## Liberia: Selected Economic and Financial Indicators, 2004–08 (_cr0853) ## Source details **Canonical URL:** [Liberia: Selected Economic and Financial Indicators, 2004–08 (_cr0853)](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0853.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0853.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0853.pdf.json) --- ### Executive summary and HIPC eligibility - Real GDP per capita decline during over twenty years of instability: "80–90 percent". - Estimated real GDP growth: "2½ percent" in 2004; "approximately 8 percent" in 2006. - Poverty and social indicators: - "Around 80 percent of households live on less than US$1 dollar a day". - Life expectancy "has dropped to 42 years". - End-June 2007 public and publicly guaranteed external debt (nominal): "US$4.8 billion"; about "96 percent" in arrears. - After traditional debt relief, end-June 2007 NPV of debt-to-exports ratio: "1,681 percent". - HIPC debt relief required to reach an NPV of debt-to-exports of "150 percent": "US$2,994.7 million" (end-June 2007 NPV terms); implied common reduction factor: "91.1 percent". - Additional MDRI and MDRI-type, beyond-HIPC relief estimate: "about US$132.5 million" (end-June 2007 NPV terms). - Immediate fiscal space from relief limited because Liberia has been servicing almost none of its debt; arrears resolution needed to restore access to development assistance. - Staff seeks Executive Directors’ guidance on likelihood of reaching decision point under the Enhanced HIPC Initiative by "end-February 2008", conditional on: - (i) a current six-month track record of satisfactory performance under an upper-tranche conditionality program with the IMF; - (ii) clearing arrears to multilateral creditors or agreeing on a strategy to clear them; and - (iii) agreeing on appropriate completion point triggers. - Staff also seeks views on triggers for a floating completion point. ### Post-conflict macroeconomic track record and vulnerabilities - Real GDP (annual percent change): "2.6", "5.3", "7.8", "9.4", "9.5" (2004–08). - Estimated real GDP growth by year: "2½ percent" in 2004; "about 5½ percent" in 2005; "7¾ percent" in 2006; projected "9½ percent" in 2007. - Consumer prices (annual average): "3.6", "6.9", "7.2", "11.2", "9.0" (2004–08). - Gross official reserves (months of imports): "0.2", "0.2", "1.0", "1.1", "0.9" (2004–08). - Net liquid foreign exchange reserves: modestly accumulated to "just under one month of imports"; net international reserves remain steeply negative due to CBL large external liabilities. - Fiscal policy: government pursues a cash-based balanced budget with expenditure management via interim commitment control system and prioritized monthly cash plans. - Vulnerabilities: ability to service external debt after HIPC relief is sensitive to increased new borrowing (even on concessional terms) and combinations of adverse domestic and external shocks. ### Preliminary Debt Relief Analysis (DRA): composition, scale, and assumptions - Creditor composition at end-June 2007 (nominal, before traditional debt relief): multilateral and bilateral creditors "65.7 percent"; commercial creditors "34.3 percent". - IMF and IDA/IBRD shares: about "17 percent" and "9 percent" of total claims, respectively. - Total HIPC debt relief required to reach NPV debt-to-exports of "150 percent": "US$2,994.7 million" (end-June 2007 NPV). - Implied common reduction factor: "91.1 percent" (also stated as "91.08 percent" in applied reductions). - For non-concessional bilateral or commercial debts this implies a total reduction of "97.03 percent". - Distribution of the US$2,994.7 million (NPV terms): - Multilateral creditors: approximately "US$1,435.2 million". - Bilateral and commercial creditors: about "US$1,559.5 million". - Translates into about "US$4,208.6 million" of nominal debt service relief over time compared with payments after assumed traditional debt relief and arrears clearance. - MDRI and MDRI-type beyond-HIPC relief estimate (assuming completion point in last quarter of 2010): "US$132.5 million" (NPV terms); nominal MDRI and MDRI-type could amount to "US$218.3 million" (breakdown: US$67.2 million from IDA, US$17.8 million from AfDF, US$133.3 million from the IMF). - Multilateral arrears clearance in December 2007: - IBRD/IDA arrears cleared in December 2007 via bridge loan and DPO proceeds. - AfDB Group arrears cleared in December 2007 through PCC framework operation (financing: one-third bilateral donors, two-thirds PCCF; bilateral donor financed Liberia's 1 percent contribution). - IMF arrears expected to be cleared through a bridge loan from a bilateral donor, with IMF new financing under a blend of PRGF and EFF to repay the bridge loan and allow interim relief. - Because Liberia has been servicing almost none of its debt, immediate fiscal space from HIPC relief is limited; arrears clearance and restored access to concessional financing are critical for medium-term benefits. ### Projected timelines, IMF/IDA/AfDB assumptions, and delivery - Key assumptions for decision point by end-February 2008 (based on end-June 2007 data): - IDA would provide "US$377.6 million" in NPV terms through the grant used to clear IBRD/IDA arrears plus additional debt-service reduction to be delivered through interim assistance and at completion point. - IMF assistance would total "US$737.0 million" in NPV terms, of which "US$32.9 million" delivered as concessional PRGF element during a three-year interim period; remaining "US$704.2 million" as grant toward HIPC debt relief. - IMF interim assistance would cover, each 12-month period, Liberia's forthcoming interest obligations to the IMF net of payments equivalent to Liberia’s current payment capacity of "about US$60,000 per month". - AfDB assistance: "US$239.6 million" in NPV terms delivered through arrears clearance operation. - Other multilateral creditors: "US$80.9 million" in NPV terms. - Paris Club bilateral creditors assumed to provide "US$864.1 million" in NPV terms on Cologne terms (90 percent NPV reduction on eligible debt) with additional completion-point assistance via stock operation. - Comparable treatment assumed for non-Paris Club official bilateral and commercial creditors: "US$695.5 million" in NPV terms. - Multilateral financing and post-relief support: - IDA expected to maintain strongly positive net flows, including grant support; first "US$5.0 million" for foreign exchange costs included in Reengagement and Reform Support Grant approved December 2007. - AfDB expected to provide additional grant financing to cover remaining interim debt service payments due. ### Debt service and NPV projections (selected figures and trajectories) - Public and publicly guaranteed external debt nominal at end-June 2007: "US$4,788.4 million". - NPV of debt after full application of traditional mechanisms (end-June 2007): "US$3,288.0 million". - NPV of debt-to-exports ratio after traditional relief (end-June 2007): "1,681 percent". - NPV of debt-to-exports ratio projected to decline to approximately "18 percent" by FY2026/27 under baseline assumptions with HIPC and additional multilateral assistance. - External debt service examples (Millions of U.S. dollars): - Before traditional debt relief: total debt service 2007/08 = "25.0". - After traditional debt relief and multilateral arrears clearance: total debt service 2007/08 = "101.9". - After HIPC assistance: total debt service 2007/08 = "94.0". - After HIPC and MDRI assistance: total debt service 2007/08 = "94.0"; 2010/11 = "25.3"; 2026/27 = "13.4". - After additional bilateral and multilateral relief beyond HIPC and MDRI: total debt service 2007/08 = "92.5"; 2010/11 = "20.5"; 2026/27 = "12.5". - NPV of total debt trajectories (Millions of U.S. dollars): - Before traditional relief: 2006/07 = "4,739.3"; 2007/08 = "4,724.8"; 2026/27 = "5,016.0". - After traditional relief and multilateral arrears clearance: 2006/07 = "3,288.0"; 2007/08 = "2,650.2"; 2026/27 = "1,350.8". - After conditional delivery of enhanced HIPC assistance: 2006/07 = "3,939.7"; 2007/08 = "2,129.9"; 2026/27 = "392.0". - After unconditional delivery of enhanced HIPC assistance: 2006/07 = "293.3"; 2007/08 = "363.0"; 2026/27 examples shown. - IMF enhanced HIPC Initiative assistance total: "US$737.0 million" in NPV terms (end-June 2007); of which "US$32.9 million" is the concessional PRGF element and "US$704.2 million" is grant toward HIPC debt relief. - IMF delivery schedule includes interim assistance and completion-point disbursements; illustrative semiannual percent breakdowns and drawdown schedules provided (examples: 2008 Feb-Jun = "1.0" percent of IMF assistance; projected IMF debt-service drawdowns show principal peaks in 2012–2013). ### Sensitivity analysis and risk scenarios (five scenarios) - Overall finding: Under five tested scenarios, external debt indicators deteriorate in several cases; debt indicators breach HIPC threshold in scenarios with substitution of loans for grants and in the combined-shocks scenario. - Scenario 1 — Higher cost of new borrowing: - Assumption: new borrowing from FY2010/11 with 200-basis-point increase in interest rate; exports unchanged. - Result: NPV debt-to-exports ratio slowly deteriorates relative to baseline, converging to about "25 percent" in FY2026/27. - Scenario 2 — Lower export prices (25 percent lower than baseline): - Average export growth falls by about "1½ percentage points". - NPV debt-to-exports: declines until FY2012/13 reaching "64 percent", then increases to "119 percent" by FY2026/27; deterioration of about "29 percentage points" in FY2007/08 and about "101 percentage points" by FY2026/27 compared with baseline. - Scenario 3 — Lower GDP growth ("2.0 percentage points" less than baseline): - NPV debt-to-exports: declines until FY2012/13 reaching "39 percent", then increases to about "113 percent" in FY2026/27; compared with baseline, about "4 percentage points" higher in FY2007/08 and "95 percentage points" higher by FY2026/27. - Scenario 4 — Substitution of loans for grants (about "80 percent" of total grants financed as loans outside the budget): - NPV debt-to-exports: declines until FY2012/13 reaching "58 percent", then increases to about "146 percent" by FY2026/27; compared with baseline, increase of "128 percentage points" by FY2026/27. - Conclusion: highlights importance of external grant assistance and the adverse impact of substituting borrowing. - Scenario 5 — Combination of shocks (combines scenarios 1–4): - NPV debt-to-exports: above "150 percent" immediately after shocks in FY2007/08, reaching "180 percent", then increases to about "647 percent" in FY2026/27; compared with baseline: about "39 percentage points" higher in FY2007/08 and "629 percentage points" higher by FY2026/27. - Sensitivity analysis conclusion: Liberia’s post-relief debt-servicing capacity is particularly vulnerable to (i) substitution of borrowing for grants, (ii) the external environment (export performance and prices), and (iii) continued implementation of the reform agenda. ### Decision point timing, completion point triggers, and monitoring public spending - Possible decision point timing: Liberia expected to clear IMF arrears and reach the HIPC decision point by "end-February 2008", given World Bank Group and AfDB arrears cleared in December 2007, sufficient IMF financing pledges secured in November 2007, and required arrangements with other multilaterals. - Suggested sequencing and conditions for decision point: - secure a current six-month satisfactory track record under an upper-tranche IMF program; - resolve or agree on multilateral arrears clearance; - agree on appropriate completion point triggers (including floating completion point triggers). - Possible floating completion point triggers include benchmarks in: - PRSP: prepare full PRSP and implement satisfactorily for at least one year, evidenced by an Annual Progress Report. - Macroeconomic stability: satisfactory performance under a PRGF/EFF-supported program. - Public financial management: quarterly and monthly publication requirements for procurement and contracts; successive annual external audits of five key ministries; implement new PFM law and supporting regulations for at least 12 months; ensure Basic Package of Health Services delivered in at least "40 percent" of health facilities; complete harmonized and regularized Ministry of Education payroll. - Debt management: develop a debt management strategy, establish a debt management unit recording all external and domestic public and publicly guaranteed debt; publish quarterly debt data on a government website for at least 6 months leading up to completion point. - Governance: implement revised investment incentive code banning tax exemptions outside the Liberia Revenue Code; become EITI-compliant with civil society engagement; establish an independent Anti-Corruption Commission operational for at least 12 months. - Monitoring public spending post-HIPC: - Initial cash flow benefits of HIPC relief initially extremely small; token monthly payments: IMF "US$60,000" per month; AfDB "US$15,000" per month; World Bank goodwill payments "US$25,000" per month (held in escrow for Liberia’s benefit). - Need for strong program ensuring effective use of domestic and external resources, costing PRSP priorities, and developing a medium-term expenditure framework. - Under GEMAP and with IMF/World Bank technical assistance: interim commitment control system prevented new domestic arrears; international expert co-signing authority for the CMCo; international controllers co-sign at major revenue-generating SOEs and Ministry of Lands, Mines and Energy; SOE revenues flow through special accounts for monitoring. ### Public financial management, governance, and reform agenda - Revenue and tax administration: - Customs remained main source; income taxes account for about "30 percent" of all revenues. - Revenue measures since 2005 include increases in pre-shipment inspection penalties, eliminating noncash tax payments, better management of import tax exemptions, redefining GST base on imports per Liberia Revenue Code, raising selective tax on restaurant services from "3.5 to 7.0 percent", increasing excise tax on beer and cigarettes and eliminating distinction between imported and domestic products for excises. - Government projects fiscal revenues (excluding grants) to increase to about "26 percent of GDP" in FY2026/27 from about "22 percent" in FY2006/07. - Public expenditure management and budget implementation: - Expenditure approvals lagged cash resources in FY2006/07 due to late legislative budget approval and procurement implementation challenges. - Recent steps: Budget Committee chaired by Minister of Finance must approve all transfers between budget lines; major transfers also require president and legislature approval. - Definition: major budgetary transfer = transfer between ministries/agencies/branches totaling "30 percent" of affected institution’s appropriation on a cumulative basis. - Government expenditures projected to increase to over "30 percent of GDP" in FY2026/27 from about "13 percent" in FY2005/06. - Domestic debt resolution: - Domestic debt resolution strategy finalized in January 2007. - Total outstanding claims "US$914 million" reviewed; "US$304 million" considered valid. - Valid claims discounted by increasing percentages: "0 percent" for claims below "US$1,000" up to about "88 percent" for claims above "US$1 million". - Payments to small claimants began in 2006/07; payments to CBL and private banks began in first half of 2007/08; payments envisioned to span "30 years". - Monetary policy, banking sector, and the CBL: - Policy focuses on maintaining low and stable inflation by targeting broad exchange rate stability given high dollarization. - Progress on bank capitalization, but banking system remains fragile and needs stronger supervision. - CBL targeting a small budget surplus for 2007. - Governance and GEMAP: - GEMAP components: securing revenue base; improving budgeting and expenditure management; improving procurement and concessions; establishing processes to control corruption; supporting accountability institutions; capacity building. - Implementation progress: strengthened revenues and expenditure management; reinforced SOE financial controls; adoption of zero-tolerance policy on corruption; progress eliminating ghost workers; drafting Civil Service Code of Conduct; requiring Cabinet members to publicly declare assets. - Key completed governance actions: deploying international experts with co-signing authority to revenue agencies and CBL; enforcing preshipment inspections; strictly enforcing Liberia Revenue Code; empowering CMCo to limit expenditures to available cash revenues; reviewing concessions/contracts signed by NTGL; finalizing and beginning domestic debt strategy implementation; strengthening CBL financial management; actions to enable lifting UN sanctions on diamond and timber exports. - Remaining challenges: integrate new procurement rules, execute budget more transparently, enhance governance in agencies and SOEs, strengthen aid tracking, improve procurement/internal audit across ministries, develop medium-term fiscal framework incorporating donor flow data. - Data, statistics, and capacity constraints: - Lack of reliable and timely data constrains policy formulation and monitoring. - Need to formulate national strategy for statistical system development and strengthen Liberian Institute for Statistics and Geo-Information Services. - Capacity building constrained by limited staff education/training and need for new controls/monitoring systems in expenditure chain. ### Social conditions, service delivery, and sector priorities - Poverty and social indicators: - UNDP poverty survey: roughly "80 percent" of households live on "US$1 a day or less". - Life expectancy: "42 years" (42.5 years in Key Poverty & Social Indicators – 2006 table). - Infant mortality: around "157 per 1,000" live births; child mortality around "235 per 1,000" live births. - Maternal mortality: "790 women per 100,000 live births". - Most medical clinics ("80 percent") are supported by humanitarian organizations. - Key Poverty & Social Indicators – 2006: - Poverty (% below poverty line) "80" - Adult literacy rate (%) "36" - Female literacy rate (%) "18" - Gross primary enrollment "51" - Female primary enrollment (%) "42" - Under-five mortality (per 1,000) "235" - Life expectancy at birth (years) "42.5" - Children stunted (%) "39" - HIV prevalence (%) "2–4.9" - Food security and basic services: - "11 percent" of surveyed households food insecure; "40 percent" highly vulnerable; "41 percent" moderately vulnerable; "9 percent" food secure. - "32 percent" of surveyed households had access to improved water sources; "24 percent" had access to sanitary communal latrines. - 150-Day Action Plan achievements and budgetary allocations: - Rehabilitated several hundred kilometers of roads and a few bridges; about "36" high schools, "39" clinics, and "4" community health facilities; community development projects in all "15" counties; began rebuilding Monrovia electricity grid; provided bed nets and medicines for new TB cases; rehabilitated water pipelines in parts of Monrovia; constructed "100" new water points and "52" new boreholes. - Budgetary outlays increased for health to "8.9 percent" of the budget and education to "8.6 percent". ### Medium- and long-term prospects, assumptions, and priorities - Real output growth projected to average about "5¾ percent" over 2008–27. - In 2008–11, growth should strengthen sharply; long-term growth expected to stabilize at about "4 percent", bringing per capita GDP close to its 1980 level by about "2027". - Fiscal policy: target cash-based balanced budget in near term; illustrative assumption from 2011: central government overall deficit (including grants) projected to average about "3 percent" of GDP over projection period (to be financed by domestic and external borrowing before HIPC assistance). - Key macroeconomic assumptions (Box 2): - Annual real GDP growth averages "5.7 percent" over 2008–27. - CPI inflation projected to decelerate from "9 percent" in 2006 to "5 percent" in the medium term. - Central government revenue expected to increase from "14¾ percent" of GDP in FY2005/06 to about "26 percent" of GDP in FY2012/13 and remain there. - Expenditure expected to increase to over "30½ percent" of GDP in the long run. - Official loan financing (excluding IMF) assumed concessional: "10-year" grace period, "40 years" maturity, and "0.75 percent" interest rate; resulting grant element for new disbursements estimated at about "50 percent". - External grants expected to decline from "32 percent" of GDP in 2007 to about "12 percent" by 2027. - FDI projections: rise from "1 percent" of GDP in 2006 to about "9 percent" in 2007, then average "26 percent" of GDP during 2008–10, stabilizing at about "9 percent" thereafter. - Net liquid foreign assets of the CBL expected to increase from under a month of imports in 2007 to nearly "three and a half months" in 2027. - Reform priorities: restore access to concessional financing after arrears clearance; sustain macroeconomic stability; strengthen PFM and public institutions; ensure inclusive growth to support security and reconstruction; continue donor financial and technical support. ### Key selected numerical indicators (Table 1 highlights, 2004–08) - Real GDP (annual percent change): "2.6", "5.3", "7.8", "9.4", "9.5". - Consumer prices (annual average): "3.6", "6.9", "7.2", "11.2", "9.0". - Nominal GDP (millions of U.S. dollars): "460.0", "530.2", "614.0", "725.1", "800.4". - Real GDP per capita (constant 1992 U.S. dollars): "113.9", "116.7", "121.0", "126.3", "131.5". - Exports of goods, f.o.b. (percent of GDP): "-4.7", "6.3", "43.0", "33.0", "33.0". - Imports of goods, f.o.b. (percent of GDP): "84.4", "24.4", "36.5", "19.5", "18.9". - Official exchange rate (L$/US$; end of period): "54.5", "56.5", "59.5", "62.5", "...". - Broad money (M2) (annual percent change): "49.3", "35.7", "34.4", "32.8", "28.6". - Central government operations (alternative presentation, percent of GDP): Total revenue and grants: "13.6", "16.2", "15.0", "22.2", "24.3"; Overall fiscal balance: "2.0", "0.8", "2.1", "2.2", "-1.8". - External sector balances (millions of U.S. dollars): Current account balance including grants (deficit, -): "-25.6", "-70.4", "-189.3", "-207.8", "-300.8" (2004–08). - Public sector external debt outstanding (total, millions): "812.0", "690.3", "710.2", "625.5", "293.2" (2004–08). - Gross official reserves (millions): "5.3", "7.8", "46.1", "60.6", "62.1" (2004–08). *IMF staff report: Preliminary assessment and Debt Relief Analysis for Liberia (based on joint IDA/IMF staff mission and updated information through October–November 2007).* ### 1. Liberia: Selected Economic and Financial Indicators, 2004–08 .........................................10 ### Liberia: Selected Economic and Financial Indicators, 2004–08 ### Executive summary and eligibility for HIPC assistance - Real GDP per capita is estimated to have declined by "80–90 percent" during over twenty years of instability. - Estimated real GDP growth: "2½ percent" in 2004; "approximately 8 percent" in 2006. - Poverty and social indicators: "Around 80 percent of households live on less than US$1 dollar a day"; life expectancy "has dropped to 42 years". - End-June 2007 public and publicly guaranteed external debt (nominal): "US$4.8 billion", about "96 percent" in arrears. - After traditional debt relief, end-June 2007 NPV of debt-to-exports ratio estimated at "1,681 percent" (far above HIPC threshold). - Estimated HIPC debt relief required to reach an NPV of debt-to-exports of "150 percent": "US$2,994.7 million" (end-June 2007 NPV terms), implying a common reduction factor of "91.1 percent". - Additional MDRI and MDRI-type, beyond-HIPC relief estimated at "about US$132.5 million" (NPV terms at end-June 2007). - Because Liberia has been servicing almost none of its debt, immediate fiscal space from relief is limited; arrears resolution would give access to additional development assistance to help progress toward the MDGs. - Staff seeks Executive Directors’ guidance on Liberia’s likelihood of reaching decision point under the Enhanced HIPC Initiative by "end-February 2008", conditional on: - (i) a current six-month track record of satisfactory performance under an upper-tranche conditionality program with the IMF; - (ii) clearing arrears to multilateral creditors or agreeing on a strategy to clear them; and - (iii) agreeing on appropriate completion point triggers. - Staff also seeks views on triggers for a floating completion point. ### Background, political developments, and donor relations - SMP and program status: Performance under the SMP since early 2006 has been "broadly satisfactory". The SMP was extended to "end-March 2008". IMF Executive Board in February and July 2007 agreed staff assessment that the 2007 SMP is of upper-credit tranche quality (apart from financing assurances). - IDA status and income: Liberia is an "IDA-only" country with a gross national per capita income of "US$130" in 2005 (Atlas method). A Joint Interim Strategy Note was presented to the IDA Board on "June 14, 2007". - Arrears clearance in December 2007: arrears to IDA/IBRD and the AfDB were cleared in December 2007 (with support under a Development Policy Operation (DPO) for the World Bank; and an operation under the PCC framework for the AfDB). - Political transition and security: Accra Comprehensive Peace Agreement of 2003 led to NTGL; elected government assumed office on "January 16, 2006". UNMIL is a force of "over 12,000". More than "100,000" combatants demobilized; displaced population estimated at "a third of the total population" has largely returned. ### Post-conflict macroeconomic track record and vulnerabilities - Growth and inflation: Estimated real GDP growth: "2½ percent" in 2004; "about 5½ percent" in 2005; "7¾ percent" in 2006; projected "9½ percent" in 2007. Inflation mostly in single digits; consumer price (annual average) reported as "3.6", "6.9", "7.2", "11.2", "9.0" for 2004–08 respectively (see table). - External sector and reserves: Net liquid foreign exchange reserves modestly accumulated to "just under one month of imports"; net international reserves remain steeply negative due to CBL large external liabilities. Gross official reserves (months of imports of goods and services) reported as "0.2", "0.2", "1.0", "1.1", "0.9" for 2004–08 (table). - Fiscal policy: Government pursues a cash-based balanced budget; expenditure management with interim commitment control system and prioritized monthly cash plans. - Vulnerabilities highlighted by sensitivity analysis: Liberia’s ability to service external debt after HIPC relief is vulnerable to increased new borrowing (even on concessional terms) and to combinations of adverse domestic and external shocks. ### Preliminary Debt Relief Analysis (DRA) — creditors and arrears - Creditor composition at end-June 2007 (nominal, before traditional debt relief): multilateral and bilateral creditors "65.7 percent"; commercial creditors "34.3 percent". IMF and IDA/IBRD were largest creditors, about "17 percent" and "9 percent" of total claims, respectively. - Clearance of arrears in December 2007 to IDA/IBRD and AfDB materially reduced the share owed to multilateral creditors. - Total HIPC debt relief required to achieve an NPV debt-to-exports ratio of "150 percent": "US$2,994.7 million" (end-June 2007 NPV terms). Common reduction factor implied: "91.1 percent". - MDRI and MDRI-type beyond-HIPC relief estimate: "about US$132.5 million" (end-June 2007 NPV terms). - Because Liberia has been servicing almost none of its debt, the relief would not immediately create additional fiscal space; medium-term benefits depend on arrears resolution and restored access to development assistance. ### Selected numerical indicators (2004–08) — key figures from Table 1 - Real GDP (annual percent change): "2.6", "5.3", "7.8", "9.4", "9.5" (2004–08). - Consumer prices (annual average): "3.6", "6.9", "7.2", "11.2", "9.0" (2004–08). - Consumer prices (end of period): "7.5", "7.0", "8.9", "9.5", "8.5" (2004–08). - Nominal GDP (millions of U.S. dollars): "460.0", "530.2", "614.0", "725.1", "800.4" (2004–08). - GDP deflator in U.S. dollars: "9.3", "9.5", "7.4", "7.9", "0.8" (2004–08). - Real GDP per capita (constant 1992 U.S. dollars): "113.9", "116.7", "121.0", "126.3", "131.5" (2004–08). - Exports of goods, f.o.b. (percent of GDP): "-4.7", "6.3", "43.0", "33.0", "33.0" (2004–08). - Imports of goods, f.o.b. (percent of GDP): "84.4", "24.4", "36.5", "19.5", "18.9" (2004–08). - Terms of trade (deterioration - ): "4.9", "3.9", "49.5", "-1.6", "-2.2" (2004–08). - Official exchange rate (L$/US$; end of period): "54.5", "56.5", "59.5", "62.5", "..." (2004–08). - Broad money (M2) (annual percent change): "49.3", "35.7", "34.4", "32.8", "28.6" (2004–08). - Reserve money (annual percent change): "31.4", "27.2", "23.9", "19.4", "20.8" (2004–08). - Broad money (stocks, billions of Liberian dollars): "4.7", "6.4", "8.5", "11.4", "14.6" (2004–08). Liberian dollar component: "2.2", "2.8", "3.5", "4.3", "5.4". U.S. dollar component: "2.5", "3.6", "5.1", "7.0", "9.2". - Central government operations (percent of GDP, fiscal year basis): Total revenue and grants: "4.3", "6.1", "6.5", "73.3", "25.2". Of which total revenue: "-1.0", "41.6", "6.6", "73.6", "26.5". Total expenditure and net lending: "-26.7", "51.3", "-3.7", "81.7", "49.4". Current expenditure: "67.6", "40.6", "2.2", "73.9", "52.6". Capital expenditure: "-90.9", "186.9", "-40.7", "164.1", "26.7". (Notes: fiscal year basis (July-June); commitment basis starting in 2006/07.) - Central government operations (percent of GDP, alternative presentation): Total revenue and grants: "13.6", "16.2", "15.0", "22.2", "24.3". Of which total revenue: "12.9", "16.0", "14.8", "21.9", "24.3". Total expenditure and net lending: "11.6", "15.4", "12.8", "19.9", "26.1". Current expenditure: "10.7", "13.3", "11.7", "17.4", "23.4". Capital expenditure: "0.9", "2.1", "1.1", "2.5", "2.8". Overall fiscal balance: "2.0", "0.8", "2.1", "2.2", "-1.8". - External sector balances (millions of U.S. dollars): Current account balance including grants (deficit, -): "-25.6", "-70.4", "-189.3", "-207.8", "-300.8" (2004–08). Trade balance (deficit, -): "-132.2", "-183.2", "-243.1", "-269.4", "-290.5". Exports, f.o.b. (millions): "22.6", "20.8", "25.7", "28.9", "34.9". Imports, f.o.b. (millions): "-51.3", "-55.4", "-65.3", "-66.1", "-71.2". Public sector external debt outstanding (total, millions): "812.0", "690.3", "710.2", "625.5", "293.2" (2004–08). Gross official reserves (millions): "5.3", "7.8", "46.1", "60.6", "62.1" (2004–08). ### Policy requirements, conditions, and completion/decision point issues - Conditions to reach HIPC decision point include: satisfactory continuation of the SMP, agreement on completion point triggers, and either clearance of arrears to multilateral creditors or agreement on an arrears-clearance strategy. - Suggested sequencing: securing a current six-month satisfactory track record under an upper-tranche IMF program, resolving or agreeing on multilateral arrears clearance, and agreeing on appropriate completion point triggers (including possible triggers for a floating completion point). - Staff recommends concurrence by Executive Directors on moving toward the decision point, contingent on the conditions listed above and IMF Board approval of PRGF/EFF arrangements if the conditions are met. ### Risks, sensitivity analysis, and medium-term prospects - Sensitivity analysis indicates high vulnerability of debt sustainability to: - increased new borrowing even on concessional terms (which could arise if external grants fell relative to the baseline), and - combinations of adverse domestic and external shocks. - Medium-term outlook depends critically on: restoring access to concessional financing after arrears clearance, sustaining macroeconomic stability, strengthening PFM and public institutions, and ensuring growth is inclusive to support security and reconstruction. *IMF staff report: Preliminary assessment and Debt Relief Analysis for Liberia (based on joint IDA/IMF staff mission and updated information through October–November 2007).* ### 14. Strengthened tax administration and progress with fiscal management have ### 14. Strengthened tax administration and progress with fiscal management have ### Revenue performance and tax administration - Strengthened tax and customs administration enhanced efficiency and widened the tax base. - Customs remained the main source of revenue; revenues from income taxes increased substantially and account for about 30 percent of all revenues. - Revenue measures taken since 2005 include: - increasing the penalty for not inspecting imports before shipment; - eliminating noncash payments of taxes; - better managing import tax exemptions, including those granted to nongovernmental organizations and others, to limit abuses; - redefining the base for the goods and services tax on imports in accordance with the Liberia Revenue Code (LRC); - raising the selective tax rate on restaurant services from 3.5 to 7.0 percent; - increasing the excise tax on beer and cigarettes and eliminating the distinction between imported and domestic products in applying excise taxes. - The government is carrying out a tax reform strategy that would lower tax rates while broadening the tax base. - Fiscal revenues (excluding grants) are projected to increase to about 26 percent of GDP in FY2026/27, from about 22 percent in FY2006/07, reflecting increased revenues from forestry and mining and continued revenue administration reforms. ### Public expenditure management and budget implementation - Expenditure approvals lagged available cash resources for most of fiscal year 2006/07 due to: - the legislature’s late approval of the 2006/07 budget; - continued challenges in implementing the new procurement act; - capacity constraints in line ministries. - Expenditure approvals accelerated in the last two months of the fiscal year, requiring significant budgetary transfers between budget line items. - Recent steps to strengthen budget implementation include: - requiring that the Budget Committee chaired by the Minister of Finance approve all transfers between budget lines; - requiring that major budgetary transfers are also approved by the president and the legislature. - Definition: A major budgetary transfer is a transfer between ministries, agencies or branches of government which totals 30 percent of the affected institution’s appropriation on a cumulative basis. - Government expenditures are projected to increase to over 30 percent of GDP in FY2026/27, from about 13 percent in FY2005/06; the projection assumes continued revenue increases and limited borrowing capacity. ### Domestic debt resolution - In January 2007, the authorities finalized a domestic debt resolution strategy. - Total outstanding claims of US$914 million were reviewed with the assistance of an external auditor; US$304 million of this total was considered valid and the remainder was classified as either “contestable” or “rejected.” - Valid claims were discounted by increasing percentages depending on the amount (0 percent for claims below US$1,000 to about 88 percent for claims above US$1 million). - Special consideration was given to debt owed to the CBL (over 90 percent of the total debt) and other financial institutions given ongoing efforts to strengthen the financial system. - Payments to small claimants began in 2006/07; payments to the CBL and private banks began in the first half of 2007/08. - Owing to scarcity of government resources and significant development priorities, payments on these domestic debt claims are envisioned to span 30 years. ### Monetary policy, banking sector, and the CBL - The CBL has taken steps to strengthen the monetary policy framework and the banking sector, while improving its own financial position. - The policy framework recognizes the limited scope for an active monetary policy given high dollarization and focuses on maintaining low and stable inflation by targeting broad exchange rate stability. - Much progress has been made in improving bank capitalization, but the banking system remains fragile and needs stronger supervision. - Progress has been made in improving the financial position of the CBL and in strengthening financial management and processes. The CBL is targeting a small budget surplus for 2007. ### Governance developments and GEMAP - Governance weaknesses are a major challenge: many civil servants and SOE staff recruited in the past two decades were unqualified patronage appointees; external audits during the NTGL revealed malfeasance and poor PFM. - In September 2005, NTGL and international partners signed the Governance and Economic Management Assistance Program (GEMAP). - An Economic Governance Steering Committee (EGSC), chaired by the president and comprising administration officials, CBL authorities, international partners and civil society, oversees GEMAP implementation. - GEMAP’s six components: - securing Liberia’s revenue base; - improving budgeting and expenditure management; - improving procurement practices and the granting of concessions; - establishing processes to control corruption; - supporting institutions key to promoting and sustaining government accountability and good financial management; - capacity building. - Implementation progress under GEMAP includes: - strengthened public revenues and expenditure management; - reinforced financial controls at SOEs; - adoption of a zero-tolerance policy on corruption; - progress on eliminating ghost workers in the civil service; - drafting a Civil Service Code of Conduct; - requiring all serving Cabinet members to publicly declare their assets. - Authorities approved an anticorruption strategy in December 2006 providing for establishing an independent anticorruption commission; draft legislation has been submitted to the legislature. - Key governance actions completed: - deploying international experts and financial controllers with co-signing authority to revenue-generating agencies and the CBL; - enforcing preshipment inspections for imports and exports; - strictly enforcing the Liberia Revenue Code; - empowering the cash management committee (CMCo) to limit expenditures to available cash revenues; - completing a review of all concessions and contracts signed by the NTGL; - finalizing and beginning implementation of a domestic debt strategy; - strengthening financial management at the CBL; - implementing actions to enable UN sanctions on diamond and timber exports to be lifted. - Remaining challenges: - integrate new procurement rules into all systems; - execute the budget more transparently; - enhance governance within agencies and SOEs; - strengthen tracking of aid commitments and flows; - improve procurement and internal audit systems across all ministries; - develop a medium-term fiscal framework incorporating donor flow data to guide budget preparation and ensure consistency with the government’s I-PRSP and the PRSP under preparation. - A Public Expenditure Management and Financial Accountability Review (PEMFAR), led by the World Bank and IMF, is underway to help address these issues. ### Data, statistics, and capacity constraints - Lack of reliable and timely data constrains policy formulation and monitoring. - A key challenge is to formulate a national strategy for development of the statistical system and to strengthen the capacity of the Liberian Institute for Statistics and Geo-Information Services. - Capacity building is constrained by limited staff education and training and by the need to develop and implement new controls and monitoring systems in the expenditure chain. ### Social conditions and service delivery - Poverty and social indicators: - A UNDP poverty survey shows roughly 80 percent of all households live on US$1 a day or less. - Life expectancy has dropped to 42 years (42.5 years in Key Poverty & Social Indicators – 2006 table). - Infant mortality is around 157 per 1,000 live births and child mortality around 235 per 1,000 live births. - Maternal mortality is 790 women per 100,000 live births. - Most medical clinics (80 percent) are supported by humanitarian organizations. - Key Poverty & Social Indicators – 2006 (percent of total populations, unless otherwise indicated): - Poverty (% below poverty line) 80 - Adult literacy rate (%) 36 - Female literacy rate (%) 18 - Gross primary enrollment 51 - Female primary enrollment (%) 42 - Under-five mortality (per 1,000) 235 - Life expectancy at birth (years) 42.5 - Children stunted (%) 39 - HIV prevalence (%) 2–4.9 - Food security and basic services (UNDP and FAO/WHO surveys): - 11 percent of surveyed households were food insecure; - 40 percent were highly vulnerable to food insecurity; - 41 percent were moderately vulnerable to food insecurity; - 9 percent were food secure. - Only 32 percent of surveyed households had access to improved water sources; - 24 percent had access to sanitary communal latrines. - Health and education service delivery pressures: - The 150-Day Action Plan rehabilitated several hundred kilometers of roads and a few bridges; about 36 high schools, 39 clinics, and 4 community health facilities; financed community development projects in all 15 counties; began rebuilding the Monrovia electricity grid; provided bed nets and medicines for new tuberculosis cases; rehabilitated water pipelines in parts of Monrovia; constructed 100 new water points and 52 new boreholes. - Budgetary outlays were increased for health to 8.9 percent of the budget and education to 8.6 percent. - Risks: withdrawal of humanitarian providers as camps close will reduce social services; delivering services at the local level remains a daunting challenge. ### Agriculture, natural resources, and structural reforms - Agriculture is the primary livelihood for most of the population; many households reverted to subsistence farming during the war. - Recovery is quicker in the commercial plantation sector, spurred by high rubber prices. - Government strategy focuses on increasing yields and production in key cash and export crops, creating efficient supply chains, promoting value-added and off-farm employment, and providing necessary infrastructure. - The government needs to implement improved plantation concession agreements to prevent past abuses. - Forestry sector reforms aim to lift sanctions and ensure sustainable management and population benefits; a UN/Government of Liberia Rubber Plantation Task Force was instituted to administer government-owned plantations pending privatization or return to original owners. - Measures on natural resources include re-establishing forestry concessions and chain of custody, observing the Kimberly process for diamonds exports, and participating in the Extractive Industries Transparency Initiative (EITI). ### Reform agenda and policy priorities - The government’s medium-term policy framework in the I-PRSP aims to: - promote rapid economic growth, create jobs, and secure macroeconomic stability; - reduce poverty and progress toward the MDGs; - strengthen governance and the rule of law, including establishing an anticorruption commission; - rebuild national infrastructure and revitalize the economy. - Fiscal policy will focus on further strengthening PFM within a medium-term framework, including: - continued procurement reform; - implementation of a new public financial management law; - improvements in internal processes. - Revenue administration efforts include reorganizing and strengthening tax administration and outsourcing customs. - Financial sector efforts focus on strengthening the monetary policy framework, enhancing private sector access to credit, improving banking supervision and regulations, and modernizing the national payments system. - Creating and carrying out a national statistical plan will strengthen statistical capacity, including improved estimates of national accounts. - Continued financial and technical donor support is essential to these efforts. ### Medium- to long-term macroeconomic prospects - Real output growth is projected to average about 5¾ percent over the period 2008–27. - In 2008–11, real output growth should strengthen sharply as security conditions improve, strong external support continues, and private sector-led investment in key export sectors (forestry and mining) increases. - Over the long term, real output growth is expected to stabilize at about 4 percent, bringing per capita GDP close to its 1980 level by about 2027. - Projections assume security holds, political and macroeconomic stability is sustained, progress is made on economic governance, and improvements in infrastructure support higher private investment. - Macroeconomic stability is expected to be supported by a prudent fiscal policy; the government plans to continue targeting a cash-based balanced budget in the near term. - For illustrative purposes starting in 2011, the central government is assumed to undertake moderate deficit financing, with the overall deficit (including grants) projected to average about 3 percent of GDP over the projection period. - Liberia will continue to need donor support given its large financing needs for reconstruction. *Source: IMF staff report text.* ### 36. The external current account deficit (excluding grants) is expected to decline ### The external current account deficit (excluding grants) is expected to decline ### External current account projections and trade dynamics - Current account deficit (excluding grants) projected to decline from 63 percent of GDP in FY2006/07 to about 22 percent of GDP in FY2026/27, mainly because of improvements in net exports. - Including grants, the current account deficit is projected to decline from 30 percent of GDP in 2006/07 to 14 percent in 2026/27. - Exports of goods and nonfactor services: - Expected to increase on average by about 13 percent annually over the projected horizon. - Average growth of exports for 2007-12 is projected at about 35 percent, reflecting the lifting of UN sanctions on timber and diamond exports and significant foreign direct investment in the iron ore sector. - Projected to average about 4 percent for the remainder of the projection period. - Imports of goods and nonfactor services: - Expected to grow, on average, by 8 percent annually, driven by economic reconstruction and investment needs. ### Main macroeconomic risks - Faltering progress in securing peace and stability and slower-than-expected reforms. - Lack of headway in enhancing security, strengthening governance and the rule of law, and rehabilitating infrastructure and basic services could: - Erode donor support. - Weaken confidence. - Hurt private sector investment. - Result in lower-than-projected GDP growth. ### I-PRSP reform strategy (overview and priorities) - I-PRSP completed in January 2007; full PRSP expected to be completed in mid-2008. - Liberia Reconstruction and Development Committee (LRDC) oversees I-PRSP implementation and serves as a policy board; LRDC is chaired by the president and includes key cabinet members and international partners. - Strategy period: July 2006 through June 2008, spanning two annual budget cycles to allow integration of the strategy into the budget process. - Key government priorities identified for the plan period: - (i) fully reforming the security sector; - (ii) revitalizing agriculture to ensure pro-poor growth; - (iii) rebuilding the road network; - (iv) accelerating human resource development; - (v) strengthening the environment for private sector growth; - (vi) creating jobs; - (vii) promoting good governance and the rule of law. - I-PRSP organized around four cross-sectoral and cross-ministerial pillars: - (i) enhancing national security; - (ii) revitalizing economic growth; - (iii) strengthening governance and the rule of law; - (iv) rehabilitating infrastructure, and delivering basic services. - Government recognizes need to prioritize resource allocation within limited budget and is seeking additional donor support on the basis of the I-PRSP. ### Debt reconciliation status and structure of external debt - Preliminary Debt Reconciliation Analysis (DRA) prepared jointly by authorities and Bank and IMF staffs; reconciliation completed by the authorities in December 2007. - Many Ministry of Finance debt records were looted, burned or lost during the civil conflict; reconciliation achieved with assistance from creditors. - Reconciliation coverage: - 100 percent of Liberia’s multilateral debt reconciled. - 93 percent of Liberia’s bilateral debt reconciled. - Commercial debt reconciliation ongoing; preliminary DSA based on external financial advisor’s initial estimates. - Public and publicly guaranteed external debt estimated at US$4.8 billion in nominal terms at end-June 2007. - Creditor composition (as of end-June 2007): - IMF: 17 percent of total claims. - IBRD/IDA: 9 percent of total claims. - Largest bilateral creditors: Germany and the United States (each holding 9 percent of total claims). - Non–Paris Club official creditors: approximately 3 percent of Liberia’s total external debt. - Arrears status at end-June 2007: - About 96 percent of external debt was in arrears. - Some 93 percent of debt to multilateral creditors was in arrears. - All debts to commercial creditors in arrears. - 91 percent of debt to non–Paris Club bilateral creditors in arrears. - 96 percent of debt to Paris Club bilateral creditors in arrears. ### Arrears clearance strategy and recent actions - Scale of Liberia’s arrears is exceptionally large relative to the economy, revenues, exports, and multilateral allocations. - Arrears clearance measures taken: - IBRD and IDA arrears cleared in December 2007 through a bridge loan provided by a bilateral donor; proceeds of a DPO were used to repay the bridge loan. This operation was financed with an exceptional allocation of IDA resources, provided on grant terms. - AfDB Group arrears cleared in December 2007 through an operation under the framework for assisting PCCs; financing share for Liberia: one-third bilateral donors, two-thirds from PCCF resources; bilateral donor assistance financed the 1 percent contribution otherwise required from Liberia. - IMF arrears expected to be cleared through a bridge loan obtained from a bilateral donor; IMF new financing would be provided under a blend of PRGF and EFF to repay the bridge loan and allow Liberia to reach the HIPC decision point to begin receiving interim relief. - Arrears clearance with remaining multilateral creditors still needs to be agreed before reaching the decision point; grant element embedded in clearance will count toward multilateral contribution under the HIPC Initiative. ### Possible HIPC Initiative assistance — eligibility and scale - Liberia’s debt in NPV terms, after full application of traditional debt relief mechanisms, estimated at US$3,288.0 million (as of end-June 2007). - This NPV debt is equivalent to 1,681 percent of exports of goods and services. - Liberia eligible for HIPC Initiative debt relief under the export window (above the 150 percent threshold). - Reduction required to lower NPV debt-to-exports from 1,681 percent to 150 percent: - HIPC debt relief required: US$2,994.7 million in end-June 2007 NPV terms. - Implies a common reduction factor of 91.1 percent after traditional debt relief. - Of the US$2,994.7 million in debt relief (NPV terms): - Multilateral creditors would contribute approximately US$1,435.2 million. - Bilateral and commercial creditors would contribute about US$1,559.5 million. - Translates into about US$4,208.6 million of nominal debt service relief over time compared with payments that would have been required following assumed traditional debt relief and arrears clearance from multilaterals. ### Assumptions underlying the projected HIPC time line and creditor contributions - Key assumptions with a decision point by end-February 2008 (based on end-June 2007 data): - IDA would provide US$377.6 million in NPV terms through the grant used to clear Liberia’s arrears to both IBRD and IDA plus some additional debt-service reduction on debt outstanding and disbursed as of June 30, 2007 to be delivered through interim assistance and upon arrival at HIPC completion point. - IMF assistance would total US$737.0 million in NPV terms, of which US$32.9 million would be delivered through the concessional element in the use of PRGF resources during a three-year interim period and count toward the IMF’s contribution to HIPC assistance. - IMF interim assistance would cover, for each 12-month period, Liberia's forthcoming interest obligations to the IMF net of payments equivalent to Liberia’s current payment capacity of about US$60,000 per month. - AfDB assistance would total US$239.6 million in NPV terms delivered through the arrears clearance operation. - Assistance by all other multilateral creditors would total US$80.9 million in NPV terms, with Liberia making no payments to these creditors until the completion point; creditors expected to clear outstanding arrears at completion point through a combination of arrears clearance grants and concessional loans with additional debt-service reduction where necessary. - Paris Club bilateral creditors assumed to provide US$864.1 million in NPV terms through a flow treatment on Cologne terms (90 percent NPV reduction on eligible debt) after reaching the decision point, with remaining assistance at the completion point through a stock-of-debt operation. - Comparable treatment assumed for non-Paris Club official bilateral creditors and commercial creditors (US$695.5 million in NPV terms). - High level of debt service payments due after HIPC assistance during the interim period likely to require a further exceptional deferral of payments given Liberia’s limited payment capacity. ### Distribution and effects of proposed assistance - Approximately 49.0 percent of HIPC debt relief due from multilateral creditors (US$703.6 million in NPV terms) would be provided through financing in support of clearance of Liberia’s arrears (grant element embedded in arrears clearance counted toward HIPC contribution). - Remaining 51.0 percent (US$731.6 million in NPV terms) would be provided through reduction of future debt service amounting to US$992.9 million in nominal terms. - As a result of arrears clearance operations, Liberia’s future debt service payments due to multilaterals would increase cumulatively from US$127.3 million to US$1,266.3 million. - Repayment of IMF PRGF and EFF loans would induce a sharp increase in debt service in FY2012/13–17/18 (no principal obligations falling due for the first 4½ years). - Most of that increase would be netted out by HIPC debt service reduction during the interim period and MDRI-type relief at the completion point. - Remaining cumulative nominal debt service payments to multilaterals after HIPC and MDRI-type relief would total US$55.1 million. *Source: IMF staff report excerpt (end-June 2007 data and related analysis).* ### 56. The World Bank and the AfDB are expected to provide assistance above and ### The World Bank and the AfDB are expected to provide assistance above and beyond the HIPC Initiative and MDRI relief ### Multilateral assistance and post-relief debt service - IDA assumed to maintain strongly positive net flows to Liberia, including grant support included in DPOs to help meet Liberia’s foreign exchange costs associated with interim period debt service. - A first US$5.0 million for such foreign exchange costs is included in the Reengagement and Reform Support Grant approved by the IDA Board in December 2007. - AfDB expected to provide additional grant financing to cover Liberia’s remaining interim debt service payments due. - Financing to cover AfDB maturities falling due during the 2008 calendar year are included as part of the AfDB arrears clearance operation. - Result: Liberia’s debt service payments to multilaterals after debt service reduction through the HIPC Initiative, MDRI and MDRI-type relief, and additional voluntary multilateral assistance would be further reduced to US$38.0 million. ### Expected impact of debt relief on Liberia’s debt ratios - Assumptions underpinning analysis: - Rapid economic growth, improved security and political stability, continuous implementation of an ambitious reform agenda, and infrastructure improvements to promote private investment. - Continuation of sound macroeconomic policies, maintaining fiscal prudence while increasing revenues and seeking donor support and concessional external financing. - Note: The medium- and long-term projections will be revised for the HIPC decision point document, according to the prospective final agreement on arrangements under the PRGF and EFF, which are expected to cover February 2008 – February 2011. - Projection: - Liberia’s NPV of debt-to-exports ratio expected to decline from 150 percent as of end-June 2007 to approximately 18 percent by FY2026/27. - Staff projection indicates the ratio would remain consistently below the HIPC Initiative threshold of 150 percent in FY2007/08–FY2026/27. - External debt service as a ratio of exports also expected to decline gradually. ### MDRI and beyond-HIPC multilateral and bilateral assistance - Eligibility and coverage: - On reaching the HIPC completion point, Liberia would qualify for MDRI debt relief from IDA and AfDF and for beyond-HIPC assistance from the IMF. - MDRI-type relief from the IMF would cover that portion of the successor arrangements under the PRGF and EFF corresponding to the stock of arrears at arrears clearance that was not already reduced by HIPC Initiative debt relief. - MDRI relief from IDA would cover all outstanding debt disbursed before end-2003 and still outstanding at the beginning of the quarter following confirmation of eligibility by IDA’s Executive Board (amounting to the full cancellation of all remaining World Bank Group claims on Liberia). - MDRI relief from AfDF would cover all outstanding debt disbursed before end-2004 and still outstanding at the completion point (effectively canceling all remaining AfDB Group claims on Liberia, except remaining Nigeria Trust Fund claims). - Estimates assuming completion point in last quarter of 2010: - MDRI and MDRI-type beyond-HIPC debt relief could amount to US$218.3 million in nominal terms (US$132.5 million in NPV terms). - Of this amount: US$67.2 million from IDA, US$17.8 million from the AfDF, and US$133.3 million from the IMF. - Comparison: possible nominal HIPC Initiative assistance of US$4,208.6 million (US$2,994.7 million in NPV terms). - Note: The US$218.3 million reflect total nominal debt service savings. The MDRI is a debt stock operation on all debt outstanding (principal only) as of end-2004 (IMF and AfDB) and end-2003 (IDA) that is not covered by HIPC assistance; this is expected to amount to US$108.4 million. - Paris Club support: - Some Paris Club creditors expected to cancel 100 percent of their claims against Liberia after the completion point. - This additional assistance would amount to US$21.8 million in nominal terms (US$15.2 million in NPV terms). - Effect on debt ratios after completion point: - Delivery of MDRI and MDRI-type assistance and additional multilateral and bilateral debt relief beyond HIPC would further reduce Liberia’s external debt. - After the completion point, Liberia’s NPV of debt-to-exports ratio would significantly fall, remaining below 20 percent over the projection period (through 2026/27). - Compared to a projection including only HIPC assistance, this represents a reduction of about 25 percentage points at completion point. ### Key medium- to long-term macroeconomic assumptions (Box 2) - Annual real GDP growth averages 5.7 percent a year over the projection period (2008–27). - Growth supported by private investment in mining and agriculture, public infrastructure, and broader-based private investment from improved security and institutions. - CPI inflation projected to decelerate from 9 percent in 2006 to 5 percent in the medium term. - Fiscal policy: - Central government revenue expected to increase gradually from 14¾ percent of GDP in FY2005/06 to about 26 percent of GDP in FY2012/13, remaining there thereafter. - Expenditure expected to increase to over 30½ percent of GDP in the long run, with increased share of pro-poor spending. - After debt relief delivery and adoption of a debt management strategy, Liberia assumed to commence borrowing in FY2010/11. - Central government overall deficit (including grants), to be financed by domestic and external borrowing, before HIPC Initiative assistance, projected to average 3 percent of GDP over the projection period. - Official loan financing (excluding the IMF) assumed concessional: 10-year grace period, 40 years maturity, and 0.75 percent interest rate; resulting grant element for new disbursements estimated at about 50 percent. - External grants expected to decline from 32 percent of GDP in 2007 to about 12 percent by 2027. - External current account deficit (excluding grants) expected to narrow from 63 percent of GDP in FY2006/07 to about 22 percent in FY2026/27. - FDI projections: - Rise from 1 percent of GDP in 2006 to about 9 percent in 2007, then average 26 percent of GDP during 2008–10, stabilizing at about 9 percent of GDP thereafter. - Net liquid foreign assets of the CBL expected to increase from under a month of imports in 2007 to nearly three and a half months in 2027. - Note: This assumes that the MDRI has no impact on Liberia’s new borrowing over the projection period. ### Sensitivity analysis and scenarios (five scenarios) - Overall finding: Under the five scenarios tested, Liberia’s external debt situation would deteriorate under each scenario; debt indicators would breach the HIPC threshold in scenarios with substitution of loans for grants and in the combined-shocks scenario. - Scenario 1: Higher cost of new borrowing - New borrowing starting in FY2010/11 contracted with an assumed 200-basis-point increase in the interest rate paid; exports unchanged. - Result: NPV of debt-to-exports ratio slowly deteriorates relative to baseline, converging to about 25 percent in FY2026/27. - Scenario 2: Lower export prices (25 percent lower than baseline) - Average growth rate of exports falls by about 1½ percentage points (from 13.3 percent to 11.8 percent). - NPV of debt to exports, assuming full HIPC delivery, declines until FY2012/13, reaching 64 percent, then increases to 119 percent by FY2026/27. - Compared with baseline: deterioration of approximately 29 percentage points in FY2007/08, increasing to about 101 percentage points by FY2026/27. - Scenario 3: Lower GDP growth (2.0 percentage points less than baseline) - Baseline assumes average growth of 8.1 percent FY2006/07–FY2016/17 and 4.0 percent in FY2017/18–FY2026/27. - Result: NPV of debt to exports declines until FY2012/13, reaching 39 percent, then increases to about 113 percent in FY2026/27. - Compared with baseline: debt-to-exports about 4 percentage points higher in FY2007/08 and 95 percentage points higher by FY2026/27. - Scenario 4: Substitution of loans for grants (about 80 percent of total grants financed projects outside the budget) - Result: NPV of debt-to-exports declines until FY2012/13, reaching 58 percent, then increases to about 146 percent by FY2026/27. - Compared with baseline: increase of 128 percentage points by FY2026/27. - Conclusion: highlights importance of external grant assistance and the adverse impact of substituting borrowing. - Scenario 5: Combination of shocks (combines scenarios 1–4) - Result: NPV of debt to exports above 150 percent immediately after shocks in FY2007/08, reaching 180 percent, then increases to about 647 percent in FY2026/27. - Compared with baseline: debt to exports about 39 percentage points higher in FY2007/08 and 629 percentage points higher by FY2026/27. - Sensitivity analysis conclusion: - Liberia’s ability to service external debt after HIPC relief is particularly vulnerable to (i) substitution of borrowing for grants, (ii) the external environment, and (iii) the continued implementation of the reform agenda. - Achievement of a robust external debt position also depends on real GDP growth and export performance. - Emphasizes need for: - (i) enhanced national security; - (ii) a conducive environment for private investment via stronger governance, rule of law, and rehabilitated infrastructure and basic services; - (iii) a prudent debt management strategy recognizing external assistance needs to be largely in the form of grants. - Note: Baseline and sensitivity scenarios do not consider impact of MDRI debt relief or additional bilateral assistance; a more detailed analysis will be included in the decision point document. ### Decision point timing, completion point triggers, and monitoring public spending - Possible decision point timing: - Liberia expected to clear arrears to the IMF and reach the HIPC decision point by end-February 2008, given: World Bank Group and AfDB arrears cleared in December 2007; sufficient financing pledges secured by IMF in November 2007; a strategy to clear arrears with other multilaterals expected by decision point; and modification of the PRGF-HIPC Trust Instrument approved in January 2008 allowing SMP performance to count as a track record. - Possible floating completion point triggers (areas to be covered include PRSP, macroeconomic stability, PFM, debt management, governance): - PRSP: Prepare a full PRSP through a participatory process and implement satisfactorily for at least one year, evidenced by an Annual Progress Report. - Macroeconomic stability: Maintain macroeconomic stability as evidenced by satisfactory performance under a PRGF/EFF-supported program. - Public financial management highlights: - Quarterly publication in the Procurement bulletin and monthly publication on the Website of all signed procurement contracts over specified thresholds for at least 6 months leading up to the completion point. - Complete successive annual external audits of five key ministries submitted to the legislature and disclosed publicly. - Implement new PFM law and supporting regulations for at least 12 months leading up to the completion point. - Ensure Basic Package of Health Services delivered in at least 40 percent of health facilities nationwide. - Complete a harmonized and regularized Ministry of Education payroll. - Debt management: - Develop a debt management strategy and establish a debt management unit recording all external and domestic public and publicly guaranteed debt. - Publish quarterly data on external and domestic public and publicly guaranteed debt on a government website for at least 6 months leading up to the completion point. - Governance: - Implement revised investment incentive code to ban tax exemptions outside Liberia Revenue Code. - Become EITI-compliant with regular public reporting and civil society engagement, including at least one civil society-led monitoring report. - Establish an independent Anti-Corruption Commission consistent with the Anti-Corruption Act and ensure it is operational for at least 12 months leading up to the completion point. - Monitoring public spending post-HIPC: - Actual cash flow benefits of HIPC relief initially extremely small. - Small token payments: IMF US$60,000 per month; AfDB US$15,000 per month; World Bank goodwill payments US$25,000 per month (held in escrow for Liberia’s benefit). - Debt relief must be accompanied by a strong program ensuring effective use of domestic and external resources, costing PRSP priorities, and developing a medium-term expenditure framework. - Under GEMAP with IMF and World Bank technical assistance: - Interim commitment control system prevented new domestic arrears; commitment vouchers reviewed by the CMCo. - An international expert maintains co-signing authority for the CMCo and coordinates monitoring of government’s account at the CBL. - International controllers have similar authority at major revenue-generating SOEs and the Ministry of Lands, Mines and Energy; SOE revenues flow through special accounts for monitoring. - Progress made in strengthening budget preparation and improving fiscal reporting. *Source: _cr0853 - 56. The World Bank and the AfDB are expected to provide assistance above and beyond the HIPC Initiative and MDRI relief (IMF staff report excerpt).* ### 70. Notwithstanding the progress to date, further efforts are needed to improve ### _cr0853 - 70. Notwithstanding the progress to date, further efforts are needed to improve ### Public Financial Management (PFM): progress and remaining needs - Further efforts are needed to improve PFM. Budget preparation, implementation, and cash management need enhancing; revenues also need to be increased further. (Paragraph 70) ### Technical assistance and institutional support - Liberia is receiving substantial technical assistance to help strengthen its PFM: - The World Bank, IMF, and AfDB provide technical assistance and training in PFM to the Ministry of Finance; the U.S. Government provides assistance to the Bureau of the Budget; the government intends to merge the Bureau into the Ministry of Finance. (Paragraph 71) - The IMF provides financing to support the special advisor at the CBL and technical assistance in revenue mobilization to the Ministry of Finance. (Paragraph 71) - The United States assisted in the introduction of a computerized payment system with full accountability checks at each stage. (Paragraph 71) - The World Bank is providing capacity building and training support to ministries and agencies to improve compliance with public procurement legal requirements. (Paragraph 71) - Enduring gains in transparency, financial management systems, and accountability will require Liberia’s international partners to sustain their support of the government’s reform process. (Paragraph 71) ### PEMFAR and medium-term PFM reform strategy - The government is developing a medium-term PFM reform strategy with support from the IMF’s Fiscal Affairs Department (FAD), as part of a broader PEMFAR being led by the World Bank and the IMF. (Paragraph 72) - The PEMFAR will: - assess fiduciary risks associated with budget support; - identify areas for a prioritized action plan; - deepen the dialogue between Liberia and its partners on PFM. (Paragraph 72) - PEMFAR content includes: - a Country Financial Accountability Assessment (CFAA); - a Country Procurement Assessment Review (CPAR); - an assessment of the systems and arrangements for budget planning; - a PFM reform strategy that includes an action plan for reforms to be implemented over the short, medium, and long term. (Paragraph 72) - PEMFAR findings will be used to compile a set of standard PEFA ratings covering as many of the 31 PEFA performance assessment indicators as possible, creating a benchmark for future PFM reforms. (Paragraph 72) - Related operational details and benchmarks: - An FAD technical assistance mission to discuss PFM reforms took place in October 2007. (footnote 33) - Liberia’s SMP contains end-March 2008 benchmarks consistent with recommendations of the FAD mission on PFM reform, including: - (i) passage of legislation to allow the merger of the Bureau of the Budget into the Finance Ministry and to limit the transfer of resources between budget lines without legislative approval; and - (ii) preparing a chart of accounts, consistent with GFSM 2001-compatible budgetary classifications. (footnote 34) - If a PRGF/EFF-supported program is approved before end-March 2008, these measures would be monitored under the new program. (footnote 34) ### Monitoring, tracking expenditures, and IFMIS - A basic monitoring mechanism for tracking expenditures is being implemented. (Paragraph 73) - Interim arrangements: - The government will track expenditure manually, or using existing systems, until the Integrated Financial Management Information System (IFMIS) is designed and installed according to the needs of the Ministry of Finance. (Paragraph 73) - Until IFMIS is in place, certain budget codes will be designated as PRSP priority expenditures so that the existing system for expenditure authorizations can track such spending. (Paragraph 73) - The government intends to use these systems to track its total budget outlays against its medium-term expenditure priorities, as defined by its I-PRSP and successor PRSP. Benchmarks are indicative and will be elaborated in consultation with the government as it develops its PRSP and expenditure plans. (Paragraph 74) ### Possible medium-term expenditure priorities (Box 4) - Education: - Rehabilitation of 80 percent of damaged primary and secondary schools; - rehabilitation of three teacher training institutions; - school feeding programs introduced; - training facility for artisans and craftsmen opened. - Health: - Improving 354 existing health facilities and provisioning the basic health services in 70 percent of health facilities; - renovating and staffing three county hospitals; - operating four facilities for youth offenders and four facilities for people with disabilities; - preparing long-term health development plans specific to each county; - creating a National AIDS commission and strengthening welfare institutions to assist vulnerable groups; - rehabilitating nine potable water facilities; - operating a new waste disposal system. - Agricultural Development: - preparing a national food security policy; - providing seeds and tools to smallholders through regional seed centers; - rehabilitating 1,000 hectares and 100 abandoned fish ponds; - assisting 2,000 coastal fishers; - providing 1,000 short-cycle ruminants; - revitalizing the tree crops subsector; - increase investment in commercial plantations; - identifying impediments to private sector participation in agriculture and endorse appropriate incentives; - reactivate extension services; - restructure agricultural marketing credit and input supply through the private sector. - Public Works: - Rebuilding 109 miles of roads, 300 miles of feeder roads, and 25 miles of urban roads; - renovation of the road maintenance and training center; - restoration of Roberts International Airport to international standards. ### Issues for discussion (HIPC eligibility and timing) - Executive Directors’ views and guidance are sought on the following issues: (Paragraph 75) - Eligibility: Do Directors agree that Liberia is eligible for assistance under the HIPC Initiative? - Timing of the decision point: Do Directors agree with the staffs’ recommendation that Liberia could reach its decision point by end-February 2008, together with the approval of a PRGF arrangement by the IMF Board, provided that: - (i) Liberia has a current six-month track record of satisfactory performance under a program of upper-credit tranche policy conditionality with the IMF; - (ii) Liberia clears its arrears to its multilateral creditors or agrees on a strategy to clear them; and - (iii) Liberia agrees on appropriate completion point triggers? - Floating completion point: What are Directors’ views on staffs’ recommendations on possible triggers against which satisfactory performance would be measured for the floating completion point (Box 3)? (Paragraph 75) ### Debt and HIPC-related figures (selected data from tables and figures) - Composition of stock of external debt at end-June 2007 (Nominal stock: $4,788.4 million): World Bank 9%; IMF 17%; AfDB Group 6%; Paris Club 30%; Commercial 34%; Other Multilaterals 2%; Other Official Bilaterals 3%. (Figure 1A) - Potential Costs of the HIPC Initiative (Total Estimated Enhanced HIPC Assistance: $2,994.7 million, end-June 2007 NPV terms): World Bank Group 13%; IMF 25%; Paris Club 28%; Commercial 20%; Other Multilaterals 3%; AfDB Group 8%; Other Official Bilaterals 3%. (Figure 1B) - Table A1 (selected totals, end-June 2007): - Total nominal stock: 4,788.4 (Millions of U.S. dollars). (Table A1) - Multilateral nominal: 1,614.8 (Millions of U.S. dollars); percent of total 33.7. (Table A1) - IMF nominal: 809.2 (Millions of U.S. dollars); percent of total 16.9. (Table A1) - World Bank nominal: 442.6 (Millions of U.S. dollars); percent of total 9.2. (Table A1) - AfDB Group nominal: 271.3 (Millions of U.S. dollars); percent of total 5.7. (Table A1) - Bilateral and commercial nominal: 3,173.6 (Millions of U.S. dollars); percent of total 66.3. (Table A1) - Paris Club nominal: 1,413.8 (Millions of U.S. dollars); percent of total 29.5. (Table A1) - Commercial nominal: 1,640.1 (Millions of U.S. dollars); percent of total 34.3. (Table A1) - Memorandum items (selected): (Millions of U.S. dollars unless otherwise indicated) - Total Estimated Enhanced HIPC Assistance (NPV): 2,994.7; Multilateral portion: 1,559.5; NPV of debt: 1,435.2; NPV percent 1.08. (Table beneath Figure 3 / Table A1) - NPV of debt: 3,288; Multilateral: 1,712; Paris Club creditors: 949. (Memorandum items) - Three-year average of exports: 196; Current-year exports: 254. (Memorandum items) - NPV of debt-to-exports ratio: 1,681. (Memorandum items) *Sources: Liberian authorities and staff estimates and projections.* ### 91.08 percent is applied to debt remaining after traditional mechanisms. For non-concessional bilateral or commercial de ### _cr0853 - 91.08 percent is applied to debt remaining after traditional mechanisms. For non-concessional bilateral or commercial de ### HIPC reduction assumptions and overall reductions - A common reduction factor of 91.08 percent is applied to debt remaining after traditional mechanisms. - For non-concessional bilateral or commercial debts this would imply a total reduction of 97.03 percent. - Note: Exports of non-factor services are estimated using the methodology described in Annex II. - Paris Club cutoff date: January 1, 1983. ### Discount rates and exchange rate assumptions (end-June 2007) - Discount rates (Commercial Interest Reference Rates published by the OECD) and exchange rates (national currency per U.S. dollar at end-June 2007) used in simulations: - Canadian dollar: Discount Rate 5.01; Exchange Rate 0.9404 - CFA franc: Discount Rate 4.94; Exchange Rate 0.0021 - Chinese yuan: Discount Rate 5.07; Exchange Rate 0.1313 - Danish kroner: Discount Rate 4.96; Exchange Rate 0.1815 - Euro: Discount Rate 4.94; Exchange Rate 1.3505 - Great Britain sterling: Discount Rate 5.92; Exchange Rate 2.0049 - Italian lira: Discount Rate 4.94; Exchange Rate 0.0007 - Liberian dollar: Discount Rate 4.94; Exchange Rate 0.0160 - Japanese yen: Discount Rate 2.41; Exchange Rate 0.0081 - Kuwaiti dinar: Discount Rate 5.62; Exchange Rate 3.4715 - Norwegian kroner: Discount Rate 5.50; Exchange Rate 0.1695 - Saudi Arabia riyal: Discount Rate 5.07; Exchange Rate 0.2670 - Special drawing rights: Discount Rate 5.07; Exchange Rate 1.5156 - Swiss franc: Discount Rate 3.53; Exchange Rate 0.8153 - United States dollar: Discount Rate 5.62; Exchange Rate 1.0000 - Sources: OECD; and IMF, International Financial Statistics. - Footnotes: Discount rates are OECD CIRR averages; exchange rates are end-June 2007. ### External debt service projections (2007/08–2026/27; Millions of U.S. dollars) - Before traditional debt relief: Total debt service 2007/08 = 25.0; 2008/09 = 20.7; 2009/10 = 14.7; ... 2026/27 = 13.4. - Debt service-to-exports ratio: 2007/08 = 7.4; 2008/09 = 4.5; 2009/10 = 2.2; 2010/11 = 1.4; ... 2016/17 = 0.6; 2007/08-2016/17 average = 2.1; 2017/18-2026/27 average = 0.5. - Debt service-to-revenue ratio: 2007/08 = 13.5; 2008/09 = 10.3; 2009/10 = 6.1; ... 2016/17 = 1.8; 2007/08-2016/17 average = 5.1; 2017/18-2026/27 average = 1.7. - After traditional debt relief and multilateral arrears clearance: Total debt service 2007/08 = 101.9; 2008/09 = 122.6; 2009/10 = 119.1; ... 2026/27 = 153.5. - Multilateral component examples: 2007/08 = 10.7; 2008/09 = 32.2; 2009/10 = 33.6; 2012/13 = 126.4; 2013/14 = 182.7. - Official bilateral (Paris Club) examples: Paris Club 2007/08 = 14.1; 2008/09 = 10.1; 2009/10 = 7.3; 2012/13 = 3.9. - New debt (projected borrowing): 2010/11 = 0.1; 2011/12 = 0.2; 2012/13 = 0.4; ... 2026/27 = 3.9 (averages: 2007/08-2016/17 = 0.5; 2017/18-2026/27 = 3.9). - Debt service-to-exports ratio: 2007/08 = 30.2; 2008/09 = 26.4; 2009/10 = 17.8; 2010/11 = 13.4; 2007/08-2016/17 average = 21.8; 2017/18-2026/27 average = 8.8. - Debt service-to-revenue ratio: 2007/08 = 54.9; 2008/09 = 61.1; 2009/10 = 49.6; 2010/11 = 45.2; 2007/08-2016/17 average = 62.2; 2017/18-2026/27 average = 27.1. - After HIPC assistance: Total debt service 2007/08 = 94.0; 2008/09 = 73.4; 2009/10 = 70.0; ... 2026/27 = 18.8. - Existing debt component 2007/08 = 94.0; 2008/09 = 73.4; 2009/10 = 70.0; 2010/11 = 25.9. - Multilateral after HIPC: 2007/08 = 2.8; 2008/09 = 5.7; 2009/10 = 7.1; 2012/13 = 37.8. - Commercial after HIPC: 2007/08 = 35.1; 2008/09 = 17.4; 2009/10 = 17.4; 2010/11 = 6.0. - New debt unchanged as earlier. - Debt service-to-exports ratio after HIPC assistance: 2007/08 = 27.9; 2008/09 = 15.8; 2009/10 = 10.5; 2010/11 = 2.8; 2007/08-2016/17 average = 7.7; 2017/18-2026/27 average = 1.1. - Debt service-to-revenue ratio after HIPC assistance: 2007/08 = 50.6; 2008/09 = 36.6; 2009/10 = 29.2; 2010/11 = 9.5; 2007/08-2016/17 average = 18.8; 2017/18-2026/27 average = 3.4. - Reduction in debt service as a result of HIPC Initiative assistance (examples by year): - 2007/08 = 7.9; 2008/09 = 49.1; 2009/10 = 48.9; 2010/11 = 99.2; 2011/12 = 137.7; 2012/13 = 188.9; ... 2016/17 = 245.3; average 2007/08-2016/17 = 152.4; 2017/18-2026/27 average = 134.7. - After HIPC and MDRI assistance: Total debt service 2007/08 = 94.0; 2008/09 = 73.4; 2009/10 = 70.2; 2010/11 = 25.3; ... 2026/27 = 13.4. - Debt service-to-exports ratio after HIPC and MDRI assistance: 2007/08 = 27.9; 2008/09 = 15.8; 2009/10 = 10.5; 2010/11 = 2.7; 2007/08-2016/17 average = 6.4; 2017/18-2026/27 average = 0.8. - Debt service-to-revenue ratio after HIPC and MDRI assistance: 2007/08 = 50.6; 2008/09 = 36.6; 2009/10 = 29.2; 2010/11 = 9.1; 2007/08-2016/17 average = 14.9? (table contains truncated figures). - After additional bilateral and multilateral relief beyond enhanced HIPC and MDRI assistance: - Total debt service examples: 2007/08 = 92.5; 2008/09 = 68.4; 2009/10 = 63.6; 2010/11 = 20.5; 2026/27 = 12.5. - Existing debt component 2007/08 = 92.5; 2008/09 = 68.3; 2009/10 = 63.5; 2010/11 = 20.2. - Debt service-to-exports ratio examples: 2007/08 = 27.4; 2008/09 = 14.7; 2009/10 = 9.5; 2010/11 = 2.2; 2007/08-2016/17 average = 6.1; 2017/18-2026/27 average = 0.7. ### NPV of external debt (2006/07–2026/27; Millions of U.S. dollars) - I. Before traditional debt-relief - NPV of total debt 2006/07 = 4,739.3; 2007/08 = 4,724.8; 2008/09 = 4,713.8; ... 2026/27 = 5,016.0. - NPV of outstanding debt examples: 2006/07 = 4,739.3; 2007/08 = 4,724.8; 2008/09 = 4,713.8; 2016/17 = 4,689.9; average 2006/07-2016/17 = 4,704.9; 2017/18-2026/27 average = 4,683.6. - Multilateral constant at 1,575.8 across early years with World Bank = 414.6; AfDB Group = 263.1; IMF = 809.2; Other multilateral = 88.8. - Official bilateral and commercial = 3,163.6 (2006/07), with Paris Club = 1,406.2; Commercial = 1,640.1. - NPV of new borrowing: 2010/11 = 4.9; 2011/12 = 14.4; 2012/13 = 26.8; ... 2026/27 = 337.0. - II. After traditional debt relief and multilateral arrears clearance - NPV of total debt 2006/07 = 3,288.0; 2007/08 = 2,650.2; 2008/09 = 2,659.0; 2009/10 = 2,671.6; 2026/27 = 1,350.8. - NPV of outstanding debt examples: 2006/07 = 3,288.0; 2007/08 = 2,618.0; 2008/09 = 2,625.2; 2016/17 = 1,777.4; average 2006/07-2016/17 = 2,451.9; 2017/18-2026/27 average = 1,346.5. - Multilateral after arrears clearance examples: 2006/07 = 1,575.8; 2007/08 = 910.5; 2008/09 = 921.8; IMF component 2007/08 = 753.5; World Bank 2007/08 = 46.4. - Official bilateral and commercial examples: 2006/07 = 1,712.3; Paris Club 2006/07 = 948.7; Commercial 2006/07 = 662.8. - NPV of new borrowing: 2007/08 = 32.2; 2008/09 = 33.8; ... 2016/17 = 106.0; averages provided. - III. After conditional delivery of enhanced HIPC assistance - NPV of total debt examples: 2006/07 = 3,939.7; 2007/08 = 2,129.9; 2008/09 = 2,160.8; 2009/10 = 2,202.3; 2026/27 = 392.0. - NPV of outstanding debt 2006/07 = 3,939.7; 2007/08 = 2,097.7; 2008/09 = 2,127.0; 2016/17 = 134.2. - Multilateral after conditional delivery examples: total multilateral 2006/07 = 776.1; IMF = 659.7 (2006/07); World Bank = 45.2 (2006/07). - IV. After unconditional delivery of enhanced HIPC assistance - NPV of total debt examples: 2006/07 = 293.3; 2007/08 = 363.0; 2008/09 = 339.3; 2009/10 = 312.0; average 2006/07-2016/17 and 2017/18-2026/27 presented. - NPV of outstanding debt 2006/07 = 293.3; 2007/08 = 330.7; 2008/09 = 305.5; 2016/17 = 134.2. - Multilateral and official bilateral/commercial breakdowns provided (examples: multilateral 2006/07 = 140.6; official bilateral and commercial 2006/07 = 152.7; Paris Club 2006/07 = 84.6; commercial 2006/07 = 59.1). - V–VI. After conditional delivery of enhanced HIPC and MDRI assistance and after conditional additional bilateral and multilateral relief beyond enhanced HIPC and MDRI assistance - Detailed NPV trajectories and sector splits provided across scenarios (full tables list year-by-year NPV of total debt, outstanding debt, multilateral, World Bank, AfDB Group, IMF, other multilateral, official bilateral and commercial, NPV of new borrowing). ### External debt indicators (selected ratios and averages) - Before traditional debt relief (percent): - NPV of debt-to-GDP ratio 2006/07 = 707.8; 2007/08 = 619.5; 2008/09 = 558.0; 2009/10 = 495.9; 2016/17 = 290.9; 2006/07-2016/17 average = 438.1; 2017/18-2026/27 average = 221.6. - NPV of debt-to-exports ratio (2006/07) = 2423.7; 2007/08 = 1826.3; 2008/09 = 1339.9; 2009/10 = 960.6. - NPV of debt-to-revenue ratio (2006/07) = 3227.5; 2007/08 = 2544.4; 2008/09 = 2350.8. - After traditional debt relief and multilateral arrears clearance: - NPV of debt-to-GDP ratio 2006/07 = 491.1; 2007/08 = 347.5; 2008/09 = 314.8; 2009/10 = 281.4; 2016/17 = 114.7; averages: 2006/07-2016/17 = 241.3; 2017/18-2026/27 = 71.6. - NPV of debt-to-exports ratio 2006/07 = 1681.5; 2007/08 = 1024.4; 2008/09 = 755.8; 2009/10 = 545.1. - Debt service ratio examples: 2007/08 = 30.2; 2008/09 = 26.4; 2009/10 = 17.8; 2016/17 = 20.2; 2006/07-2016/17 average = 21.8; 2017/18-2026/27 average = 8.8. - After conditional delivery of enhanced HIPC assistance: - NPV of debt-to-GDP ratio 2006/07 = 588.4; 2007/08 = 279.2; 2008/09 = 255.8; 2009/10 = 232.0. - NPV of debt-to-exports ratio 2006/07 = 2014.8; 2007/08 = 823.3; 2008/09 = 614.2; 2009/10 = 449.3. - Debt service-to-exports ratio: 2007/08 = 27.9; 2008/09 = 15.8; 2009/10 = 10.5; 2010/11 = 2.8; 2006/07-2016/17 average = 7.7; 2017/18-2026/27 average = 1.1. - Debt service-to-revenue ratio: 2007/08 = 50.6; 2008/09 = 36.6; 2009/10 = 29.2; 2010/11 = 9.5; average 2006/07-2016/17 = 18.8; 2017/18-2026/27 average = 3.4. - After unconditional delivery of enhanced HIPC assistance: - NPV of debt-to-GDP ratio examples: 2006/07 = 43.8; 2007/08 = 47.6; 2008/09 = 40.2; 2009/10 = 32.9. - NPV of debt-to-exports ratio: 2006/07 = 150.0; 2007/08 = 140.3; 2008/09 = 96.5; 2009/10 = 63.7. - Debt service-to-exports and debt service-to-revenue ratios align with HIPC/MDRI scenario reductions (examples provided above). ### Sensitivity analysis highlights (2006/07–2026/27; percent unless otherwise indicated) - Baseline scenario (after HIPC and MDRI, implicit): - NPV debt-to-GDP ratio 2006/07 = 43.8; 2007/08 = 47.6; 2008/09 = 40.2; 2016/17 = 14.6; averages 2006/07-2016/17 = 28.4; 2017/18-2026/27 = 13.2. - NPV debt-to-exports ratio 2006/07 = 150.0; 2007/08 = 140.3; 2008/09 = 96.5. - NPV debt-to-revenue ratio 2006/07 = 199.8; 2007/08 = 195.5; 2008/09 = 169.2. - Debt service-to-exports ratio 2007/08 = 27.9; 2008/09 = 15.8; 2009/10 = 10.5. - Debt service-to-revenue ratio 2007/08 = 50.6; 2008/09 = 36.6; 2009/10 = 29.2. - Less concessional new borrowing (interest rate on new debt 2 percentage points higher than baseline from 2011): - NPV debt-to-GDP ratio shows higher trajectory (example 2016/17 = 17.8; 2026/27 average 17.9). - NPV debt-to-exports ratio and debt-to-revenue ratio both increase relative to baseline; debt service-to-exports ratio slightly higher. - Lower export growth (assumes on average 3 percentage points lower export growth in 2007-27): - NPV of debt-to-GDP ratio increases substantially (examples: 2007/08 = 68.3; 2008/09 = 62.2; 2016/17 = 59.9; 2026/27 = 89.4). - NPV of debt-to-exports ratio and debt-to-revenue ratio increase significantly; debt service-to-exports ratio rises (examples: 2007/08 = 37.3; 2008/09 = 21.3; 2016/17 = 5.6). - Lower GDP growth (assumes 3 percentage points lower GDP growth in 2007-27): - NPV debt-to-GDP ratio rises sharply (examples: 2007/08 = 76.1; 2008/09 = 67.4; 2026/27 = 100.60). - Debt service-to-exports and debt service-to-revenue ratios also increase. - Grants versus loans (government substitutes grants with borrowing for projects financed outside budget): - NPV debt-to-GDP ratio rises over time (examples: 2006/07 = 43.8; 2016/17 = 69.6; 2026/27 = 109.8). - NPV debt-to-exports and debt-to-revenue ratios increase markedly. - Combination of shocks (assumes combination of all shocks): - NPV debt-to-GDP ratio examples: 2007/08 = 73.2; 2008/09 = 71.4; 2009/10 = 69.3; 2026/27 = 126.45. - NPV debt-to-exports ratio and debt-to-revenue ratio escalate significantly; debt service-to-exports ratio examples: 2007/08 = 38.5; 2008/09 = 22.9; 2016/17 = 15.6. ### Memoranda and other key figures - Memorandum items (selected): Exports of goods and nonfactor services (fiscal year exports) examples: - 2007/08 = 337.3; 2008/09 = 464.4; 2009/10 = 668.7; 2016/17 = 1,275.3; 2026/27 = 2,280.9; 2007/08-2016/17 average = 957.2; 2017/18-2026/27 average = 1,815.9. - Government revenues (central government revenues, excluding grants) examples: - 2007/08 = 185.7; 2008/09 = 200.5; 2009/10 = 240.3; 2016/17 = 453.7; 2026/27 = 755.0; 2007/08-2016/17 average = 315.1; 2017/18-2026/27 average = 591.5. - Sources: Liberian authorities and staff estimates and projections. - All external debt statistics correspond to public and publicly guaranteed debt. Fiscal year ends on June 30. ### IMF enhanced HIPC Initiative assistance delivery (possible schedule; FY2008–2021, July–June fiscal years) - Total IMF assistance under the enhanced HIPC Initiative is US$ 737.0 million in NPV terms (data at end-June 2007). - Of this amount, US$ 32.9 million represents the concessional element associated with the disbursement of a PRGF loan following Liberia's clearance of arrears to the IMF. - Remaining US$ 704.2 million will be provided as a grant toward debt relief under the HIPC Initiative (based on data at end-June 2007). - Delivery schedule of IMF assistance (in percent of the total assistance) examples by semi-annual periods: - 2008 Feb-Jun = 1.0 - Later semiannual entries include: 3.9; 3.9; 1.9; 2.1; 4.8; 12.1; 18.2; 15.2; 12.5; 10.8; 13.6 (table shows detailed semi-annual disaggregation). - Projected debt service due on IMF obligations (examples, millions of U.S. dollars): - 2008 Feb-Jun total IMF projected debt service due = 7.6 - 2009 Jul-Dec = 27.9 - 2010 Jan-Jun = 28.0 - Later years show large projected IMF principal drawdowns around 2012–2015 reflecting EFF and PRGF components (e.g., Principal 2012 = 89.3; 2013 = 157.4; subsequent years show PRGF principal schedule). - Total HIPC-eligible debt examples: - 2008 Feb-Jun = 7.6 - 2009 Jul-Dec = 27.9 - 2010 Jan-Jun = 27.9 - Principal component examples: 2012 = 89.3; 2013 = 154.1. - IMF assistance—deposits into Liberia's Umbrella Account (examples): - Interim assistance totals listed across 2008–2010 as 27.4; 27.3; 20.9 (semiannual). - Completion point assistance 5/ = 628.6; Completion point interest = 87.4. - IMF assistance—drawdown schedule from Liberia's Umbrella Account (examples): - 2008 Feb-Jun = 7.4; 2009 Jul-Dec = 27.2; 2010 Jan-Jun = 27.3; 2012 onward large drawdowns shown (e.g., 2012 = 90.9; 2013 = 154.1). - IMF assistance without interest (examples): 2008 Feb-Jun = 7.4; 2009 Jul-Dec = 27.2; 2010 Jan-Jun = 27.3; 2012 = 84.9; 2013 = 128.0; 2014 = 107.1; 2015 = 88.3; 2016 = 75.8; 2017 = 95.7. - Estimated interest earnings (examples): 2012 = 1.9; 2013 = 2.6; 2014 = 6.1; 2015 = 26.0; 2016 = 47.0; 2017 = 65.8; 2018 = 58.0; 2019 = 46.5. - Debt service due on EFF and PRGF obligations after IMF assistance (examples): - 2008 Feb-Jun = 0.2; 2009 Jul-Dec = 0.7; 2010 Jan-Jun = 0.7; 2012 = 0.4; 2013 = 0.1; 2014 = 0.2; larger amounts appear in later years (e.g., 2015 onward). - Proportion (in percent) of each repayment falling due during the period to be paid by HIPC assistance from the Umbrella Account (examples): - 2008 Feb-Jun = 96.8; 2009 Jul-Dec = 97.7; 2010 Jan-Jun = 98.0; 2012 = 98.2; 2013 = 88.6; 2014 = 92.9; 2015 = 95.0; 2016 = 83.1; 2017 = 69.5; 2018 = 57.3; 2019 = 49.2; 2020 = 62.1. - II. Debt relief provided at Completion Point (on stock basis in cash terms): - Total = 857.9; HIPC assistance = 717.8; Beyond-HIPC = 140.1. - III. Debt service due to the IMF after HIPC and beyond-HIPC debt relief (selected semiannual values): - 2008 Feb-Jun = 0.2; 2009 Jul-Dec = 0.7; 2010 Jan-Jun = 0.7; 2012 = 0.4; later semiannual values provided (e.g., 2016 onward: 3.5; 6.7; 9.4; 10.1; 11.8; etc.). - Memorandum items (based on debt service data and exchange rates as of end-June 2007): - Total debt service due (millions of U.S. dollars): 2007/08 = 25.0; 2008/09 = 20.7; 2009/10 = 14.7; 2012 onward series in table. - Total IMF assistance under enhanced HIPC Initiative: US$ 737.0 million in NPV terms (with breakdown US$ 32.9 million concessional PRGF element; US$ 704.2 million grant). *Sources: Extracted tables and text from the provided IMF staff document (Liberian authorities and staff estimates and projections).* ### 2007. Beyond the completion point, EFF charges are based on assumed SDR interest rate (gradually rising to 5 percent) pl ### _cr0853 - 2007. Beyond the completion point, EFF charges are based on assumed SDR interest rate (gradually rising to 5 percent) pl ### Interest and charge assumptions; HIPC/IMF timelines - EFF charges are based on assumed SDR interest rate (gradually rising to 5 percent) plus 108 basis points and adjustments for deferred charges. - The remaining IMF's grant HIPC assistance would be disbursed into the member's account at the assumed completion point in December 2010, which is reflected in the calculation of interest. - Projected interest earnings are estimated based on assumed interest rates which are gradually rising to 5 percent in 2011 and beyond; actual interest earnings may be higher or lower. - Debt service after HIPC assistance during the interim period reflects the assumed monthly payments by Liberia of US$60,000. - Credit outstanding at the completion point associated with arrears clearance. ### Key debt service projections and impacts (selected figures from Table A11) - Debt service before HIPC Assistance — Total (selected fiscal years, in millions of U.S. dollars unless otherwise indicated): - 2007/2008 Jul.-Feb. + Mar.-Jun. Total: 2.9, 1.0, 3.9 - 2008/2009: 3.8 - 2009/2010: 3.8 - 2010/2011: 3.8 - 2011/2012: 3.8 - 2012/2013: 3.7 - 2013/2014: 3.7 - 2014/2015: 3.7 - 2015/2016: 3.7 - 2016/2017: 3.6 - 2017/2018: 3.6 - 2018/2019: 3.6 - 2019/2020: 3.6 - 2020/2021: 3.6 - 2021/2022: 3.5 - 2022/2023: 3.5 - 2023/2024: 3.2 - 2024/2025: 3.1 - 2025/2026: 3.1 - 2026/2027: 2.9 - 2027/2028: 2.8 - 2028/2029: 2.7 - 2029/2030: 2.2 - 2030/2031: 2.0 - 2031/2032: 2.0 - 2032/2033: 1.9 - 2033/2034: 0.6 - 2034/2035: 0.5 - 2035: 0.1 - Cumulative 2008-35 total: 82.5 - Debt service on IDA Credits (before HIPC Assistance) — cumulative 2008-35 total: 82.5 - Of which principal — cumulative 2008-35 total: 75.7 - Of which interest — cumulative 2008-35 total: 6.8 - Debt service after HIPC Assistance — Total (selected years mirror structure above): - Cumulative 2008-35 total: 78.8 - Debt service on IDA Credits (after HIPC Assistance) — cumulative 2008-35 total: 78.8 - Of which principal — cumulative 2008-35 total: 72.5 - Of which interest — cumulative 2008-35 total: 6.3 - Savings on debt service to IDA (annual and cumulative highlights): - Selected first years: 1.8, 0.5, 2.3, 0.2 - Cumulative savings total: 3.7 - Of which principal — cumulative: 3.2 - Of which interest — cumulative: 0.5 - Enhanced HIPC assistance details: - Enhanced HIPC assistance of $4.398 million in end-June 2007 NPV terms proposed to be delivered over about 5 years through a 50 percent relief on the debt service falling due to IDA on credits outstanding at end-June 2007, corresponding to a nominal relief of $2.151 million. - Timing and procedural notes: - Decision point is expected to be reached in February 2008. - Delivery of the interim assistance by the World Bank Group is expected to start on March 1, 2008. - Savings on debt service to IDA in 2007/08 include payments that were cleared as part of the arrears clearance in December 2007. ### Paris Club creditors’ delivery of bilateral relief (selected features) - Table A10 summarizes creditor approaches under bilateral initiatives beyond the HIPC Initiative, using categories such as ODA and non-ODA, and timing (pre-cutoff date, post-cutoff date, decision point, completion point). - Examples of creditor-specific provisions (textual summaries preserved from source): - Australia: post-cutoff date non-ODA relief to apply to debts incurred before a date to be finalized; timing details for both flow and stock relief are to be finalized. - Canada: including Bangladesh. Canada has granted a moratorium of debt service as of January 2001 on all debt disbursed before end-March 1999 for 13 out of 17 HIPCs with debt service due to Canada. 100% cancellation will be granted at completion point. As of July 2004, Canada has provided completion point stock of debt cancellation for Benin, Bolivia, Guyana, Senegal, and Tanzania. - France: cancellation of 100 percent of debt service on pre-cutoff date commercial claims on the government as they fall due starting at the decision point. Once countries have reached their completion point, debt relief on ODA claims on the government will go to a special account and will be used for specific development projects. - Netherlands: 100 percent ODA (pre- and post-cutoff date debt will be cancelled at decision point); for non-ODA in specific cases 100 percent write-off on the flow at decision point; interim relief up to 90 percent reduction in other cases; at completion point, all HIPCs receive 100 per cent cancellation of the remaining stock of the pre-cutoff date debt. - United Kingdom: "beyond 100 percent" full write-off of all debts of HIPCs as of their decision points, and reimbursement at the decision point of any debt service paid before the decision point. - United States: 100 percent post-cutoff date non-ODA treated on debt assumed prior to June 20, 1999 (the Cologne Summit). - Source: Paris Club Secretariat. ### Annex I — Liberia: Debt management (findings and required reforms) - Institutional and legal framework: - Debt management responsibility: Ministry of Finance and the Central Bank of Liberia (CBL). - Existing legislation does not clearly specify different tasks of each institution or responsibility for designing and implementing a cohesive debt strategy. - Four pieces of legislation cited in the legal framework: Constitution of 1986 (article 34), executive law creating the Ministry of Finance (Chapter 21.3), Revenue Code of Liberia Act of 2000 (Section 2300 and Section 2301), and the 1999 Act to Authorize the Establishment of the CBL (multiple Parts regulating CBL functions). - Footnote: Debt management is now the responsibility of the Deputy Minister of Finance for Expenditure and Debt Management. - Debt recording and statistics: - The Debt Management Unit (DMU) of the Ministry of Finance is now the main source of public debt statistics. - The DMU completed a review of domestic debt with assistance from KPMG Ghana. - No comprehensive public debt database currently exists; debt data are stored in various Excel spreadsheets. - The Unit lacks debt recording software and standard procedures for monitoring/recording incoming data, access controls, data back-up procedures, and clear division of responsibility among staff. - Many original loan agreements lost or destroyed during the civil conflict; loan documentation not filed systematically or kept in a secure archive. - Debt strategy and new borrowing: - Current debt strategy consists solely of a domestic debt resolution strategy; no comprehensive debt and new financing strategy exists. - A domestic debt issuance policy has yet to be developed and implemented. - Government proposes in the next few years to follow a “no borrowing” strategy. - Contingent liabilities and guarantees: - No formal procedures to monitor contracting of debt by SOEs; SOEs do not need ministerial approval to take on new debts unless the creditor requires a state guarantee. - Last guarantee provided to Liberian Electricity Corporation in 2002 following a request from ECOBANK. - Bureau of State Enterprises (BSE) is responsible for monitoring SOE financial performance. - Debt servicing and projections: - Formal servicing process: DMU → Controller General → Deputy Minister of Expenditure and Debt → CBL as depositary of the Treasury. - In practice, there has not been systematic coordination with the Ministry of Finance before payment instructions are sent to the CBL; only small “good will” payments currently being made to IMF, World Bank Group, and AfDB Group. - Government does not currently use computerized debt strategy tools; plans to obtain CS-DRMS 2000+ exist but are not yet implemented. - Publication and transparency: - No national debt report is currently produced. - Existing publications with some debt statistics: annual report of the MOF (last published for 2006), annual budget (includes some provisions for debt servicing but no debt stock data), and the Quarterly Economic Bulletin (QEB) produced by the CBL (includes appendix tables summarizing Liberia’s public debt by quarter and by creditor type). - Staffing and capacity: - Ministry of Finance’s DMU employs seven staff members: only two are in technical capacity; the other staff members are supportive roles. - Debt Unit of the CBL employs two staff. - DMU has limited office space and unreliable internet connection. - Training noted: one Ministry of Finance staff attended CS-DRMS course in July 2005 (knowledge not retained); two CBL technical staff and one Ministry of Finance technical staff attended a Debt Sustainability Analysis workshop in March 2007. Applications pending for additional courses (Loan Negotiation and Evaluation, Debt Restructuring, External Debt Statistics). - Recent reform measures: - Debt Management Task Force (DMTF) created in April 2004 (CBL, Ministry of Finance, Ministry of Planning and Economic Affairs, General Auditing Office, Bureau of the Budget) had temporary success reconciling domestic debt data; ceased to exist from end-2005, partly due to lack of funding. - Future reforms required (policy recommendations and priorities): - Increase institutional capacity significantly to cope with debt management tasks. - Produce accurate public debt statistics, inclusive of SOEs, on a timely basis and make them publicly available via a periodically published debt report. - Design and implement a debt management strategy, including procedures for borrowing by SOEs. - International community support will be critical for achieving these goals. ### Annex II — Proposed methodology for imputing value of services receipts - Context and need: - Lack of official or other reliable source data on services receipts precluded the usual calculation of the net present value of external debt to exports (goods and services) to assess Liberia’s eligibility for the HIPC Initiative; it was necessary to impute the value of services receipts. - Imputation approach: - Staff used historic comparator country data to derive a benchmark ratio of services receipts to merchandise exports. This ratio was then applied to existing Liberian data for merchandise exports to impute the value of services receipts for required periods. - Considerations in the approach: - Choice of comparator country group. - Data from which to derive the ratio. - Time period over which to sample data. - Comparator group criteria and composition: - Comparator group includes countries that are (a) both PRGF-eligible and included in the World Bank’s group of low-income countries (WB LIC); and (b) post-conflict. - Rationale: PRGF-eligibility alone produced large variation; applying World Bank low-income cutoff (2005 cutoff of $875 per capita) refines sample; further refinement based on post-conflict status accounts for impediments to trade in services. - Proposed comparator country group of low-income post-conflict countries covers 18 countries: Burundi, Cambodia, Central African Republic, Chad, Democratic Republic of Congo, Côte d'Ivoire, Ethiopia, Guinea, Guinea-Bissau, Haiti, Mozambique, Niger, Rwanda, Sierra Leone, Sudan, Tajikistan, Timor Leste, and Yemen. - Note on methodological precedent: - This methodology is similar to the one developed and used in the case of Afghanistan and that was endorsed by the Boards of IDA and the IMF during their discussion of the HIPC preliminary document for that country. - Definition note: - In the IMF’s Balance of Payments Manual (fifth edition) services cover travel and transportation as well as communication services, construction services, financial and insurance services, various business-related services (e.g., computer services), and government services (e.g., goods and services purchases by embassies). - Data requirements: - Exports of goods and services data were required for 2003/04-05/06 for the preliminary DRA presented in this document. *Source: IMF staff estimates and annexes as presented in the provided content.* ### 20. The time period for calculating the benchmark ratio was chosen to cover the ### _cr0853 - 20. The time period for calculating the benchmark ratio was chosen to cover the ### Time period and methodology - The benchmark ratio time period covers 1980–2005, chosen to use the longest available data time frame. - Consideration was given to potential differences in conflict impacts on merchandise exports versus services receipts (e.g., damage to infrastructure or presence of foreigners), but lack of consistent time-series data for comparator countries prevented identification of such patterns. - The comparator ratio was derived from the IMF's Balance of Payments Yearbook (database) based on data covering 1980-2005. 1/ ### Results: estimates of Liberian services receipts - The use of estimates is acknowledged as subjective and uncertain, but practical given data constraints. - Key judgments: - The criteria for defining the comparator country group are described as both relatively objective and well-justified. - The benchmark ratio of total services receipts to merchandise exports in comparator countries is considered a sound choice given the limited range of data available in Liberia and comparator countries. - The proposed benchmark ratio is 38.0 percent; it is characterized as possibly erring on the side of being too high to avoid under-estimation (and over-estimating of HIPC debt relief), but represents a pragmatic middle ground. - The benchmark ratio for the comparator group (38.0 percent) falls between the median (26.5 percent) and average (42.8 percent) for HIPCs. - Footnote on revisions and adjustments (39): - If, before a country reaches the completion point, there are revisions to the data (debt or economic) used in the decision point DRA, a revised DRA will be prepared. Adjustments to the amount of HIPC debt relief will depend on the nature of data revisions. - For revisions to export data provided by, or at the behest of, the member (e.g., official merchandise export data for the period covered by the decision point NPV ratio (i.e., 2003/04-2005/06)), the amount of debt relief can be adjusted upward or downward (if it exceeds or falls short of the de minimis 1 percent threshold specified in the HIPC Trust Instrument). - Adjustments in HIPC debt relief attributable to incorrect information on export data that was not provided by, or at the behest of, the member (e.g., staff estimates of the ratio between total services receipts to merchandise exports) would only be made if they lead to higher assistance. - Given that Paris Club creditors are likely to provide 100 percent relief in the context of the HIPC Initiative, any revised debt relief calculations would ultimately only affect the time profile with which their claims are forgiven. However, the amount of HIPC debt relief to be provided by other creditors could be affected. ### Key statistics and estimates (Table II.1) - Merchandise Exports (Millions of US dollars; IMF estimates) by year: - 2001/02: 147 - 2002/03: 138 - 2003/04: 106 - 2004/05: 107 - 2005/06: 134 - Services Receipts (Current IMF Estimates in BoP; Millions of US dollars) by year: - 2001/02: 25 - 2002/03: 24 - 2003/04: 19 - 2004/05: 20 - 2005/06: 21 - Comparator Group: Post-conflict and PRGF Eligible (Ratio in percent implied by comparator) over the period shown: 38 56 52 40 41 51 (presented in the table as a group series labeled "Comparator Group: Post-conflict and PRGF Eligible 385652404151") - Other country group ratios (as presented): - Post-Conflict (all) 385652404151 - WB LIC 405955434354 - WB IDA-only 6810194737392 - PRGF-eligible 7010397757594 - Notes: - 1/ Comparator ratio derived from the IMF's Balance of Payments Yearbook (database) based on data covering 1980-2005. - 2/ IMF estimates. ### Comparative distribution (Figure II.1) - The benchmark ratio for the comparator group (38.0 percent) is compared with individual HIPC country values, the HIPC average, and the HIPC median. - Numerical comparisons explicitly cited: - Comparator group benchmark ratio: 38.0 percent - HIPC median: 26.5 percent - HIPC average: 42.8 percent *Source: _cr0853 - 20. The time period for calculating the benchmark ratio was chosen to cover the (excerpt).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr0853.pdf_