## _cr10192 - Executive Summary ## Source details **Canonical URL:** [_cr10192 - Executive Summary](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10192.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10192.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10192.pdf.json) --- ### Key findings and outcomes - In March 2008, the Boards of IDA and the IMF agreed Liberia had met the requirements for reaching the decision point under the Enhanced HIPC Initiative. - Amount of debt relief committed at the decision point: US$ 2,845.5 million in end-June 2007 present value (PV) terms. - Decision-point calculation implied a common reduction factor of 90.5 percent for all creditors. - Staff assessment: Liberia has made satisfactory progress toward completion point triggers; 11 out of 12 completion point triggers have been fully implemented. - Outstanding trigger: 12 months implementation of the Public Financial Management (PFM) law and related regulations (substantially implemented; authorities request a waiver based on 10 months of implementation). - First full Poverty Reduction Strategy Paper (PRSP) presented to IDA and IMF Boards in March 2008; first annual progress report submitted in April 2010. JSAN highlights PRS implementation as satisfactory. - Macroeconomic stability maintained despite global crisis; strong performance under the ECF-supported program. IMF staff recommend completion of the 4th ECF review in conjunction with this completion point document. ### Debt data revisions and debt relief delivery - Debt reconciliation reduced the present value of eligible external debt at end-June 2007 from US$ 3,144.7 million to US$ 3,038.4 million. - Estimated HIPC assistance in end-June 2007 PV terms reduced by US$ 106.3 million to US$ 2,739.2 million. - Nominal total debt relief estimated at about US$ 4.6 billion. - Portion of nominal relief delivered by multilateral creditors: US$ 1.5 billion; remainder by bilateral and commercial creditors. - Common reduction factor revised downward from 90.5 percent to 90.2 percent. - Creditors accounting for 96.4 percent of total HIPC-eligible debt have given satisfactory assurances of participation in the Enhanced HIPC Initiative. - All Paris Club and multilateral creditors (except ECOWAS) confirmed participation; most commercial creditors provided debt relief via a buyback supported by IDA’s debt reduction facility. - Staff encouraged authorities to seek agreements with remaining commercial and bilateral creditors. ### Topping-up, MDRI, and beyond-HIPC assistance - Liberia does not qualify for exceptional topping-up under the Enhanced HIPC Initiative. - PV of debt-to-exports ratio after enhanced HIPC assistance at end-June 2009: 69.1 percent (20.8 percentage points lower than anticipated at the decision point). - After full delivery of additional bilateral debt relief beyond the HIPC Initiative, PV of external debt-to-exports ratio at end-June 2009: 62.6 percent. - Upon reaching the completion point, Liberia would qualify for additional debt relief under: - The Multilateral Debt Relief Initiative (MDRI), - IMF beyond-HIPC assistance, - EU special debt relief initiative. - MDRI and MDRI-type assistance from the IMF and EU would reduce nominal debt service on average by US$ 13.7 million annually over a period of 20 years and would cover all remaining debt service obligations on eligible credit balances to IDA, IMF, AfDB, and the EU. ### Debt sustainability outlook and risks - HIPC and MDRI assistance will reduce the PV of debt-to-exports in FY 2010/11, excluding new borrowing, from 266.3 percent to 22.9 percent. - The debt ratio will be well below policy-related thresholds after relief. - Remaining debt service will be more frontloaded into the period 2011–15 due to terms agreed with a few bilateral creditors after the decision point. - Sensitivity analysis indicates vulnerability to: - FDI flows, - Lower GDP growth, - Lower concessionality of new borrowing. - Policy implications: - Carefully manage new borrowing. - Ensure timely and coherent implementation of the PFM law. - Further develop debt management capacity. ### Implementation status of completion point triggers (summary) - PRSP: Implemented. Full PRSP finalized March 2008; first Annual Progress Report April 2010. - Macroeconomic stability: Implemented. ECF/EFF program satisfactory; 3rd review completed December 2009; 4th review expected by June 2010. - Public Financial Management and procurement: - Quarterly procurement publications implemented (first publication June 2009; subsequent publications through April 2010). - Successive external audits of five key ministries implemented (first round published March 2009; second round published April 2010). - PFM law: Substantially implemented. PFM law into law September 2, 2009; implementing regulations approved November 2009; FY2011 budget prepared under the law; IPSAS accounting standards and a new chart of accounts adopted; accounting function at Ministry of Finance unified; Debt Management Committee appointed in April 2010. - Other triggers implemented: development of a debt strategy and Debt Management Unit, publication of quarterly debt reports, elimination of discretionary tax incentives, EITI-related transparency measures, harmonization/regularization of education payroll, expansion of basic health service coverage, introduction of an Anti-Corruption Commission. - Staff recommendation: Executive Directors of the IDA and the IMF approve the completion point for Liberia under the Enhanced HIPC Initiative. ### Box 1 — Status of Floating Completion Point Triggers (selected) - Social sectors - MoE payroll harmonization completed March 2010; April 2010 audit removed 3,247 unverified personnel including 2,138 “ghosts”; salary arrears accrued before March 2008 cleared; personnel paid regularly. - Basic Package of Health Services delivered in 47 percent of health facilities nationwide (survey August 2009); trigger target was at least 40 percent. - Debt management - Debt management strategy approved June 2010 (updates June 2008, July 2009); Debt Management Committee appointed April 2010. - Debt Management Unit (DMU) fully staffed and operational since 2008; records external and domestic debt statistics. - Quarterly public debt reports posted starting February 2009 and regularly published. - Governance - Investment Act approved April 2010; fiscal incentives provided through revised Liberia Revenue Code adopted in 2009. - EITI: first annual report published February 2009; validated October 2009; 2nd EITI Report published February 2010. - Anti-Corruption Commission established September 2008 and operational from December 2008. ### Social sector priorities, payroll, and health (selected statistics) - Approximately 21 percent of the FY2009/10 budget is allocated to the social sector. - Within the social sector budget: Education accounts for 52 percent; Health accounts for 35 percent. - Government per capita health expenditure remains low at less than US$5 in FY2007/08. - In FY08/09 the share of the national budget allocated to the health sector was 7.7 percent. - Ministry of Finance estimated education and health sectors will together receive about 25.7 percent of the total projected sector aid flows of approximately US$ 443.5 million for FY2009/10. - MoE payroll reform: 3,247 unverified personnel removed; 2,138 classified as “ghosts”; payroll cleaned and salary arrears cleared. - BPHS delivery: 47 percent coverage; national target 70 percent by December 2010. - Health outcomes: infant mortality nearly halved to 71 per 1,000 births; under-five mortality nearly halved to 110 per 1,000 births over last 20 years. ### Debt management institutional strengthening (selected) - Debt Management Strategy: developed June 2008, updated July 2009 and June 2010; three objectives: complete external debt restructuring/domestic debt resolution; strengthen institutional capacity; establish borrowing guidelines. - CS-DRMS installed in May 2010 in the DMU. - DMU operational since 2008; posted quarterly debt reports and central government external and domestic debt stock data. - Remaining needs: clarify responsibilities among Debt Management Committee, DMU, and MOF units; train DMU staff on CS-DRMS; enhance analytical capacity. ### Updated debt stock, reconciliation results, and HIPC assistance revisions (end-June 2007 base) - Nominal stock of debt decreased by US$ 333.6 million to US$ 4,398.7 million. - PV of debt after traditional debt relief revised downward by US$ 106 million to US$ 3,038.4 million. - Required HIPC assistance at end-June 2007 in PV terms revised downward from US$ 2,845.5 million to US$ 2,739.2 million. - Common reduction factor marginally decreased from 90.5 percent to 90.2 percent. - At completion point, financing assurances received from creditors accounting for 96.4 percent of the PV of HIPC assistance estimated at the decision point. - Authorities working toward agreements with creditors accounting for US$ 122.1 million (China, Kuwait, Saudi Arabia, and Taiwan Province of China) and good faith efforts with two commercial creditors accounting for US$ 43.8 million. - Revised HIPC assistance in nominal terms estimated at US$ 4.6 billion. ### Revised amount of enhanced HIPC assistance from multilateral creditors (summary) - Revised amount from multilateral creditors: US$ 1,421.2 million in end-June 2007 PV terms. - IDA: fully provided its share of HIPC assistance: US$ 373.6 million in end-June 2007 PV terms via arrears clearance grant; arrears cleared by IDA amounted to US$ 374.9 million in end-June 2007 PV terms. - IMF: IMF’s share in HIPC debt relief amounts to SDR 446 million (US$ 729.5 million) in NPV terms; Fund staff proposes increasing grant assistance from SDR 428.1 million to SDR 440.9 million; IMF approved SDR 30.1 million in interim HIPC assistance; remaining SDR 410.8 million to be delivered at completion point through a stock-of-debt operation. - AfDB Group: fully provided its share: US$ 240.2 million in end-June 2007 PV terms via arrears clearance plus additional US$ 6.4 million covering 2008–2009 debt service. ### Bilateral and commercial creditors (selected) - Paris Club creditors: agreed in principle to provide enhanced HIPC assistance estimated at US$ 858.5 million in end-June 2007 PV terms; interim assistance delivered estimated at US$ 18.78 million; some creditors delivered additional debt relief beyond HIPC estimated at US$ 474 million. - Non-Paris Club bilateral creditors: PV of such relief at end-June 2007 estimated at US$ 95.3 million. - Commercial debt: commercial debt stock reduced by over US$ 1.2 billion; April 16, 2009 buy-back operation supported by IDA’s DRF extinguished almost 97 percent of total commercial claims (estimated at US$ 1,234 million nominal as of end-June 2007); remaining debt owed to two holdouts before any debt relief: US$ 43.8 million. ### Debt Reduction Analysis (end-June 2009 snapshot) - Nominal stock of Liberia’s external debt at end-June 2009: US$ 1,772.6 million. - Multilateral creditors: US$ 1,066 million or 60 percent of total debt. - IDA: 4.0 percent of total nominal debt. - IMF: 49.4 percent of total nominal debt. - AfDB Group: 1.5 percent of total nominal debt. - Paris Club creditors: 31.7 percent of total outstanding nominal debt. - Non-Paris Club bilateral creditors: 7.0 percent of total debt. - Topping-up assessment: Liberia does not qualify for topping-up; PV debt-to-exports after HIPC and bilateral relief at end-June 2009: 69.1 percent; after additional bilateral relief: 62.6 percent (threshold for topping-up: 150 percent). ### Factors affecting PV debt-to-exports ratio (end-June 2009) — key figures - PV of debt-to-export ratio (as projected at Decision Point): 89.9 - PV of debt-to-export ratio (actual): 69.1 - Unanticipated changes in the ratio: -20.8 (100%) - Due to changes in parameters: 5.1 (-24%) - of which due to changes in the discount rates: 2.9 (-14%) - of which due to changes in the exchange rates: 2.2 (-10%) - Due to unanticipated new borrowing: -4.5 (21%) - of which due to higher than expected disbursements: -4.5 (22%) - of which due to lower concessionality of the loans: 0.10% - Due to changes in export: -24.4 (117%) - Due to changes in HIPC relief and other factors: 3.0 (-14%) - Bilateral debt relief beyond HIPC: -6.5 - PV of debt-to-export ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 62.6 ### Creditor participation in MDRI and IMF beyond-HIPC assistance (selected) - MDRI from IDA: IDA would provide MDRI debt relief amounting to US$ 66.9 million in nominal terms; implies average debt service savings (net of HIPC assistance) of US$ 2.9 million per year over the next 25 years. - MDRI from AfDF: US$ 17.2 million in nominal terms; full cancellation of post-completion-point repayment obligations to AfDB Group except Nigerian Trust Fund claims (US$ 7.7 million estimated at end-June 2010 nominal terms). - IMF beyond-HIPC assistance: about SDR 117.4 million financed from the IMF Administered Account for Liberia at completion point. - EU Special Debt Relief Initiative: EU will provide additional US$ 0.9 million in nominal terms cancelling remaining EU claims on Liberia. ### Debt sustainability projections and baseline macro assumptions - Baseline assumes gradual recovery and restart of iron ore production in 2011. - Key baseline macro assumptions: - Real GDP growth: accelerate to over 8 percent in 2011–12; thereafter stabilize at 5 percent. - Inflation (GDP deflator, local currency): decelerate from 9 percent in 2009 to 5 percent in 2011 and stabilize at 4 percent afterwards. - Exports: grow by 12 percent annually during 2010/11–2012/13, then stabilize at 7 percent annually. - Imports: projected to average 10 percent growth for 2010/11–2012/13, then slow to about 3 percent. - Current account deficit: about a deficit of 50 percent of GDP in 2010/11–2012/13, then stabilize at a deficit of 20 percent afterwards. - Tax revenues: projected to decline to 21 percent of GDP in 2010/11 and broadly remain stable. - Nominal external concessional borrowing: assumed at 2 percent of GDP in 2010/11, rising to 5 percent of GDP in 2013/14, then declining to 2 percent of GDP by 2022/23 and remaining at this level thereafter; all financing assumed on IDA-equivalent terms. - Primary fiscal balance: will move into a deficit position after the completion point roughly mirroring the borrowing path. - External grants: decline from 50 percent of GDP in 2010/11 to about 30 percent of GDP in 2015/16, then stabilize at 20 percent of GDP in 2023/24. - Projected debt indicators after full delivery of HIPC, additional bilateral assistance and MDRI: - PV of debt-to-exports ratio at end-June 2011: 25.8 percent after delivery of MDRI assistance. - PV of debt-to-exports ratio end-June 2015: 24.4 percent. - PV of debt-to-exports ratio end-June 2030: 27.2 percent (increase mainly due to new borrowing). - PV of debt-to-GDP and PV of debt-to-revenue ratios: from 44 percent and 156.4 percent in FY2008/09-18/19 to 16.7 percent and 67.1 percent in 2019/20–29/30, respectively. - Debt service-to-revenue ratio: after HIPC, beyond-HIPC and MDRI, increases from 1.6 percent in FY2010/11 to over 7.3 percent during FY2011/12–FY2015/16; after FY2015/16 indicators decline substantially. ### Sensitivity analysis and alternative scenarios (overview) - Overall finding: After full delivery of HIPC, beyond-HIPC, and MDRI debt relief, in all tested scenarios the PV of debt-to-export ratio remains significantly below the HIPC threshold. - Alternative Scenario 1: Lower GDP Growth - Assumes GDP growth on average 25 percent lower than baseline. - Real GDP growth averages 5 percent from 2009/10–2016/17 and 3.5 percent from 2014/15 onwards. - Under this scenario: - PV of debt-to-export ratio would be 29.4 percent by 2029/30 (1.9 percentage points higher than baseline). - PV of debt-to-GDP and PV of debt-to-revenue ratios exceed baseline on average by 1.8 and 3.6 percentage points, respectively, over the medium-term projections. - Debt service-to-revenue ratio would on average be higher by 0.3 percentage points, reaching 0.4 by end-June 2030. - Scenario: lower export prices (20 percent) - Exports grow at a lower pace due to 20 percent lower prices for main export goods. - PV of debt-to-exports increases by 5 percentage points in 2008/09–2018/19 and by 5.6 percentage points in FY2019/20–2029–30, reaching 33.1 percent at end of period. - Debt service-to-exports ratio increases on average by 0.4 percentage points; PV of debt-to-revenue ratio reaches 62.8 percent in 2029/30. - Alternative Scenario 3: New borrowing – Lower concessionality - Concessionality of new debt assumed 35 percent (15 percentage points lower than baseline 50 percent). - PV of debt-to-exports is 31.4 percent in 2029/30, 4.4 percentage points higher than baseline. - Debt service in percent of government revenues is on average 0.3 percent higher over the long-term. - Sensitivity analysis policy implications: - Diversify the economy to reduce shock risk. - Pursue prudent debt management to maintain low debt vulnerabilities. - Increase exports via structural reforms and focus borrowing on highly concessional sources. - Target public spending and reforms to remove bottlenecks hampering private investment, including in the export sector. ### DSA methodology and high-level outcomes - DSA prepared using Fund-World Bank standardized Debt Sustainability Framework (DSF) for Low-Income Countries. - Liberia’s public debt as of end-June 2009 estimated at about 190 percent of GDP (external 185 percent, domestic 5 percent). - Completion point assumed end-June 2010 with external debt stock reduced to US$ 166 million and nominal reduction in debt stock estimated at US$ 1,509.4 million; annual debt service savings of about US$ 145 million in first 10 years. - Baseline and alternatives show that after HIPC and MDRI the risk of debt distress is low, though results are sensitive to FDI flows, export shocks, and borrowing conditions. ### Conclusions and recommendation - Satisfactory progress toward completion point: 11 out of 12 triggers fully implemented; substantial progress on the remaining PFM-law trigger. - Debt reconciliation caused a marginal downward revision of the common reduction factor from 90.5 percent to 90.2 percent. - Liberia received financing assurances of participation from creditors representing 96.4 percent of the PV of HIPC assistance at the decision point. - IDA and IMF staffs conclude Liberia does not meet requirements for exceptional topping-up. - After full HIPC and MDRI assistance, PV of debt-to-exports in FY 2010/11 will fall from 266.3 percent to 22.9 percent; with annual average new borrowing up to 3 percent of GDP the PV debt-to-exports would remain below 28 percent throughout the projection period. - Despite remaining below policy thresholds under the baseline, alternative and shock scenarios show vulnerability to borrowing costs and export performance. - Staff recommendation: Executive Directors of the IDA and IMF determine that Liberia has reached the completion point under the Enhanced HIPC Initiative. *Source: _cr10192 - Executive Summary.* ### Executive Summary ...................................................................................................... ### _cr10192 - Executive Summary ...................................................................................................... ### Key findings and outcomes - In March 2008, the Boards of IDA and the IMF agreed Liberia had met the requirements for reaching the decision point under the Enhanced HIPC Initiative. - Amount of debt relief committed at the decision point: US$ 2,845.5 million in end-June 2007 present value (PV) terms. - Decision-point calculation implied a common reduction factor of 90.5 percent for all creditors. - Staff assessment: Liberia has made satisfactory progress toward completion point triggers; 11 out of 12 completion point triggers have been fully implemented. - The one outstanding trigger: 12 months implementation of the Public Financial Management (PFM) law and related regulations (substantially implemented; authorities request a waiver based on 10 months of implementation). - First full Poverty Reduction Strategy Paper (PRSP) presented to IDA and IMF Boards in March 2008; first annual progress report submitted in April 2010. JSAN highlights PRS implementation as satisfactory. - Macroeconomic stability maintained despite global crisis; strong performance under the ECF-supported program. IMF staff recommend completion of the 4th ECF review in conjunction with this completion point document. ### Debt data revisions and debt relief delivery - Debt reconciliation reduced the present value of eligible external debt at end-June 2007 from US$ 3,144.7 million to US$ 3,038.4 million. - Estimated HIPC assistance in end-June 2007 PV terms reduced by US$ 106.3 million to US$ 2,739.2 million. - Nominal total debt relief estimated at about US$ 4.6 billion.1 - Portion of nominal relief delivered by multilateral creditors: US$ 1.5 billion; remainder by bilateral and commercial creditors. - Common reduction factor revised downward from 90.5 percent to 90.2 percent. - Creditors accounting for 96.4 percent of total HIPC-eligible debt have given satisfactory assurances of participation in the Enhanced HIPC Initiative. - All Paris Club and multilateral creditors (except ECOWAS) confirmed participation; most commercial creditors provided debt relief via a buyback supported by IDA’s debt reduction facility. - Staff encouraged authorities to seek agreements with remaining commercial and bilateral creditors. 1 This amount includes beyond HIPC assistance delivered by a number of creditors during the interim period. ### Topping-up, MDRI, and beyond-HIPC assistance - Liberia does not qualify for exceptional topping-up under the Enhanced HIPC Initiative. - PV of debt-to-exports ratio after enhanced HIPC assistance at end-June 2009: 69.1 percent (20.8 percentage points lower than anticipated at the decision point). - After full delivery of additional bilateral debt relief beyond the HIPC Initiative, PV of external debt-to-exports ratio at end-June 2009: 62.6 percent. - Upon reaching the completion point, Liberia would qualify for additional debt relief under: - The Multilateral Debt Relief Initiative (MDRI), - IMF beyond-HIPC assistance, - EU special debt relief initiative. - MDRI and MDRI-type assistance from the IMF and EU would reduce nominal debt service on average by US$ 13.7 million annually over a period of 20 years and would cover all remaining debt service obligations on eligible credit balances to IDA, IMF, AfDB, and the EU. ### Debt sustainability outlook and risks - HIPC and MDRI assistance will reduce the PV of debt-to-exports in FY 2010/11, excluding new borrowing, from 266.3 percent to 22.9 percent. - The debt ratio will be well below policy-related thresholds after relief. - Remaining debt service will be more frontloaded into the period 2011–15 due to terms agreed with a few bilateral creditors after the decision point. - Sensitivity analysis indicates vulnerability to: - FDI flows, - Lower GDP growth, - Lower concessionality of new borrowing. - Policy implications: carefully manage new borrowing, ensure timely and coherent implementation of the PFM law, and further develop debt management capacity. ### Implementation status of completion point triggers (summary) - PRSP: Implemented. Full PRSP finalized March 2008; first Annual Progress Report April 2010. - Macroeconomic stability: Implemented. ECF/EFF program satisfactory; 3rd review completed December 2009; 4th review expected by June 2010. - Public Financial Management and procurement: - Quarterly procurement publications implemented (first publication June 2009; subsequent publications through April 2010). - Successive external audits of five key ministries implemented (first round published March 2009; second round published April 2010). - PFM law: Substantially implemented. PFM law into law September 2, 2009; implementing regulations approved November 2009; FY2011 budget prepared under the law; IPSAS accounting standards and a new chart of accounts adopted; accounting function at Ministry of Finance unified; Debt Management Committee appointed in April 2010. - Other triggers implemented: development of a debt strategy and Debt Management Unit, publication of quarterly debt reports, elimination of discretionary tax incentives, EITI-related transparency measures, harmonization/regularization of education payroll, expansion of basic health service coverage, introduction of an Anti-Corruption Commission. ### Recommendation - Staffs recommend that the Executive Directors of the IDA and the IMF approve the completion point for Liberia under the Enhanced HIPC Initiative. *Source: _cr10192 - Executive Summary.* ### Box 1. Status of Floating Completion Point Triggers ### Box 1. Status of Floating Completion Point Triggers ### Social sectors - Trigger: Complete a harmonized and regularized Ministry of Education (MoE) payroll. - Status: Implemented. - Details: - Payroll harmonization completed in March 2010. - Following an audit completed by the GAC in April 2010, some 3,247 unverified personnel including 2,138 “ghosts” were removed from the MoE payroll. - Salary arrears accrued before March 2008 have been cleared. - MoE personnel are now paid on a regular monthly cycle, mostly through direct deposits but a few in the remote counties through checks. - Note: “Harmonized” means teachers are paid according to coherent payroll regulations. “Regularized” means they are paid with fixed periodicity and through an established and effective mechanism. - Trigger: Ensure that the Basic Package of Health Services is delivered in at least 40 percent of all health facilities nationwide. - Status: Implemented. - Detail: A nationwide survey found 47 percent coverage in August 2009. ### Debt management - Trigger: Develop a debt management strategy in consultation with partners and establish a debt management unit recording all information on external and domestic public and publicly guaranteed debt, including for state owned enterprises, and ensure it is operational for at least 12 months leading up to the completion point. - Status: Implemented. - Details: - A comprehensive debt management strategy was approved in June 2010, updating strategies adopted in June 2008 and July 2009. - A debt management committee was appointed in April 2010 to authorize all government and state enterprise borrowing. - A Debt Management Unit (DMU) is fully staffed and operational since 2008. - The DMU records all external and domestic debt statistics by creditor. - Trigger: Publish, on a quarterly basis and on a government website, data on external and domestic public and publicly guaranteed debt, including debt stocks and terms and conditions of new loan agreements for at least 6 months leading up to the completion point. - Status: Implemented. - Detail: First quarterly data report for end-December 2008 was posted on the internet in February, 2009. Quarterly publications have been regularly published. ### Governance - Trigger: Implement a revised investment incentive code to ban granting tax exemptions outside the Liberia Revenue Code (LRC). - Status: Implemented. - Details: - The Investment Incentives Act was repealed and replaced by the Investment Act approved in April 2010. - Fiscal incentives are applicable as specified in the revised LRC adopted in 2009. - Trigger: Regular public reporting of payments to, and revenues received by, the government for the extractive industries (mining and minerals) in a participatory manner in line with EITI criteria during at least the year leading up to the completion point. - Status: Implemented. - Details: - The EITI published its first annual report in February 2009, covering the period July 2007–June 2008. The report was validated by the EITI Board in October 2009. - The 2nd EITI Report covering the period July 2009–June 2009 and involving 71 companies and 5 agencies of Government was published in February 2010. - Trigger: 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. - Status: Implemented. - Detail: Anti-Corruption Commission was established in September 2008 and operational from December 2008. ### A. Poverty Reduction Strategy - LPRS completed in March 2008. - Requirement: Prepare a full PRSP through a participatory process and implement satisfactorily for at least one year, evidenced by an Annual Progress Report (APR) submitted to IDA and IMF staffs. - Implementation and consultations: - LPRS built on the first 150-day action plan and interim PRS prepared in 2007. - Prepared through broad-based consultations at district and county levels, and with civil society, private sector, legislature, and international partners. - Strategy pillars: - (i) consolidating peace and security; - (ii) revitalizing the economy; - (iii) strengthening governance and the rule of law; - (iv) rehabilitating infrastructure and delivering basic services. - Cross-cutting themes: gender equity, peace building, environment issues, HIV and AIDS, children and youth, and monitoring and evaluation. - JSAN observations (August 2008): - LPRS presented a comprehensive, credible medium-term strategy consistent with MDG rates of change. - Noted weaknesses: lack of specificity on short-term strategy for social stability; need for detailed and prioritized costing; greater specificity for pro-poor growth strategy; expedite law to establish the Land Commission; elaborate strategy/timetable for devolving political and financial authority; elaborate measures for monitoring and evaluation including piloting social accountability systems. - Implementation progress: - Initial implementation slow; Government submitted an APR candidly assessing progress and used 90–day Action Plans to accelerate implementation. - LRDC integrated with the government-partner coordination forum into the Ministry of Planning and Economic Affairs. - Conclusion: Trigger on preparation and satisfactory implementation for at least one year has been met. - APR data: Rate of implementation accelerated from 21 percent in March 2009 to 88 percent by end-November 2009. - Strong progress on public finance management and building an effective monitoring and evaluation system. ### B. Macroeconomic Stability - Since decision point in March 2008, Liberia maintained macroeconomic stability and implemented prudent monetary and fiscal policies under the ECF-supported program. - ECF reviews: - Third review completed on December 18, 2009. - Fourth review scheduled for consideration by the Executive Board on June 23, 2010. - Impact of global financial crisis: - Investments postponed and export revenues sharply reduced in the rubber sector. - Real GDP growth slowed to an estimated 4½ percent in 2009. - Signs of recovery in early 2010; 2010 growth projected to rebound to 6 percent. - Recovery dependent on size and timing of FDI in commodity and agriculture sectors. - Inflation and exchange rate: - Inflation rose during 2008 due to food and fuel price increases, moderated in 2009 as increases reversed. - Exchange rate broadly stable but came under pressure during 2009 when exports weakened. - Reserves: - Reserve position improved significantly, largely due to an SDR allocation of SDR103 million. - Fiscal policy and outcomes: - Cash-based balanced budget in place since February 2006. - Government revenues, including grants, reached 30 percent of GDP in FY2009/10. - Spending for LPRS objectives remained above the target of 60 percent of revenue for FY 2009/10 and is expected to rise to 65 percent in FY 2010/11. - Post-HIPC completion point fiscal rules intended: (a) maintain a basic balance surplus; (b) set a sustainable annual ceiling of public sector borrowing on concessional terms; (c) adopt an overall public sector debt ceiling. - Commitment to refrain from central bank financing of the budget except for temporary shortfalls of external financing. - Current account and financing: - Current account deficit, including official transfers, averaged over 40 percent of GDP since the decision point. - Donor transfers averaged 50 percent of GDP since 2007 and remain largely off-budget. - Gross reserves increased: imports coverage from 0.5 months in 2008 to 2.2 months (3.1 months excluding UNMIL-related imports). - Staff assessment: IDA and IMF staffs consider Liberia has maintained macroeconomic stability and implemented its Fund-supported program satisfactorily. ### C. Public Financial Management - Completion point trigger requirements: - (i) Quarterly publication in the Procurement bulletin and monthly publication on the Website of all signed procurement contracts over US$25,000 for goods, US$10,000 for consulting services, and US$50,000 for works, and all signed sole-source procurement and concessions contracts identified by PPCC for at least 6 months leading up to the completion point. - (ii) Complete successive annual external audits of five key ministries (Health, Education, Public Works, Finance and Lands, Mines and Energy), prepared under authority of the GAC, submitted to the legislature and disclosed publicly. - (iii) Implement the new PFM law and supporting financial regulations for at least 12 months leading up to the completion point. - Progress and achievements: - Government publishes on a quarterly basis (with some lag) all signed procurement contracts over US$25,000 for goods, US$10,000 for consulting services and US$50,000 for works, and all signed sole source procurement and concessions contracts. - Public awareness of public procurement benefits increased through dissemination of the PPCA and numerous PPCC training sessions. - Expectation of long-term procurement monitoring by private sector and civil society, leading to social accountability and behavior change. - External audits: - Successive annual external audits for fiscal years 2006/07 and 2007/08 of five key ministries prepared by GAC, submitted to the Legislature, and disclosed publicly. - Through April 2010, GAC completed over 20 audits including four forensic audits. - GAC audit strategy evolving to focus less on transactions and more on systems. - PFM law: - Legislature approved new PFM law in August 2009; draft submitted in September 2008; final law signed by the President on September 2, 2009. - Enabling regulations approved by the President in November 2009. - Implementation advances: (i) FY2010/11 budget prepared according to law; (ii) unified accounting function established in Ministry of Finance; (iii) high level debt management committee established issuing a revised debt management strategy; (iv) chart of accounts and international accounting standards adopted. - Staff conclusion: - IDA and IMF staffs consider Liberia has fully implemented the triggers on procurement and external audits. - Trigger on implementation of the PFM law has been substantially implemented; staffs recommend a waiver be granted based on significant progress to date. ### D. Social Sector (summary) - Social sectors (education and health) remain key government priorities. - Completion point triggers required: - (i) Complete a harmonized and regularized MoE payroll. - (ii) Ensure Basic Package of Health Services delivered in at least 40 percent of all health facilities nationwide. - Both triggers reported as implemented (see Social sectors section above for details). *Source: Box 1. Status of Floating Completion Point Triggers (contd. and concluded), IMF staff report content.* ### 23. The substantial investment in infrastructure is aimed to ensure improved access ### _cr10192 - 23. The substantial investment in infrastructure is aimed to ensure improved access ### Social sector priorities and spending - Approximately 21 percent of the FY2009/10 budget is allocated to the social sector. - Within the social sector budget: - Education accounts for 52 percent. - Health accounts for 35 percent. - Government per capita health expenditure remains low at less than US$5 in FY2007/08. - In FY08/09 the share of the national budget allocated to the health sector was 7.7 percent. - The Ministry of Finance estimated that the education and health sectors will together receive about 25.7 percent of the total projected sector aid flows of approximately US$443.5 million for FY2009/10. ### Education payroll reform and HRMIS achievements - April 2010: harmonization and regularization of the Ministry of Education (MoE) payroll completed as part of broader pay and grade reform. - December 2009: Government adopted the Medium Term Pay Reform Strategy and a new rationalized grading structure for civil servants, including teachers. - HRMIS outcomes: - Biometric identification and a “one-employee-one file” registry created. - Harmonization of separate employee databases between the Civil Service Agency and Ministry of Finance payroll planned. - April 2010 GAC audit (supported by USAID) of MoE payroll for Monrovia and the 14 Counties: - 3,247 personnel on the MoE payroll could not be verified and were recommended for removal. - Of these, 2,138 were classified as “ghosts” and 357 were pensioners. - The Ministry of Finance deleted these personnel from the MoE payroll as recommended. - Resulting status: - The Ministry of Education now has a clean payroll. - All salary arrears have been cleared. - Personnel on the payroll are being paid on a regular monthly cycle, mostly through direct deposits; a few in remote Counties receive check payments. ### Health service delivery and outcomes - Basic Package of Health Services (BPHS) delivery: - BPHS is being delivered in 47 percent of all health facilities nationwide. - National health policy target: roll out BPHS in 70 percent of all functional clinics by December 2010. - Post-war health indicator progress: - Infant mortality nearly halved to 71 per 1,000 births over the last 20 years. - Under-five mortality nearly halved to 110 per 1,000 births over the last 20 years. - Improvements largely attributable to restoration of key maternal and child health services, such as immunization. - Other indicators remain problematic, e.g., child malnutrition and maternal mortality rates remain high. - Health financing and access: - Suspension of user fees reported to have increased access and utilization of services. - Provision of many health services remains inadequate and inequitable, with resource concentration in the capital. - MOHSW implementation capacity improving with external technical assistance, including from the Global Fund and DFID. - Trigger assessment: - IDA and IMF staffs consider that Liberia has succeeded in ensuring that the basic health service package is delivered in at least 40 percent of the health facilities nationwide. ### Debt management institutional strengthening - Requirements and strategy: - Completion point triggers required development of a debt management strategy and publication of external and domestic public and publicly-guaranteed debt data. - Debt Management Strategy (DMS) developed June 2008, updated July 2009 and June 2010, with three main objectives: - (i) complete external debt restructuring and make progress on domestic debt resolution; - (ii) strengthen institutional and professional capacity for debt management; - (iii) establish detailed guidelines for future borrowing on concessional terms. - Authorities intend to develop a domestic debt market initially through sale of treasury bills. - Until the HIPC completion point is achieved, authorities observed a balanced budget and “no borrowing” policy. - June 2010 DMS update anticipated HIPC completion point by end of FY2009/10 (June 2010) and focused on guidelines for resumption of borrowing in FY 2010/11 consistent with debt sustainability. - Institutional developments: - Debt Management Unit (DMU) fully staffed and operational in the Ministry of Finance since 2008. - Reports on outstanding central government external and domestic debt stock disaggregated by major creditor groups posted on MOF and CBL websites; quarterly fiscal outturn reports update debt activities. - New debt management recording and reporting system (CS-DRMS) installed in May 2010 in the DMU to centralize domestic and external borrowing and guarantees across the public sector. - Remaining capacity and coordination needs: - Efficiency of debt management functions covering central government and state-owned enterprises still needs strengthening. - Specific responsibilities among the Debt Management Committee, the DMU, and the Donor Coordination and Macro-Fiscal Units of MOF need clarification and formalization. - Coordination and information sharing should be further streamlined. - DMU staff require training to use the CS-DRMS effectively and to enhance analytical capacity for forward-looking debt management strategy development. - Trigger assessment: - IMF and IDA staffs conclude that the trigger on debt management has been fully implemented. ### Governance and transparency progress - Institutional and legislative actions: - Revised investment code; establishment of LEITI secretariat; establishment of independent Liberia Anti-Corruption Commission (LACC); establishment of the Land Commission. - LEITI (Liberia Extractive Industry Transparency Initiative): - Established May 2008 with government, civil society, private sector, and donors. - First full audited report of receipts and payments published February 2009. - Liberia designated EITI compliant on October 14, 2009 (first in Africa, second in the world to be validated). - 2nd EITI Report covering July 1, 2009-June 30, 2009 involving seventy-one (71) companies and five (5) agencies of Government published February 2010; covers mining, oil, forestry, and agriculture. - Government intends to implement an EITI++ or ‘value chain’ approach to concessions management in mining, agriculture and forestry to ensure good policies and practices along the value chain. - Liberia Anti-Corruption Commission (LACC): - Established December 2008 consistent with Anti-Corruption Act approved in 2008. - Interim budget December 2008: US$0.3 million; FY09/10 budget allocation: US$1.3 million. - Organized into three divisions: Administration, Enforcement and Prevention, and Education. - Partnerships formed with CENTAL, PUL, GAC, and donors. - August 2009: LACC launched an asset declaration campaign for senior public officials and developed a case load of investigations for possible submission to the Ministry of Justice. - Transparency International rankings: - 2009: Liberia reached 97th position out of 180 countries with a score of 3.1 out of 10. - 2007: Liberia ranked 150th out of 179 countries with a score of 2.1 out of 10. - 2009 regional ranking: 13th out of the 47 Sub-Saharan countries. - 2008 regional ranking: 30th out of 47 Sub-Saharan countries. - Investment framework reforms: - April 2010: Investment Act and Investment Commission Act approved and signed. - New Investment Act repeals and replaces the Investment Incentives Act of 1973; streamlines non-fiscal incentives and removes fiscal incentives from the Act (now provided in the Liberia Revenue Code as amended). - New National Investment Commission (replacing the 1979 Act) comprises ministers (Finance, Planning, Justice, Commerce and State for Economic affairs) to advise on investment policy, identify projects, evaluate concession awards, and assist investor compliance. - Trigger assessment: - IDA and IMF staffs conclude that the trigger on governance has been fully implemented. ### Updated debt stock, reconciliation results, and HIPC assistance revisions - Reconciliation outcomes (end-June 2007 base): - Nominal stock of debt decreased by US$333.6 million to US$4,398.7 million. - PV of debt after traditional debt relief revised downward by US$106 million to US$3,038.4 million. - Most downward revision attributable to changes in commercial debt. - Creditor-specific revisions and notes: - Multilateral creditors: total multilateral debt stock as of end-June 2007 increased by US$0.7 million (reduction of interest in arrears to IDA by US$0.25 million; increase of principal in arrears to IFAD by US$0.95 million). - Paris Club creditors: PV of debt to Paris Club creditors at end-June 2007 after traditional debt relief revised upward from US$947 million to US$952 million (increase by US$4.7 million). - Other official bilateral creditors: nominal value unchanged; PV after traditional relief marginally revised assuming treatment of post-cutoff date debt comparable to the Paris Club. Decision point database includes cancelled Chinese claims of US$12.2 million (equivalent to US$7.3 million in PV values after traditional debt relief) reinstated to account for creditor cancellations prior to decision point. - Commercial creditors: - Decrease in outstanding commercial debt at end-June 2007 by US$340.7 million. - This reflects upward revision of total commercial debt stock by US$111.4 million and the exclusion of claims estimated at US$452.1 million. - The exclusion reflects reconciliation work; claims estimated at US$452 million were treated as time-barred and removed effective December 2008, and excluded from the IDA DRF-supported buy-back operation concluded April 2009. - Exports benchmark: - Estimates of the 2004/05-2006/07 average of exports of goods and services remain at US$199.5 million. - HIPC assistance and participation: - Required HIPC assistance at end-June 2007 in PV terms revised downward from US$2,845.5 million to US$2,739.2 million. - Common reduction factor marginally decreased from 90.5 percent to 90.2 percent. - At completion point, Liberia received financing assurances by creditors accounting for 96.4 percent of the PV of HIPC assistance estimated at the decision point. - Almost all multilateral creditors (IDA, the IMF, and the AfDB Group comprise 48.9 percent of total HIPC assistance) and all Paris Club creditors (31.3 percent of total HIPC assistance) confirmed participation. - Through an IDA DRF-supported buy-back operation, commercial creditors provided debt relief comparable to Paris Club creditors. - Remaining creditor engagement efforts at completion point: - Authorities working toward agreements with creditors accounting for US$122.1 million (China, Kuwait, Saudi Arabia, and Taiwan Province of China). - Good faith efforts toward agreements with two commercial creditors accounting for US$43.8 million. - Revised HIPC assistance in nominal terms is estimated at US$ 4.6 billion. *Italic: Source — IMF staff report content provided in the supplied PDF excerpt.* ### 44. The revised amount of enhanced HIPC assistance from multilateral creditors is ### _cr10192 - 44. The revised amount of enhanced HIPC assistance from multilateral creditors is ### Revised amount of enhanced HIPC assistance (summary) - The revised amount of enhanced HIPC assistance from multilateral creditors is US$1,421.2 million in end-June 2007 PV terms. - IDA and the African Development Bank (AfDB) Group provided debt relief above their estimated share through arrears clearance operations. - The IMF, the AfDB Group, and the European Union (EU) provided interim assistance. - OFID, BADEA, and EIB provided part of their share through arrears clearance operations during the interim period. ### Multilateral creditor contributions (detailed) - IDA - Fully provided its share of HIPC assistance: US$373.6 million in end-June 2007 PV terms via the grant element in clearance of Liberia’s arrears to both IBRD and IDA. - Arrears cleared by IDA amounted to US$374.9 million in end-June 2007 PV terms. - IMF - IMF’s share in HIPC debt relief amounts to SDR 446 million (US$729.5 million) in NPV terms, slightly lower (SDR 1.7 million) than at decision point (SDR 447.7 or US$732.2 million). - SDR 5.1 million (about US$8.4 million) delivered via the concessional element associated with an ECF loan following arrears clearance; this is significantly lower than the SDR 19.5 million assumed at decision point. - Fund staff proposes increasing grant assistance approved at the decision point from SDR 428.1 million by SDR 12.8 million to SDR 440.9 million to make up for the lower concessional element and revised debt sustainability. - IMF already approved SDR 30.1 million in interim HIPC assistance to meet Liberia’s debt service payments to the Fund. - Remaining SDR 410.8 million (in NPV terms) to be delivered at completion point through a stock-of-debt operation. - AfDB Group - Fully provided its share of HIPC assistance: US$240.2 million in end-June 2007 PV terms via an arrears clearance operation. - AfDB Executive Board extended coverage to debt service payments falling due in 2008 and in 2009, amounting to additional debt relief of US$6.4 million in end-June 2007 PV terms. - Other multilateral creditors - Modalities by BADEA; EU/EIB; ECOWAS; IFAD and OFID summarized in the source tables. ### Bilateral and commercial creditors - Paris Club creditors - Agreed in principle to provide share of enhanced HIPC assistance estimated at US$858.5 million in end-June 2007 PV terms. - Interim assistance delivered estimated at US$18.78 million in end-June 2007 PV terms via flow rescheduling on Cologne terms (April 2008). - Some creditors delivered additional debt relief beyond HIPC estimated at US$474 million in end-June 2007 PV terms. - United States provided 100 percent cancellation of consolidated debt. - Germany cancelled 100 percent of outstanding principal and interest in arrears as of end-February 2008. - Denmark, Finland, and Italy cancelled all their outstanding claims. - Additional voluntary bilateral Initiative beyond HIPC under consideration estimated at about US$40 million in end-June 2009 PV terms. - Non-Paris Club bilateral creditors - Assumed to provide relief on HIPC-eligible debt on terms comparable to Paris Club. - PV of such relief at end-June 2007 estimated at US$95.3 million. - Major non-Paris Club creditors: Taiwan Province of China (2.4 percent of HIPC-eligible debt), Saudi Arabia (0.5 percent), Kuwait and China (0.3 percent each). - In February 2007, China cancelled 100 percent of its outstanding claims due before December 31, 2005, amounting to US$12.2 million in nominal values (95 percent of China’s expected debt relief at decision point). - Commercial debt - Commercial debt stock reduced by over US$1.2 billion. - On April 16, 2009, Liberia concluded a buy-back operation supported by IDA’s Debt Reduction Facility (DRF). - Almost 97 percent of total commercial claims (estimated at US$1,234 million in nominal values as of end-June 2007) were extinguished through the buyback operation. - Remaining debt owed to two holdouts before any debt relief: US$43.8 million. ### Considerations for exceptional topping-up assistance and debt stock (DRA update) - Debt Reduction Analysis updated using loan-by-loan data, exchange rates and interest rates as of end-June 2009. - At end-June 2009: - Nominal stock of Liberia’s external debt: US$1,772.6 million. - Multilateral creditors: US$1,066 million or 60 percent of total debt. - IDA: 4.0 percent of total nominal debt. - IMF: 49.4 percent of total nominal debt. - AfDB Group: 1.5 percent of total nominal debt. - Paris Club creditors: 31.7 percent of total outstanding nominal debt. - Non-Paris Club bilateral creditors: 7.0 percent of total debt. - Topping-up assessment - Liberia does not qualify for topping-up. - PV of debt-to-exports ratio at end-June 2009 after full delivery of HIPC assistance: 69.1 percent (20.8 percentage points below projection at decision point). - PV of debt-to-exports ratio after full delivery of additional voluntary bilateral debt relief beyond HIPC at end-June 2009: 62.6 percent, below the 150 percent threshold for topping-up consideration under the enhanced HIPC Initiative. ### Factors affecting PV of debt-to-exports ratio (end-June 2009) — key figures from Table 2 - PV of debt-to-export ratio (as projected at Decision Point): 89.9 - PV of debt-to-export ratio (actual): 69.1 - Unanticipated changes in the ratio: -20.8 (100%) - Due to changes in parameters: 5.1 (-24%) - o/w due to changes in the discount rates: 2.9 (-14%) - o/w due to changes in the exchange rates: 2.2 (-10%) - Due to unanticipated new borrowing: -4.5 (21%) - o/w due to higher than expected disbursements: -4.5 (22%) - o/w due to lower concessionality of the loans: 0.10% - Due to changes in export: -24.4 (117%) - Due to changes in HIPC relief and other factors: 3.0 (-14%) - Bilateral debt relief beyond HIPC: -6.5 - PV of debt-to-export ratio after full delivery of HIPC assistance and bilateral debt relief beyond HIPC (actual): 62.6 ### Creditor participation in MDRI and IMF beyond-HIPC assistance - MDRI from IDA - IDA would provide MDRI debt relief amounting to US$66.9 million in nominal terms. - MDRI would cancel Liberia’s debt service obligations for credits disbursed before end-2003 and still outstanding at end-June 2010. - MDRI from IDA implies average debt service savings (net of HIPC assistance) of US$2.9 million per year over the next 25 years. - MDRI from AfDF - AfDF would provide MDRI debt relief amounting to US$17.2 million in nominal terms, starting from the completion point. - Calculated based on debt disbursed as of December 31, 2004 and still outstanding on June 30, 2010. - MDRI would result in full cancellation of Liberia’s post-completion-point repayment obligations to the AfDB Group, except remaining Nigerian Trust Fund claims (US$7.7 million estimated at end-June 2010 nominal terms). - MDRI-type beyond-HIPC assistance from the IMF - At completion point, the IMF would provide beyond-HIPC assistance to Liberia of about SDR 117.4 million financed from the IMF Administered Account for Liberia. - This amount, together with IMF HIPC assistance, will cover 100 percent of the stock associated with successor arrangements under the ECF and EFF corresponding to the stock of arrears at arrears clearance. - EU Special Debt Relief Initiative - EU will provide additional US$0.9 million in nominal terms as debt relief to Liberia, effectively cancelling all remaining EU claims on Liberia. ### Debt sustainability outlook, 2009/10–29/30 (baseline and projections) - Baseline macroeconomic framework assumes gradual economic recovery, including restart of iron ore production in 2011. - Key baseline macroeconomic assumptions (Box 2) - Real GDP growth: accelerate to over 8 percent in 2011–12 when large mining investments ramp up; thereafter stabilize at 5 percent. - Inflation (GDP deflator, local currency): decelerate from 9 percent in 2009 to 5 percent in 2011 and stabilize at 4 percent afterwards. - Exports: grow by 12 percent annually during 2010/11–2012/13, then stabilize at 7 percent annually. - Imports: import growth projected to average 10 percent for 2010/11–2012/13, then slow to about 3 percent. - Current account deficit: widen during construction phase; about a deficit of 50 percent of GDP in 2010/11-2012/13, then stabilize at a deficit of 20 percent afterwards. - Tax revenues: projected to decline to 21 percent of GDP in 2010/11 and broadly remain stable. - Nominal external concessional borrowing: assumed at 2 percent of GDP in 2010/11, rising to 5 percent of GDP in 2013/14, then declining to 2 percent of GDP by 2022/23 and remaining at this level thereafter; all financing assumed on IDA-equivalent terms. - Primary fiscal balance: will move into a deficit position after the completion point roughly mirroring the borrowing path. - External grants: decline from 50 percent of GDP in 2010/11 to about 30 percent of GDP in 2015/16, then stabilize at 20 percent of GDP in 2023/24. - Projected debt indicators after full delivery of HIPC, additional bilateral assistance and MDRI - PV of debt-to-exports ratio at end-June 2011: 25.8 percent after delivery of MDRI assistance. - PV of debt-to-exports ratio end-June 2015: 24.4 percent. - PV of debt-to-exports ratio end-June 2030: 27.2 percent (increase mainly due to new borrowing). - PV of debt-to-GDP and PV of debt-to-revenue ratios: - From 44 percent and 156.4 percent in FY2008/09-18/19 to 16.7 percent and 67.1 percent in 2019/20–29/30, respectively. - Debt service-to-revenue ratio: - After HIPC, beyond-HIPC and MDRI, increases from 1.6 percent in FY2010/11 to over 7.3 percent during FY2011/12–FY2015/16, reflecting terms of bilateral agreements for commercial post cutoff date debt. - After FY2015/16 when post cutoff debt is fully amortized, debt service indicators decline substantially. ### Sensitivity analysis and alternative scenarios (overview and Alternative Scenario 1) - Overall finding - After full delivery of HIPC, beyond-HIPC, and MDRI debt relief, in all tested scenarios the PV of debt-to-export ratio remains significantly below the HIPC threshold. - Other debt indicators (debt service to exports and to government revenue) deteriorate somewhat under lower exports and less concessional borrowing scenarios. - Alternative Scenario 1: Lower GDP Growth - Assumes GDP growth on average 25 percent lower than baseline projections. - Real GDP growth averages 5 percent from 2009/10–2016/17 (1.7 percentage points lower than baseline) and 3.5 percent from 2014/15 onwards. - Under this scenario: - PV of debt-to-export ratio would increase slightly to 29.4 percent by 2029/30 (1.9 percentage points higher than baseline). - PV of debt-to-GDP and PV of debt-to-revenue ratios would exceed baseline on average by 1.8 and 3.6 percentage points, respectively, over the medium-term projections, and by 3.8 and 9.6 percentage points in 2019/20–29/30. - Debt service-to-export ratio would increase marginally versus baseline. - Debt service-to-revenue ratio would on average be higher by 0.3 percentage points, reaching 0.4 by end-June 2030. *Italic: Extracted from IMF document _cr10192 - 44. The revised amount of enhanced HIPC assistance from multilateral creditors is* ### 57. In this scenario exports are assumed to grow at lower pace due to 20 percent ### _cr10192 - 57. In this scenario exports are assumed to grow at lower pace due to 20 percent ### Scenario: lower export prices (20 percent) - Exports are assumed to grow at a lower pace due to 20 percent lower prices for the main export goods. - All ratios of the PV of the debt increase over the medium- and long-term projections compared to the baseline scenario, although the ratios do not cross the HIPC thresholds. - The PV of debt-to-exports ratio: - Increases by 5 percentage points in the period 2008/09-2018/19. - Increases by 5.6 percentage points in the period FY2019/20–2029–30, reaching 33.1 percent at the end of projected period. - The increase of the debt service-to-exports ratio over the projected period averages 0.4 percentage points. - The PV of debt-to-revenue ratio reaches 62.8 percent in 2029/30, which is still well below the HIPC threshold. - The shock is characterized as minor relative to the cumulative increase in export value over the period and is not assumed to affect other macroeconomic variables other than exports. ### Alternative Scenario 3: New borrowing – Lower concessionality - Concessionality of new debt is assumed to be 35 percent (15 percentage points lower than the baseline assumption of 50 percent). - Higher interest costs for the new borrowing lead to deterioration of all debt ratios. - The ratio of PV of debt-to-exports is 31.4 percent in 2029/30, 4.4 percentage points higher than the baseline scenario. - Debt service in percent of government revenues is on average 0.3 percent higher over the long-term. ### Sensitivity analysis: vulnerabilities and policy implications - The sensitivity analysis highlights the need to: - Diversify the economy to reduce the risk of adverse shocks. - Pursue prudent debt management to maintain low debt vulnerabilities. - Even after HIPC, beyond-HIPC, and MDRI debt relief, Liberia remains vulnerable to shocks, particularly: - Lower exports. - Higher borrowing costs than assumed in the baseline scenario. - To ensure new debt remains below HIPC thresholds it is crucial to: - Increase exports via decisive structural reforms to encourage investment across a range of sectors. - Focus borrowing on highly concessional sources. - Target public spending and structural reforms to address bottlenecks that hamper private investment, including in the export sector. ### Conclusions (IDA and IMF staff assessment) - Satisfactory progress made in implementing reforms specified for reaching the completion point: - 11 out of 12 triggers fully implemented. - Satisfactory progress on the remaining trigger (12-month implementation of the PFM law). The law was approved in August 2009 and related operational regulations were approved in November 2009. - Evidence of implementation: preparation of the FY2010/11 budget in line with the PFM law; establishment of a high level Debt Management Committee; unification of accounting system in the Ministry of Finance; adoption of international accounting standards and a new chart of accounts. - Debt reconciliation exercise results: - Marginal downward revision of the common reduction factor from 90.5 percent to 90.2 percent. - Revision resulted from a downward revision of the debt stock used to calculate HIPC assistance at the decision point, mainly due to a reduction of commercial claims estimated at US$452.1 million. - Liberia received financing assurances of participation in the enhanced HIPC Initiative from creditors representing 96.4 percent of the present value of HIPC assistance at the decision point. - Exceptional topping-up under the HIPC Initiative: - IDA and IMF staffs view that Liberia does not meet the requirements for exceptional topping-up. - The PV of debt-to-exports ratio at end-June 2009—after full delivery of HIPC assistance committed at the decision point and additional bilateral assistance beyond the HIPC Initiative—is estimated at 62.6 percent, well below the 150 percent threshold for topping-up consideration. - Impact of full HIPC and MDRI assistance: - After HIPC and MDRI assistance, the PV of debt-to-exports ratio in FY 2010/11 will fall from 266.3 percent to 22.9 percent. - Assuming an annual average of new borrowing of up to 3 percent of GDP, the PV of debt-to-exports ratio would remain below 28 percent throughout the projection period. - Despite remaining below policy thresholds under the baseline scenario, alternative and shock scenarios show vulnerability of the debt outlook to borrowing costs and export performance. - Staff recommendation: - The staffs recommend that the Executive Directors of the IDA and IMF determine that Liberia has reached the completion point under the Enhanced HIPC Initiative. *Source: IMF/IDA staff assessment as presented in the provided content unit.* ### 65. Executive Directors may wish to consider the following questions: ### _cr10192 - 65. Executive Directors may wish to consider the following questions: ### Completion point and HIPC assistance - Do Directors agree that Liberia has reached the Completion Point under the Enhanced HIPC Initiative? - Staff recommendation on HIPC assistance: - Revised amount of HIPC assistance: US$ 2,739.2 million (end-June 2007 PV terms). - IMF HIPC assistance revised from SDR 428.1 million to SDR 440.9 million. ### Topping-up and exceptional treatment - Do Directors agree that Liberia does not meet the requirements for exceptional topping-up at the completion point? ### Creditor participation and irrevocable commitments - Do Directors agree that Liberia’s creditors have given sufficient assurances to irrevocably commit Enhanced HIPC Initiative assistance to Liberia? ### Key debt composition and burden-sharing figures (as presented) - Composition of stock of external debt (nominal stock: US$4,398.7 million, end-June 2007) by creditor group: - World Bank: 10% - IMF: 19% - AfDB Group: 6% - Other multilateral: 2% - Other official bilateral: 3% - Paris Club: 32% - Commercial: 28% - Total Estimated Enhanced HIPC Assistance: US$2,739.2 million (end-June 2007 PV terms) — breakdown by creditor share (percent of total assistance): - World Bank: 13.64% - IMF: 26.63% - AfDB Group: 8.66% - Other multilateral: 2.95% - Other official bilateral: 3.48% - Paris Club: 31.34% - Commercial: 13.29% ### Creditor participation status (selected items, end-June 2007 PV terms) - Total HIPC assistance (table summary): US$ 2,739 (100.0 percent) — data in end-June 2007 PV terms as revised at completion point. - Multilateral creditors (selected): - World Bank/IDA: IDA has fully provided US$374.9 million in PV terms through the arrears clearance grant. - IMF: interim debt relief equivalent to US$49.3 million in PV terms delivered; remaining IMF HIPC delivery to be US$671.8 million through a stock of debt operation; IMF delivered additional US$8.4 million through grant element associated with disbursement of an ECF loan following arrears clearance. - AfDB Group: fully provided US$240.2 million in PV terms through arrears clearance operation plus additional US$6.4 million in PV terms covering 2008–2009 debt service payments. - Selected bilateral/non-Paris Club and commercial: - China: canceled outstanding claims with payments falling due before end-December 2005. - Kuwait, Saudi Arabia, Taiwan Province of China: authorities continue making good-faith efforts to negotiate HIPC relief. - Commercial creditors: US$364 (13.3 percent of total assistance); debt relief provided through IDA buy-back operations on April 16, 2009. ### Debt burden and projected impacts (high-level indicators presented) - Figures and tables present projections and scenarios for PV of debt to exports, debt service to exports, debt-to-GDP, and sensitivity to shocks (lower GDP growth, lower export growth, lower concessionality) for periods 2008/09–2029/30 and related averages. - Representative indicator values (from tables and scenarios): - PV of total debt before debt-relief (2008/09): 1,622.6 (US$ millions). - After unconditional delivery of enhanced HIPC assistance (selected year entries): PV of total debt 387.5 (US$ millions) in the table context; PV of outstanding debt 387.5/395.9/402.5 entries shown across projection columns. - Baseline PV of debt-to-GDP ratio (selected series, percent): 44.3 (2008/09), 42.2 (2009/10), 40.7 (2010/11), continuing downward in projections under various assumptions (full tables provide year-by-year values). - Baseline PV of debt-to-exports ratio (percent): 69.1 (2008/09), 69.1 (2009/10), 69.6 (2010/11), with projections and alternative scenarios provided in full tables. - Sensitivity analysis scenarios presented: - II.(a) Lower GDP growth: GDP growth on average 25 percent lower than projected in the baseline. - II.(b) Lower exports: export growth at a lower pace due to a 20 percent fall in the main export goods. - II.(c) Lower concessionality: concessionality assumed to be 35 percent (15 percentage points lower than baseline 50 percent). *Sources: Liberian authorities; and IMF and World Bank staff estimates and projections.* ### 19.5 million, estimated at decision point, to reflect actual interest rate path and the early completion point date. The ### _cr10192 - 19.5 million, estimated at decision point, to reflect actual interest rate path and the early completion point date. The ### Revision of IMF grant HIPC assistance and interest assumptions - IMF grant HIPC assistance revised from SDR 428.1 million, committed at decision point, to SDR 440.9 million at completion point. - Notional delivery of HIPC assistance shown on a flow basis; total debt relief expected to be provided at completion point on a stock basis. - Projected debt service is based on data as of end-April 2010 and includes the debt service associated with the remaining undisbursed amount under the ECF arrangement approved in March 2008. - Interest obligations exclude net SDR charges and assessments. - Effective January 7, 2010 interest charges on concessional loans are waived through 12/31/11. - The Fund will review interest rates for all concessional facilities in late 2011 and every two years thereafter. - After 2011, projected interest charges are based on 0.25 percent per annum for the ECF credit outstanding. - Remaining IMF grant HIPC assistance assumed to be disbursed into the member's account at the projected completion point in June 2010, which is reflected in the calculation of interest. - Estimated interest earnings on: (a) amounts held in the member's Umbrella Account; and (b) up to the completion point, amounts committed but not yet disbursed. - Projected interest earnings are estimated based on assumed interest rates which are gradually rising to 4.5 percent in 2015 and beyond; actual interest earnings may be higher or lower. - It is estimated that 98.7 percent of the completion point HIPC assistance would be used for financing of debt relief related to credit outstanding associated with arrears clearance in March 2008. ### Paris Club creditors' delivery of debt relief under bilateral initiatives (high-level points) - Table 12 reports creditor-by-creditor delivery under bilateral initiatives beyond the HIPC Initiative, showing coverage of ODA and non-ODA, pre-cutoff and post-cutoff debt, and provision of relief at decision point and completion point. - Examples (verbatim indicators from the table): - Australia: HIPCs 100 100 100 100 - Austria: HIPCs 100-100- Case-by-case, flow Stock - Belgium: HIPCs 100100100-100 flowStock - Canada: HIPC s2/- 3/- 3/100100100 flowStock - Denmark: HIPCs100100 4/100100 4/100 flowStock - United Kingdom: HIPCs100100100100 15100 flow 15/Stock - United States: HIPCs100100100100 16 100 flowStock - Source: Paris Club Secretariat. - Footnotes convey case-specific rules, moratoria, cancellation practices, and special cases (e.g., Canada, Denmark, France, Netherlands, Norway, Switzerland, United Kingdom, United States). ### HIPC Initiative: Status of country cases (selected figures) - Table 13 provides decision and completion point dates, target exports, estimated total NPV of debt reduction assistance levels, percentage reductions, nominal debt, and multilateral shares for country cases as of January 27, 2010. - Aggregate reported totals: - Total assistance provided/committed: 42,597 (present-value measure) - Total multilateral: 21,786 - Bilateral and other columns: 20,682; 3,406; 9,728 - Grand total: 70,529 (In millions of U.S. dollars, present value) - Selected country entries (verbatim numeric fragments preserved as in source): - Afghanistan: Jul. 07 Jan. 10 1505 82 ... 1,280 - Benin: Jul. 00 Mar. 03 1502 65 ... 460 - Bolivia: original framework Sep. 97 Sep. 98 2254 48 ... 760; enhanced framework Feb. 00 Jun. 01 1508 54 ... 1,300 - Mozambique: original framework Apr. 98 Jun. 99 2,001,717 1,076 641 125 381 63 3,700; enhanced framework Apr. 00 Sep. 01 1503 06 194 112 18 62 27 600; total line shows 2,023 1,270 753 143 443 4,300 - Congo, Democratic Rep. of (decision point reached): Jul. 03 Floating 150 6,311 3,837 2,474 472 831 80 10,389 - Footnote: Equivalent to SDR 2181.98 million at an SDR/USD exchange rate of 0.640563, as of January 27, 2010. - Sources: IMF and World Bank Board decisions, completion point documents, decision point documents, preliminary HIPC documents, and staff calculations. ### Appendix I — Liberia: Debt management (institutional, legal, recording, and capacity) - Since the HIPC decision point, debt management in Liberia has improved substantially; main developments include: - A new consolidated legal framework for government debt management operations (PFM). - A debt management strategy has been adopted. - Domestic and external debt statistics have been published regularly. - A new debt data recording and reporting system has been adopted. - Institutional and Legal Framework: - PFM law adopted in September 2009; under the PFM law, the Minister of Finance is responsible for borrowing and guarantees. - The law creates a Debt Management Committee (DMC) at the ministerial level which approves all government loan and guarantee agreements. - The Director of the Debt Management Unit (DMU) serves as secretariat to the DMC. - All borrowing and guarantee contracts for the Government or State-Owned Enterprises (SOEs) must be approved by the DMC and the Finance Minister. - The Central Bank of Liberia (CBL) manages domestic government securities as the agent of the Ministry of Finance (MoF). - Responsibilities: - MoF, through the DMU: debt registration, transaction confirmations, maintaining records of all debt data, initiating settlement of transactions and payments for debt servicing. - CBL: responsibility for domestic debt securities issuance (currently not issued) and records and processes debt payments. - Debt Strategy and New Borrowing: - Debt management strategy approved June 2008, revised July 2009, and June 2010. - Initial strategy includes resolution for arrears on external and domestic debt; sets debt management objectives and legal/managerial structure. - Until HIPC completion point, central government and state enterprises observed a balanced cash-based budget and a zero limit on domestic and external borrowing. - After HIPC completion point, revised strategy assumes new external borrowing only on concessional terms and used for priority projects with high economic returns. - Debt Recording and Reporting: - Database re-established using creditor information, outcomes of debt restructuring agreements, and verified domestic claims. - DMU maintains electronic data files on external public and publicly guaranteed (PPG) debt stock as of end-June 2007 and end-June 2009, and projected debt service payments by each creditor, though updates have had some delay. - DMU installed the Debt Recording and Management System (CS-DRMS) provided by the Commonwealth Secretariat. - PFM law requires submission of annual reports to the President and the Legislature including new loans and guarantees and publication of regular reports on outstanding public debt and debt service projections. - MoF prepares and publishes quarterly and annual data on outstanding central government external and domestic debt on its website; CBL’s Financial Statistics Bulletin also reports domestic and external debt stock data. - DMU Staff Capacity: - DMU operational in the Ministry of Finance since 2008; comprises a Director and six staff members. - Staff require training to efficiently use CS-DRMS and to develop procedures to regularly update the debt database. ### Appendix II — Debt Sustainability Analysis (LIC DSF methodology) (summary) - The DSA was prepared jointly by Bank and Fund staffs in accordance with the standardized Debt Sustainability Framework (DSF) methodology for Low-Income Countries (LICs). - After HIPC and MDRI debt relief, Liberia’s risk of debt distress is low. - The result is sensitive to FDI flows and export shocks, as well as to borrowing conditions. - With the assumption of average annual concessional borrowing of 3 percent of GDP for the period, the assessment of the country’s risk of debt distress remains unchanged and the present value of the external debt remains well below 30 percent. *Italic: Source — _cr10192 (IMF staff text as provided in the supplied content).* ### 1. This joint DSA was prepared using the Fund-World Bank standardized Debt ### This joint DSA was prepared using the Fund-World Bank standardized Debt ### Methodology and key initial conditions - The DSA uses the Fund-World Bank standardized Debt Sustainability Framework (DSF) methodology for Low-Income countries approved by the respective Boards. - It updates the LIC DSA presented to the Bank and Fund Boards in early 2009 and uses the reconciled debt database prepared for the completion point HIPC DSA. - In the baseline, the DSA incorporates the impact of HIPC, additional bilateral assistance beyond HIPC, and MDRI debt relief. - Liberia’s public debt as of end-June 2009 is estimated at about 190 percent of GDP, mostly owed to external creditors (185 percent), mainly the African Development Bank, the IMF, and the World Bank (64 percent of total external debt) and bilateral and commercial creditors (36 percent). - The domestic debt stock amounts to about 5 percent of GDP. The DSA includes the domestic debt of the public sector, including borrowing from the banking sector; borrowing from the central bank is excluded. - The completion point is assumed to take place at end-June 2010, at which time Liberia will benefit from irrevocable debt relief: - External debt stock reduced to US$166 million, of which 69 percent will be owed to bilateral creditors and the remainder to multilaterals and other creditors. - Nominal reduction in debt stock estimated at US$1,509.4 million, with annual debt service savings of about US$145 million in the first 10 years following the completion point. - Baseline macro assumptions: - GDP growth assumed to accelerate until large mining investments reach full capacity; after this, output growth slows to 5 percent for the remainder of the projection period. - Inflation moderates quickly and stabilizes at 4 percent. - Exports grow rapidly during 2011/12-2012/13 when mining projects commence, then stabilize at 10 percent. - Imports: annual growth averages 25-30 percent for the construction phase (2010/11–2012/13), then slows to about 4 percent. - Fiscal revenues from projects are lagged, becoming significant only in the latter part of the projection period. - Projected real growth over the next five years revised downwards from 9 to 7 percent; growth averages about 5 percent thereafter. ### Baseline scenario - Assumes full delivery of HIPC and MDRI debt relief and that Liberia reaches the completion point by end-June 2010. - Post-completion point debt is reduced to low levels, but debt service on the majority of remaining obligations—mostly owed to bilateral creditors—is scheduled to begin in 2011/12 and be fully amortized in 5 years, creating a debt service hump in 2011/12–2015/16. - Long-term borrowing policy assumed moderate, somewhat higher than the 2009 DSA baseline, with front loading in the first 5 years: - New external borrowing begins in FY 2010/11 at 2 percent of GDP, rises to 5 percent of GDP in FY2013/14–2014/15, and gradually declines to 2 percent of GDP. All new external borrowing assumed on concessional (IDA) terms. - Domestic borrowing through a planned treasury bill market is constant at 1 percent of GDP per year. - (Contrast: the 2009 DSA assumed 2 percent of total borrowing throughout the period.) ### External debt sustainability — baseline findings - In the period following the completion point, debt dynamics are dominated by rapid repayment of remaining obligations owed to official bilateral creditors. - PV of external debt declines from 15 percent in 2010/11 to 12 percent of GDP in 2015/16, at which time this debt is fully repaid. - Ratios of debt service to exports and debt service to revenues undergo a steep increase during the 2011/12–2015/16 peak. - Meeting these obligations would require a mix of fiscal measures and refinancing options; the increase in debt service relative to decision point estimates is treated as a financing gap pending creditor discussions. - After repayment of near-term obligations: - Debt and debt service profiles are relatively benign. - Most remaining obligations carry favorable terms; new obligations contracted at IDA terms and annual new borrowing declines as a share of GDP. - PV of debt to GDP increases only moderately after 2015/16 and stabilizes at about 17 percent by the end of the period, well below the 30 percent threshold value. - Ratios of debt service to exports and to revenues are very low once the 2011/12–2015/16 bulge passes, aided by rising exports and revenues from mining projects: - Debt service-to-exports ratio is mitigated by the end of the debt service bulge as projects begin exporting. - Debt service-to-revenue mitigation becomes significant toward the second half of the projection period. ### External debt sustainability — alternative and shock scenarios - Results broadly unchanged across DSF alternative scenarios except the historical scenario. - Under less favorable borrowing terms: - PV of external debt to GDP ratio reaches 27 percent in FY2021/22 and 29 percent by 2029/30. - PV of external debt to exports remains about 40 percent, with marginal decline by end of projection period. - Threshold levels are never exceeded under these alternatives. - Historical-data-based scenario (using 2004/05-2009/10 trends) projects sharp increases and breaches policy-dependent thresholds for PV debt-to-GDP, debt-to-exports, and debt-to-revenue ratios; staff consider the historical trend unreliable due to data unreliability and atypical past FDI patterns. ### Public sector debt sustainability — baseline findings - Following debt relief, public debt indicators decline markedly in the baseline, largely due to external debt relief. - Over the period, the PV of public debt rises by 8.2 percentage points of GDP, compared to only 1.6 percentage points for external debt, reflecting commercial terms assumed for domestic debt and its steady accumulation. - The PV debt-to-revenue ratio rises until 2023/24, then falls as mining revenues rise. - The debt service-to-revenue ratio jumps sharply during FY2011/12–2015/16, then falls back to below 5 percent for FY2017/18 to 2029/30. ### Public sector debt sustainability — alternative scenarios - Alternative and shock scenarios show a similar gradual rising trend of debt indicators, but all remain within acceptable limits in most scenarios. - Under an alternative scenario of lower GDP: - PV public debt-to-GDP ratio increases moderately from 18 percent in FY2010/11 to about 39 percent by the end of the projection period. - PV public debt-to-revenue ratio deteriorates substantially, reaching about 95 percent in FY2020/21 and 121 percent in FY2029/30. - Debt service-to-revenue ratio remains below 10 percent under the pessimistic lower GDP growth scenario. *Prepared using the Fund-World Bank standardized Debt Sustainability Framework (DSF) methodology for Low-Income countries as presented in the provided DSA content.* ### 11. Liberia’s risk of debt distress remains low following the debt relief under the ### Liberia’s risk of debt distress remains low following the debt relief under the HIPC initiative and the MDRI ### Overview and main finding - Liberia’s risk of debt distress remains low following debt relief under the HIPC initiative and the MDRI. - Baseline scenario assumption: annual average new borrowing of 3 percent of GDP on concessional terms. - Staff view: historical data scenario is not a reliable basis for assessing debt vulnerabilities due to paucity of data and large structural changes in the immediate post-conflict period. ### Baseline scenario outcomes and debt indicators - Under the baseline (including annual average new borrowing of 3 percent of GDP on concessional terms), debt indicators remain well below the relevant indicative thresholds. - PV of external debt (selected projection path entries shown in the DSA tables): - 2015/16: 12.1 - 2016/17: 13.2 - 2017/18: 14.0 - 2018/19: 14.8 - 2019/20: 15.7 - 2020/21: 16.5 - 2021/22: 17.0 - 2029/30: 16.7 - PV of PPG external debt (selected values): - 2015/16: 12.1 - 2016/17: 13.2 - 2019/20: 16.5 - 2020/21: 17.0 - 2021/22: 17.3 - 2029/30: 16.7 - Debt service ratios (selected values): - Debt service-to-exports ratio examples: 3.4, 3.3, 3.3, 3.5, 3.1 (periods in tables) - PPG debt service-to-revenue ratio examples: 1.59, 7.5, 7.5, 7.1, 7.5, 6.7 (periods in tables) - Total gross financing need (Millions of U.S. dollars) (selected years/values): - Example sequence in table: 160.9, 176.7, 101.1, 46.9, 50.0, 76.8, 102.3, 139.0, 173.1, 80.0, 60.5, 64.2, 106.2, 160.0 - Grant-equivalent financing (in percent of GDP) in projections: repeated value of 51.6 (grant element assumed on residual financing row lists 50 for many years as memorandum item; grant-equivalent financing earlier series shows values around 7.0, 5.3, 6.3, 7.3, 7.6, 7.4, 6.5, 6.3, 6.0, 6.0, 6.0, 6.3 in projection years). ### Sensitivity and stress-test findings - Debt outlook is sensitive to export shocks. - Alternative scenario with concessional borrowing on less favorable terms shows some vulnerability; however, all indicators remain below threshold values in the scenarios presented. - Historical scenario breaches the PV debt-to-GDP threshold, but staff consider this unreliable because it results mainly from high current account deficits and low FDI in the post-conflict return-to-stability period. - Stress-test specifics (selected results from sensitivity tables): - PV of debt-to-GDP (baseline and alternative paths): baseline values around 15–17 percent in projection horizon; A1 and A2 scenarios show much higher series (e.g., A1: 15, 22, 29, ... up to 92 by 2030/31 in one table column; A2: 15, 14, 15, ... up to 29). - PV of debt-to-exports and PV of debt-to-revenue ratios rise substantially under many alternative scenarios and bound tests (tables show large increases under A1 and other bound tests). - The most extreme stress test in figures corresponds to loans on less favorable terms for several indicators, and to export values growing at historical average minus one standard deviation for PV debt-to-exports. ### Key macroeconomic assumptions used in the DSA (selected exact values) - Real GDP growth (in percent) (selected series entries): 8.2; 5.8; 5.5; 3.0; 9.2; 7.5; 8.4; 7.3; 6.3; 6.0; 5.4; 6.8; 4.7; 4.7; 5.1; 5.2; 5.3; 5.1 (table lists these across periods). - GDP deflator in US dollar terms (change in percent) (selected entries): 8.6; 2.1; 0.3; 7.0; 4.0; 1.1; 1.1; 2.4; 2.7; 3.2; 3.1; 2.3; 2.3; 2.2; 1.9; 1.9; 3.5; 2.4. - Growth of exports of goods & services (US dollar terms, in percent) (selected entries): 13.1; -5.3; -2.1; 15.3; 16.3; 19.8; 11.0; 3.2; 1.6; 7.4; 8.9; 8.7; 8.4; 8.0; 6.2; 4.0; 4.1; 4.1. - Growth of imports of goods & services (US dollar terms, in percent) (selected entries): 11.0; -1.4; -3.3; 11.2; 14.1; 13.6; 6.3; -6.7; -8.4; -2.0; -1.1; 0.3; 6.4; 6.4; 5.2; 5.2; 6.2; 1.1. - Grant element of new public sector borrowing (in percent): 51.6 (repeated across projection years where shown). - Government revenues (excluding grants, in percent of GDP) (selected entries): 21.9; 24.5; 30.5; 29.4; 30.7; 28.2; 27.9; 27.2; 26.5; 24.1; 23.7; 26.5; 26.8; 26.8; 25.2. - Aid flows (in Millions of US dollars) and breakdown (selected): - Aid flows (total) (selected): 1.5; 23.6; 13.0; 78.6; 73.3; 98.4; 127.0; 142.2; 149.2; 177.0; 181.1; 252.5; 270.5; 294.7. - o/w Grants (selected): 1.5; 23.6; 13.0; 59.1; 40.7; 50.7; 61.9; 71.0; 77.2; 111.9; 119.8; 179.9; 192.7; 209.9. - o/w Concessional loans (selected): 0.0; 0.0; 0.0; 19.5; 32.6; 47.7; 65.1; 71.2; 72.0; 65.1; 61.3; 72.7; 77.8; 84.8. ### Policy implications and vulnerability notes - Delays in implementing structural reforms aimed at raising growth, investment, and exports could be a source of external vulnerability. - The DSA highlights sensitivity to export shocks and to less favorable concessional borrowing terms; maintaining concessional terms and sustaining reforms to boost exports and investment are implied priorities to preserve low risk of debt distress. *Sources: Country authorities; and staff estimates and projections (selected tables and figures from the DSA).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2010/_cr10192.pdf_