing the economy
- Private sector designated as the main engine of economic growth.
- Focus sectors: agriculture (including fisheries and rubber), forestry, mining, and urban services.
- Government commitments welcomed by staffs:
  - Comprehensive macroeconomic policy reforms to maintain macroeconomic stability.
  - Reform tax policy and revenue administration.
  - Continue disciplined cash-based budget framework.
  - Bring tariffs into compliance with the planned future ECOWAS common external tariff.
  - Reform state-owned enterprises.
  - Revise the investment incentives code to limit discretion and noncompliance with tax laws.
  - Move toward compliance with the Kimberly Process and the Extractive Industries Transparency Initiative.
  - Modernize telecommunications laws.
- Agriculture:
  - Need integrated approach addressing inequalities facing small-holder farmers.
  - Complementary investment required in infrastructure and agricultural markets.
  - Staffs urge expeditious reviews and competitive tendering of rubber concessions and other plantation estates.
- Forestry:
  - New forestry law and related reforms include benefit sharing, social agreements, and environmental assessments.
  - Full PRSP should identify ways to streamline participatory processes for vetting regulations, forest land use allocations, and timber contracts.
- Mining:
  - Absence of baseline sector data; constraints include lack of clear regulatory framework, fiscal regime, poor infrastructure, and limited capacity.
  - Full PRSP should elaborate a program for institutional development for the Ministry of Lands, Mines, and Energy and the Geological Survey, including a functional review, policy/legal/regulatory development, and building operational infrastructure and regulatory capacity.
- Financial sector:
  - I-PRSP focuses on microfinance institutions but should also create a policy framework for strengthening the domestic banking sector and its regulation.
  - Full PRSP should identify policies to address institutional barriers to credit (e.g., weak contract enforcement), strengthen monetary policy in a dollarized environment, and develop a modern national payments system.

### Pillar III: Strengthening governance and the rule of law
- Goals: lay foundations for a democratic culture, balanced development addressing human rights and gender, and promote accountability.
- I-PRSP acknowledges unequal rights for men and women, abuse of women and children, and potential importance of women in decision making and governance.
- Government developing a National Gender Policy with donor support.
- Full PRSP should link gender equality, access to education and work, and personal safety to legal and judiciary reforms and capacity building to address gender-based discrimination and protection.
- Public financial management (PFM):
  - Steps taken to add transparency to budget preparation, execution, and reporting.
  - Interim commitment control system has helped reverse poor budget implementation and domestic arrears.
  - Budget execution remains slow and credibility of budget execution is a challenge; improvements needed in procurement, internal audit, and systems across ministries.
  - Full PRSP should outline a policy framework to move from an unreliable budget to a robust budget based on sound macro-fiscal analysis and a medium term expenditure framework linked to PRSP objectives.
  - Emphasize improved budget reporting, timely reporting of revenues and expenditures, and systems to define and track poverty reduction spending.
  - Strengthening budget transparency and fiduciary systems expected to increase donor confidence and channel donor support through the budget.
- Civil service and anticorruption:
  - Commitment to reform government payroll and develop a broader comprehensive civil service reform program with donor support.
  - Progress in organizational and strategic reviews of major ministries and agencies.
  - Government intends to create a senior executive service (SES) with donor-funded top-ups; staffs urge integration of the SES into broader civil service reform to ensure financial sustainability and address in the full PRSP.
  - Commitment to implement anticorruption strategy, including establishing an anticorruption commission; staffs urge consultation with international partners on draft legislation and financing.

### Pillar IV: Rehabilitating infrastructure and delivering basic services
- Massive needs to rehabilitate infrastructure and improve delivery of basic services.
- Past efforts were ineffective due to lack of socioeconomic data, inadequate government resources, and inability to coordinate and track donor and NGO activities (NGOs represent about two-thirds of the sector’s total funding).
- Planned phaseout of humanitarian relief programs providing basic social services poses challenges to maintaining existing capacity.
- Infrastructure planning:
  - Ministry of Public Works should establish priorities for rehabilitation over the next four years and integrate maintenance costs into the annual budget.
  - Water sector: distinguish needs of urban, small towns, and rural areas with different capital and operating/maintenance methods.
  - Some planned future investments, possibly with private funds, are not captured in the I-PRSP.
  - Power sector: efforts should include rebuilding capacity at the Liberia Electricity Corporation.
- Education:
  - Large increase in student enrollment following abolition of fees and shortage of qualified teachers strains public sector capacity.
  - External financing is fragmented or aimed at noncore activities, providing little help to public service delivery or filling budget gaps.
  - Government and donors are developing an education sector plan focused on universal primary and basic education.
- Health:
  - I-PRSP identifies health indicators: mortality rates, malnutrition rates, immunization rates, and anti-malaria and HIV/AIDs efforts.
  - Commitment to complete a national health plan.
  - Full PRSP needs to address systemic inefficiencies, operations management, infrastructure investment, human resources development, and funding recurrent expenditures.

### Poverty diagnostics
- I-PRSP lacks a satisfactory diagnostic of poverty due to lack of comprehensive poverty data but recognizes need for capacity building.
- Key data challenges:
  - No comprehensive household expenditure data.
  - Population census last conducted over 20 years ago.
  - Economic statistics limited to Monrovia.
  - Routine data collection at service delivery agencies has collapsed.
- Recommended statistical activities and timelines:
  - Finalize the National Statistical Strategy and identify priority statistical activities for PRSP funding.
  - Demographic and Health Survey planned in early 2007, followed by a Core Welfare Indicators Questionnaire survey with household consumption module; these will form the basis of a poverty profile for the PRSP.
  - Timely completion of these surveys would help ensure the full PRSP can be completed in early 2008.
  - National Population and Housing Census planned for March 2008 but faces a significant funding gap and is urgently needed for spatially disaggregated demographic and social statistics and an up-to-date sampling frame.

### The macroeconomic framework
- Medium-term macroeconomic objectives outlined in the I-PRSP:
  - Sustaining medium-term GDP growth of 7–8 percent.
  - Maintaining price stability.
  - Building foreign exchange reserves consistent with maintaining relative exchange rate stability.
  - Increasing government revenues.
- Full PRSP should develop a more comprehensive framework describing:
  - Potential sources of growth.
  - Monetary policy and the external sector.
  - The fiscal framework, with detailed medium-term projections for growth, inflation, balance of payments, and revenues and expenditures to show policy impacts and unfunded elements of the PRSP.
- Potential sources of growth identified:
  - Improved security on rubber plantations.
  - Investment in the iron ore sector.
  - Effect of lifting UN export sanctions on timber and diamonds.
  - Strengthened agricultural, manufacturing, and service sectors.
- Full PRSP should present medium-term growth scenarios, assess upside and downside risks by sector, and evaluate consistency with poverty-reduction objectives.

### Monetary policy and the external sector
- Primary objective of monetary policy: to maintain price stability.
- Staff view: price stability is essential to promote investment, growth and poverty reduction, and gradual market-driven de-dollarization.
- Full PRSP should:
  - Present a more detailed description of planned reforms to strengthen the monetary policy framework, including the introduction of new policy instruments.
  - Describe efforts to strengthen the balance sheet of the central bank, a condition needed to make monetary policy more effective.
  - Provide more detail on policies to develop the financial sector and how the sector’s revitalization would stimulate private sector–led growth.
  - Explain drivers of the I-PRSP projection of a widening current account deficit, outline potential risks, and set out policy options to address external shocks.
  - Outline the trade policy agenda for 2008–11, including policies governing import licenses and implementation of the planned future ECOWAS common external tariff.

### Public debt
- I-PRSP recognizes need to address Liberia’s unsustainable external debt, a large share of which is in arrears.
- Government commitments:
  - Continue strengthening economic management under the SMP.
  - Fulfill requirements for arrears clearance and early comprehensive debt relief under the Enhanced HIPC Initiative.
- Staff welcome government strategy to tackle heavy burden of domestic debt and arrears.
- Full PRSP should:
  - Elaborate a program for strengthening debt management capacity.
  - Present a strategy for mobilizing financing to meet Liberia's development needs over the medium term.

### Fiscal policy framework
- I-PRSP actions described:
  - Efforts to increase government revenues, including further strengthening of tax and customs administration and continued reduction of tax exemptions.
- Full PRSP needs to present:
  - Medium-term revenue and expenditure projections, including data on medium-term plans for pro-poor spending.
- Fiscal stance:
  - In view of Liberia’s unsustainable domestic and external debt, Liberia will need to pursue a balanced budget (after grants) in the foreseeable future.
- Public financial management:
  - Implementation of an interim commitment control is essential to improve budget implementation and increase donor confidence.
  - Full PRSP could provide more details on planned efforts to address capacity constraints and improve budget implementation, including timely implementation of line ministries’ expenditure plans.

### Implementation, monitoring, and evaluation
- Institutional arrangements:
  - LRDC (chaired by the President; includes representatives from major development partners, civil society, and nongovernmental agencies) is proving a useful management framework for the I-PRSP.
  - LRDC has four pillar committees aligned with the I-PRSP.
- Staff encouragement:
  - Use LRDC as a platform to promote transparency, review I-PRSP implementation progress, and encourage donors to align priorities with the I-PRSP and the budget.
- Resource and capacity needs:
  - Successful preparation, implementation, and monitoring of the PRSP depend on availability of resources and adequate local capacity.
  - Adequate budgetary resources needed to build capacity at the planning ministry for monitoring and evaluation tasks, PRSP-related thematic and sectoral studies, and PRSP-related workshops and seminars.
  - Reform agenda should be prioritized and properly sequenced, recognizing the tradeoff between timeliness and comprehensiveness.
  - Coordination among donors and the government is essential to assure provision of adequate finance and technical services to complete, implement and monitor the PRSP and its priority elements.

### Risks
- General risk assessment:
  - Significant risks to implementation of the I-PRSP; the I-PRSP is ambitious and serves as a full poverty reduction strategy for two years while the Government lacks human and financial capacity to implement such a strategy.
  - Donors must be prepared to mitigate capacity risks through technical and financial assistance to areas of highest priority.
- Risks to the timeline:
  - I-PRSP outlines an ambitious path to complete a full PRSP in early 2008.
  - Risks: data limitations, public and private sector capacity constraints, human resource issues, weak communications strategies, potential strains in government-legislature relations.
  - Participatory process could generate demands and public expectations that cannot be met; staff recommend the participatory process identify strategic options and priority actions in areas of consensus and analyze trade-offs.
  - Early emphasis on participatory monitoring and evaluation of existing policies, in close coordination with local line ministries responsible for service delivery, could help ensure a realistic and concrete approach.
  - Practical constraints that could delay finalizing the PRSP: Liberia’s long and intense rainy season, resource constraints, and poor road and telecommunication infrastructures.
- Fiscal and donor risks:
  - Commitment to fiscal discipline and macroeconomic stability is important to sustain I-PRSP implementation and facilitate timely completion of the full PRSP.
  - Staff urge authorities to continue policy reforms and continue seeking financing assurances needed to initiate debt relief under the HIPC Initiative.
  - Full PRSP should assess implications of a potential substantial increase in donor inflows and public expenditure.
  - Continued partner commitment required to overcome cutbacks in humanitarian and security assistance as the conflict recedes and to assure additional resources and technical assistance required for priority actions.

### Conclusions and priorities
- I-PRSP sets out an ambitious 2 year program to:
  - Consolidate peace, improve national security, rebuild key legal and democratic institutions (including in the public sector), promote private sector-led economic revitalization, and further reduce poverty.
  - Lay out a timetable to complete the full PRSP by early 2008 (timeline may be too ambitious if baseline data development is slow).
- Recommended actions:
  - Expand the participatory process so the full PRSP can be created and instituted as soon as possible.
  - Act quickly to build statistical capacity and assemble reliable baseline data on poverty, demographics, and key economic sectors.
  - Prepare strategic plans for agriculture, mining, and forestry with more detailed data on production, employment, and other trends.
  - Address the absence of national income statistics which impedes long-term growth strategy design.
  - Prepare in-depth sectoral studies on productive sectors (mining, agriculture, forestry) and social sectors (health, education, water supply).
  - Prepare thematic studies on cross-cutting themes such as governance and gender equity.
  - Strengthen public sector capacity; civil service reform with donor financial and technical support is critical, including ensuring the senior executive service is sustainable and fully integrated in the reform program.
  - Fully cost strategies in the I-PRSP and PRSP to assess financing needs, prioritize programs, and develop a macroeconomic framework to sustain the strategy.
  - Better coordinate aid from development partners to align donor financing with PRSP priorities, given limited resources in the cash-based balanced budget and continued large aid flows outside the budget.

### Issues for Executive Directors
- Directors’ views are sought on:
  - Whether they agree with the main areas identified by staffs as priorities for strengthening the I-PRSP and its implementation.
  - Whether they concur with the areas identified by staffs as key implementation risks.

*Source: _cr07313 - 26. Monetary policy and the external sector: As noted in the I-PRSP, the primary (IMF staff report content provided).*

### 1.      Liberia has undergone profound changes in the past three years. A country long

### Liberia has undergone profound changes in the past three years. A country long

### Government commitment and ownership
- The government took office on January 16, 2006, headed by President Ellen Johnson-Sirleaf.
- The Liberia Reconstruction and Development Committee (LRDC), chaired by the President, plays a central role in guiding the I-PRSP.
- Progress in the first year of the government’s term is reflected in the 150-Day Action Plan, the Governance and Economic Management Assistance Program, and the IMF staff-monitored program (SMP).
- The government submitted the I-PRSP to IDA and the IMF on January 18, 2007.

### The participatory process
- Consultations began on May 12, 2006, involving administrative and technical personnel, elected officials, women and youth leaders, nongovernmental organizations, the private sector, and the donor community.
- County, development superintendents, tribal chiefs, and clan chiefs conducted discussions in Liberia’s 15 counties.
- The I-PRSP process built on earlier consultations by the Governance Reform Commission and the Results Focused Transitional Framework.
- Recommendations:
  - Strengthen participation of marginalized and conflict-affected groups (returning refugees, youth, women, ex-combatants).
  - Consult extensively with the legislature and delineate committees/entities responsible for consultations to build agreement on policy interventions.
  - Continue building trust among civil society, government, and development partners.

### The strategy (I-PRSP) — overview and prioritization
- Timeframe: July 2006–June 2008.
- Strategic objective: facilitate rapid economic growth, job creation, poverty reduction, and progress toward the Millennium Development Goals by consolidating peace, enhancing justice, deepening democracy, ensuring food security, promoting human development, and steering toward sustainable growth and development.
- Four strategic pillars: 
  - Enhancing national security
  - Revitalizing the economy
  - Strengthening governance and the rule of law
  - Rehabilitating infrastructure and delivering basic services
- Given capacity constraints and limited resources, it will be important to prioritize which policy interventions are developed and costed within each pillar.

### Pillar 1: Enhancing national security
- Identified as a top priority; addresses lack of professionalism, absence of democratic control, poor accountability, weak oversight, and inadequate resources in security forces.
- Focus on ensuring national security agencies can maintain functions after UN force departure.
- Government plans to finish demobilizing and reintegrating ex-combatants and provide training for at-risk youths — staffs welcome these plans.

### Pillar II: Revitalizing the economy
- Private sector designated as the main engine of economic growth.
- Focus sectors: agriculture (including fisheries and rubber), forestry, mining, and urban services.
- Government commitments welcomed by staffs:
  - Comprehensive macroeconomic policy reforms to maintain macroeconomic stability.
  - Reform tax policy and revenue administration.
  - Continue disciplined cash-based budget framework.
  - Bring tariffs into compliance with the planned future ECOWAS common external tariff.
  - Reform state-owned enterprises.
  - Revise the investment incentives code to limit discretion and noncompliance with tax laws.
  - Move toward compliance with the Kimberly Process and the Extractive Industries Transparency Initiative.
  - Modernize telecommunications laws.
- Agriculture:
  - Need for integrated approach addressing inequalities facing small-holder farmers.
  - Complementary investment required in infrastructure and agricultural markets.
  - Staffs urge expeditious reviews and competitive tendering of rubber concessions and other plantation estates.
- Forestry:
  - New forestry law and related reforms include benefit sharing, social agreements, and environmental assessments.
  - Full PRSP should identify ways to streamline participatory processes for vetting regulations, forest land use allocations, and timber contracts.
- Mining:
  - Absence of baseline sector data; constraints include lack of clear regulatory framework, fiscal regime, poor infrastructure, and limited capacity.
  - Full PRSP should elaborate a program for institutional development for the Ministry of Lands, Mines, and Energy and the Geological Survey, including a functional review, policy/legal/regulatory development, and building operational infrastructure and regulatory capacity.
- Financial sector:
  - I-PRSP focuses on microfinance institutions but should also create a policy framework for strengthening the domestic banking sector and its regulation.
  - Full PRSP should identify policies to address institutional barriers to credit (e.g., weak contract enforcement), strengthen monetary policy in a dollarized environment, and develop a modern national payments system.

### Pillar III: Strengthening governance and the rule of law
- Goals: lay foundations for a democratic culture, balanced development addressing human rights and gender, and promote accountability.
- I-PRSP acknowledges unequal rights for men and women, abuse of women and children, and potential importance of women in decision making and governance.
- Government developing a National Gender Policy with donor support.
- Full PRSP should link gender equality, access to education and work, and personal safety to legal and judiciary reforms and capacity building to address gender-based discrimination and protection.
- Public financial management (PFM):
  - Steps taken to add transparency to budget preparation, execution, and reporting.
  - Interim commitment control system has helped reverse poor budget implementation and domestic arrears.
  - Budget execution remains slow and credibility of budget execution is a challenge; improvements needed in procurement, internal audit, and systems across ministries.
  - Full PRSP should outline a policy framework to move from an unreliable budget to a robust budget based on sound macro-fiscal analysis and a medium term expenditure framework linked to PRSP objectives.
  - Emphasize improved budget reporting, timely reporting of revenues and expenditures, and systems to define and track poverty reduction spending.
  - Strengthening budget transparency and fiduciary systems expected to increase donor confidence and channel donor support through the budget.
- Civil service and anticorruption:
  - Commitment to reform government payroll and develop a broader comprehensive civil service reform program with donor support.
  - Progress in organizational and strategic reviews of major ministries and agencies.
  - Government intends to create a senior executive service (SES) with donor-funded top-ups; staffs urge integration of the SES into broader civil service reform to ensure financial sustainability and address in the full PRSP.
  - Commitment to implement anticorruption strategy, including establishing an anticorruption commission; staffs urge consultation with international partners on draft legislation and financing.

### Pillar IV: Rehabilitating infrastructure and delivering basic services
- Massive needs to rehabilitate infrastructure and improve delivery of basic services.
- Past efforts were ineffective due to lack of socioeconomic data, inadequate government resources, and inability to coordinate and track donor and NGO activities (NGOs represent about two-thirds of the sector’s total funding).
- Planned phaseout of humanitarian relief programs providing basic social services poses challenges to maintaining existing capacity.
- Infrastructure planning:
  - Ministry of Public Works should establish priorities for rehabilitation over the next four years and integrate maintenance costs into the annual budget.
  - Water sector: distinguish needs of urban, small towns, and rural areas with different capital and operating/maintenance methods.
  - Some planned future investments, possibly with private funds, are not captured in the I-PRSP.
  - Power sector: efforts should include rebuilding capacity at the Liberia Electricity Corporation.
- Education:
  - Large increase in student enrollment following abolition of fees and shortage of qualified teachers strains public sector capacity.
  - External financing is fragmented or aimed at noncore activities, providing little help to public service delivery or filling budget gaps.
  - Government and donors are developing an education sector plan focused on universal primary and basic education.
- Health:
  - I-PRSP identifies health indicators: mortality rates, malnutrition rates, immunization rates, and anti-malaria and HIV/AIDs efforts.
  - Commitment to complete a national health plan.
  - Full PRSP needs to address systemic inefficiencies, operations management, infrastructure investment, human resources development, and funding recurrent expenditures.

### Poverty diagnostics
- I-PRSP lacks a satisfactory diagnostic of poverty due to lack of comprehensive poverty data but recognizes need for capacity building.
- Key data challenges:
  - No comprehensive household expenditure data.
  - Population census last conducted over 20 years ago.
  - Economic statistics limited to Monrovia.
  - Routine data collection at service delivery agencies has collapsed.
- Recommended statistical activities and timelines:
  - Finalize the National Statistical Strategy and identify priority statistical activities for PRSP funding.
  - Demographic and Health Survey planned in early 2007, followed by a Core Welfare Indicators Questionnaire survey with household consumption module; these will form the basis of a poverty profile for the PRSP.
  - Timely completion of these surveys would help ensure the full PRSP can be completed in early 2008.
  - National Population and Housing Census planned for March 2008 but faces a significant funding gap and is urgently needed for spatially disaggregated demographic and social statistics and an up-to-date sampling frame.

### The macroeconomic framework
- Medium-term macroeconomic objectives outlined in the I-PRSP:
  - Sustaining medium-term GDP growth of 7–8 percent.
  - Maintaining price stability.
  - Building foreign exchange reserves consistent with maintaining relative exchange rate stability.
  - Increasing government revenues.
- Full PRSP should develop a more comprehensive framework describing:
  - Potential sources of growth.
  - Monetary policy and the external sector.
  - The fiscal framework, with detailed medium-term projections for growth, inflation, balance of payments, and revenues and expenditures to show policy impacts and unfunded elements of the PRSP.
- Potential sources of growth identified:
  - Improved security on rubber plantations.
  - Investment in the iron ore sector.
  - Effect of lifting UN export sanctions on timber and diamonds.
  - Strengthened agricultural, manufacturing, and service sectors.
- Full PRSP should present medium-term growth scenarios, assess upside and downside risks by sector, and evaluate consistency with poverty-reduction objectives.

*Joint Staff Advisory Note on the I-PRSP submitted by the government of Liberia (submitted to IDA and the IMF on January 18, 2007).*

### 26.      Monetary policy and the external sector: As noted in the I-PRSP, the primary

### _cr07313 - 26.      Monetary policy and the external sector: As noted in the I-PRSP, the primary

### Monetary policy and the external sector
- Primary objective of monetary policy: to maintain price stability.
- Staff view: price stability is essential to promote investment, growth and poverty reduction, and gradual market-driven de-dollarization.
- Full PRSP should:
  - Present a more detailed description of planned reforms to strengthen the monetary policy framework, including the introduction of new policy instruments.
  - Describe efforts to strengthen the balance sheet of the central bank, a condition needed to make monetary policy more effective.
  - Provide more detail on policies to develop the financial sector and how the sector’s revitalization would stimulate private sector–led growth.
  - Explain drivers of the I-PRSP projection of a widening current account deficit, outline potential risks, and set out policy options to address external shocks.
  - Outline the trade policy agenda for 2008–11, including policies governing import licenses and implementation of the planned future ECOWAS common external tariff.

### Public debt
- I-PRSP recognizes the need to address Liberia’s unsustainable external debt, a large share of which is in arrears.
- Government commitments:
  - Continue strengthening economic management under the SMP.
  - Fulfill requirements for arrears clearance and early comprehensive debt relief under the Enhanced HIPC Initiative.
- Staff welcome government strategy to tackle heavy burden of domestic debt and arrears.
- Full PRSP should:
  - Elaborate a program for strengthening debt management capacity.
  - Present a strategy for mobilizing financing to meet Liberia's development needs over the medium term.

### Fiscal policy framework
- I-PRSP actions described:
  - Efforts to increase government revenues, including further strengthening of tax and customs administration and continued reduction of tax exemptions.
- Full PRSP needs to present:
  - Medium-term revenue and expenditure projections, including data on medium-term plans for pro-poor spending.
- Fiscal stance:
  - In view of Liberia’s unsustainable domestic and external debt, Liberia will need to pursue a balanced budget (after grants) in the foreseeable future.
- Public financial management:
  - Implementation of an interim commitment control is essential to improve budget implementation and increase donor confidence.
  - Full PRSP could provide more details on planned efforts to address capacity constraints and improve budget implementation, including timely implementation of line ministries’ expenditure plans.

### Implementation, monitoring, and evaluation
- Institutional arrangements:
  - LRDC (chaired by the President; includes representatives from major development partners, civil society, and nongovernmental agencies) is proving a useful management framework for the I-PRSP.
  - LRDC has four pillar committees aligned with the I-PRSP.
- Staff encouragement:
  - Use LRDC as a platform to promote transparency, review I-PRSP implementation progress, and encourage donors to align priorities with the I-PRSP and the budget.
- Resource and capacity needs:
  - Successful preparation, implementation, and monitoring of the PRSP depend on availability of resources and adequate local capacity.
  - Adequate budgetary resources needed to build capacity at the planning ministry for monitoring and evaluation tasks, PRSP-related thematic and sectoral studies, and PRSP-related workshops and seminars.
  - The reform agenda in the PRSP should be prioritized and properly sequenced, recognizing the tradeoff between timeliness and comprehensiveness.
  - Coordination among donors and the government is essential to assure provision of adequate finance and technical services to complete, implement and monitor the PRSP and its priority elements.

### Risks
- General risk assessment:
  - Significant risks to implementation of the I-PRSP; the I-PRSP is ambitious and serves as a full poverty reduction strategy for two years while the Government lacks human and financial capacity to implement such a strategy.
  - Donors must be prepared to mitigate capacity risks through technical and financial assistance to areas of highest priority.
- Risks to the timeline:
  - I-PRSP outlines an ambitious path to complete a full PRSP in early 2008.
  - Risks: data limitations, public and private sector capacity constraints, human resource issues, weak communications strategies, potential strains in government-legislature relations.
  - Participatory process could generate demands and public expectations that cannot be met; staff recommend the participatory process identify strategic options and priority actions in areas of consensus and analyze trade-offs.
  - Early emphasis on participatory monitoring and evaluation of existing policies, in close coordination with local line ministries responsible for service delivery, could help ensure a realistic and concrete approach.
  - Practical constraints that could delay finalizing the PRSP: Liberia’s long and intense rainy season, resource constraints, and poor road and telecommunication infrastructures.
- Fiscal and donor risks:
  - Commitment to fiscal discipline and macroeconomic stability is important to sustain I-PRSP implementation and facilitate timely completion of the full PRSP.
  - Staff urge authorities to continue policy reforms and continue seeking financing assurances needed to initiate debt relief under the HIPC Initiative.
  - Full PRSP should assess implications of a potential substantial increase in donor inflows and public expenditure.
  - Continued partner commitment required to overcome cutbacks in humanitarian and security assistance as the conflict recedes and to assure additional resources and technical assistance required for priority actions.

### Conclusions and priorities
- I-PRSP sets out an ambitious 2 year program to:
  - Consolidate peace, improve national security, rebuild key legal and democratic institutions (including in the public sector), promote private sector-led economic revitalization, and further reduce poverty.
  - Lay out a timetable to complete the full PRSP by early 2008 (timeline may be too ambitious if baseline data development is slow).
- Recommended actions:
  - Expand the participatory process so the full PRSP can be created and instituted as soon as possible.
  - Act quickly to build statistical capacity and assemble reliable baseline data on poverty, demographics, and key economic sectors.
  - Prepare strategic plans for agriculture, mining, and forestry with more detailed data on production, employment, and other trends.
  - Address the absence of national income statistics which impedes long-term growth strategy design.
  - Prepare in-depth sectoral studies on productive sectors (mining, agriculture, forestry) and social sectors (health, education, water supply).
  - Prepare thematic studies on cross-cutting themes such as governance and gender equity.
  - Strengthen public sector capacity; civil service reform with donor financial and technical support is critical, including ensuring the senior executive service is sustainable and fully integrated in the reform program.
  - Fully cost strategies in the I-PRSP and PRSP to assess financing needs, prioritize programs, and develop a macroeconomic framework to sustain the strategy.
  - Better coordinate aid from development partners to align donor financing with PRSP priorities, given limited resources in the cash-based balanced budget and continued large aid flows outside the budget.

### Issues for Executive Directors
- Directors’ views are sought on:
  - Whether they agree with the main areas identified by staffs as priorities for strengthening the I-PRSP and its implementation.
  - Whether they concur with the areas identified by staffs as key implementation risks.

*Source: _cr07313 - 26. Monetary policy and the external sector: As noted in the I-PRSP, the primary (IMF staff report content provided).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07313.pdf_