## _cr11345 - Appendix I comprises the authorities’ Letter of Intent, Supplementary Memorandum of

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---

### Recent Developments
- Social and political:
  - Presidential and legislative elections on October 11, 2011 and second-round presidential elections on November 8 resulted in the election of President Johnson Sirleaf to a second six-year term while her political party remained short of an overall majority in the legislature.
  - Due to continuing poor security conditions in western Côte d'Ivoire a significant number of refugees (138,000) remain in Liberia.
- Output and external sector:
  - GDP growth was robust, led by increased rubber production and the first post-war iron-ore exports.
  - Timber shipments have picked up; infrastructure bottlenecks remain a limiting factor.
  - Off-shore oil drilling by three international companies has begun.
  - Terms of trade have improved and gross official reserves remain stable at about 2¾ months of import cover.
- Prices and poverty vulnerability:
  - Consumer price inflation temporarily rose above 10 percent in mid-year before dropping back in September.
  - Inflation was boosted by the pass-through of international fuel prices and markedly higher market prices for imported rice.
  - Vulnerability to high food prices particularly falls on the urban poor, who are targeted by donor-funded school feeding and food-for-work initiatives.
- Monetary and financial sector trends:
  - Broad money and official reserves increased in line with program projections through end-June.
  - Private credit and deposits have both grown rapidly.
  - A substantial portion of the loan portfolio is rated non-performing; bank profitability is low.
  - The banking system is well-capitalized and highly liquid despite operating challenges.
- Fiscal implementation:
  - FY2011 showed improved revenue mobilization and better execution of capital spending relative to FY2010.
  - The tax revenue to GDP share improved by 2¾ percentage points over FY2010 due to buoyant corporate income taxes and receipt of a one-off withholding payment associated with the transfer of an oil concession.
  - Domestically financed capital spending increased substantially to more than 6 percent of GDP.
  - Following attainment of the HIPC completion point in 2010, highly concessional external borrowing commenced in FY2011 with disbursements amounting to just below 1 percent of GDP.
- Program performance:
  - All performance criteria were observed through end-June 2011; end-September indicative monetary targets were observed; preliminary data suggest fiscal policies remained on track at end-September.
  - One structural benchmark for the seventh review—the extension of the ASYCUDA system to the Monrovia oil terminal and international airport—was met; two others are in progress.
  - Delay in establishing regular financial reporting by state-owned enterprises (SOE) is being addressed, with resolution expected by March 2012.

### Macroeconomic Outlook (Staff and Authorities)
- Near- to medium-term growth:
  - GDP growth is expected to be in the 7–10 percent range in 2011–12, buttressed by the restart of iron-ore production.
  - Forestry activity is expected to rise following the opening in FY2012–13 of an additional port that would lift an export bottleneck.
  - Iron ore and logging are expected to sustain high rates of growth over the medium term.
- Inflation and reserves:
  - Staff and authorities anticipate that inflation will deccelerate from around 7½ percent in 2011 to 3 percent in 2012 based on a moderation of international food and fuel prices.
  - Modest gross foreign reserve accumulation, excluding government deposits, is expected to continue, though increased FDI-financed imports will reduce import cover.
- Risks and policy advice:
  - Principal downside risks: a downturn in commodity export prices and related FDI; a reduction of aid due to donor country austerity.
  - Staff advised considering means to mitigate volatility from commodity price fluctuations and stressed advantages of transitioning from a cash-based budget to a medium-term expenditure framework with mechanisms for expenditure smoothing, including a stabilization fund.

### Fiscal Policies and FY2012 Budget
- FY2012 budget design and contingent resources:
  - Authorities considered potential revenue and grants amounting to 4½ percent of GDP to be contingent on specific actions or decisions.
  - The FY2012 budget is divided into core and contingent components: the core budget consists only of expenditure funded by secure revenue and financing; contingent revenue will fund mapped, mainly non-recurrent, quick disbursing expenditure items released on receipt of corresponding revenue.
  - Staff warned a large contingent budget could create unrealistic expenditure expectations and administrative complexity; suggested allocating revenue over-performance through supplementary budgets or saving it.
- Fiscal program framing:
  - Fiscal program defined as the core budget plus expenditure financed through World Bank lending.
  - External borrowing constrained by debt management strategy: external borrowing substantially below the maximum level consistent with long-run debt sustainability (3 percent of GDP in net present value terms).
  - Financing limited to highly concessional World Bank lending, with revenues and grants broadly unchanged from FY2011.
- Tax and revenue outlook:
  - Tax policy changes and one-off factors will reduce tax revenue significantly in FY2012, with offsetting increases mostly in non-tax revenue and grants.
  - Tax reductions include: full-year effect of cuts in income tax rates; fall in one-time withholding tax receipts; trade tax declines from adoption of GATT valuation and tariff reductions towards the ECOWAS common external tariff; waiver of fuel import duties for health and education institutions.
  - Offsetting increases: iron-ore payments including royalties, increased excises, higher sales tax on cell-phone usage, and additional commodity grants.
- Expenditure priorities:
  - Expenditure concentrated in health, education, and infrastructure.
  - Health and education are budgeted to amount to 25 percent of core spending (actual health and education spending is an indicative target under the ECF).
  - Central government wage bill set to increase by 16 percent due to a rise in the minimum wage and adoption of a new salary structure reducing the number of grades from 15 to 10.
- Revenue code reform:
  - Extensive amendments to the Liberia Revenue Code were published—and entered into force—in November 2011 (prior action for the seventh review). The amendments cover most major taxes and support medium-term fiscal sustainability.

### Key FY2011 Outturn and FY2012 Program (Percent of GDP)
- Total revenue and grants: 35.0; 35.1
- Total revenue: 31.2; 30.4
- Tax revenue: 25.1; 21.3
  - Trade: 9.8; 8.1
  - Income: 10.4; 8.0
  - Withholding on equity sales: 1.4; 1.1
  - Other: 4.9; 5.2
- Non-tax revenue: 6.1; 9.1
- Grants: 3.8; 4.7
- Total Expenditure: 35.7; 36.5
  - Current expenditure: 28.9; 27.2
  - Capital expenditure: 6.9; 5.2
  - Unallocated expenditure: 0.0; 4.1
- Overall balance: -0.7; -1.4
- Financing: 0.7; 1.4
  - Foreign financing (net): 0.4; 1.0
  - Gross borrowing: 0.9; 1.4
  - Domestic Financing (net): 0.4; 0.4

### Monetary and Financial Policies
- Financial deepening and monetization:
  - Monetization is steadily increasing.
  - Commercial bank deposits have increased at annual rate of over 30 percent while credit to the private sector is also growing rapidly.
  - Foreign exchange reserve accumulation has been in line with program objectives; the CBL uses foreign exchange auctions to limit excess volatility in the exchange rate.
  - Authorities are considering issuance of CBL notes to enhance central bank policy toolkit as the FY2012 budget does not envisage issuance of treasury bills.
- Credit risk and supervision:
  - Non-performing loans (NPLs) to total gross loans have declined but remain high.
  - Some credit risk is mitigated by high liquidity in the banking system and limited channels for contagion given absence of interbank lending.
  - One of the largest banks brought in new capital from a parent bank to meet capital requirements and write off bad loans.
  - CBL advising banks on risk management; all banks compliant with capital and provisioning requirements at end-August 2011; on-site risk-based supervision is advancing.
  - Staff noted that if the economic situation deteriorates causing increased bad debt, higher provisioning, and erosion of bank capital, confidence could weaken and further bank recapitalization may be needed.

### Program Performance and Structural Benchmarks
- All performance criteria were observed through end-June 2011; end-September indicative monetary targets were observed; preliminary data suggest fiscal policies remained on track at end-September.
- Structural benchmark status (highlights):
  - Publication of validated national accounts data for 2008 by LISGIS (Benchmark, February 2011): Not met.
  - Publication of the revised Liberian Revenue Code 2011 (Prior action, Seventh Review): Met. November 14, 2011.
  - Extend ASYCUDA to Monrovia oil terminal and international airport (Benchmark, Seventh Review): Met.
  - Regular quarterly reporting of SOE financial operations to Ministry of Finance (Benchmark, Seventh Review): Not met.
  - Launch pilot phase of IFMIS linking Ministry of Finance, Civil Service Agency, Central Bank and GAC (Benchmark, Seventh Review): Delayed. Launched in Ministry of Finance; links to other agencies to be completed by end-January 2012.

### Poverty Reduction Strategy and Medium-Term Vision
- Authorities have begun consultations for a successor medium-term growth and development strategy within the national visioning Liberia Rising–2030 aiming “to become a middle-income country by 2030 characterized by sustainable and inclusive economic growth with improved quality of life for each citizen”.
- The exercise will be informed by the report on implementation of PRS1 currently in preparation.

### State-Owned Enterprise (SOE) Reforms
- An inter-ministerial SOE Reform Working Group established; reviewed legislation, proposed revised classification of enterprises, and investigated governance framework.
- All SOEs required to begin reporting financial statements to the Ministry of Finance; eight SOE supplied annual statements for 2010.
- Enterprise managing directors responsible for filing annual financial reports by December 2011 and to begin reporting on a quarterly basis by March 2012.
- Compliance with reporting requirements under the PFM act is a precondition for authorizing a SOE to contract foreign or domestic debt.

### Definitions, Measurements, and Program Mechanics (selected)
- Government (GoL) defined as the central Government of Liberia; excludes legally autonomous SOEs whose budgets are not included in the central government budget.
- Revenues of the GoL measured on basis of cash deposits in specified GoL accounts at the CBL converted to U.S. dollars using end of period exchange rate.
- Program Schedule for Cumulative Signing Bonuses and Social Development Fund Payments from New Iron-Ore Projects (In millions of U.S. dollars, cumulative from start of fiscal year):
  - September 2011 0.0
  - December 2011 22.7
  - March 2012 26.0
  - June 2012 53.8
- External Financing Adjustor (cumulative, In millions of U.S. dollars):
  - September 2011 0.0
  - December 2011 51.1
  - March 2011 72.3
  - June 2012 100.1
- Ceiling for contracting and guaranteeing non-concessional external debt by the public sector: set at zero continuously throughout the program period except as agreed with Fund staff.

### FY2012 Education and Healthcare Spending (Core Budget, Millions of US dollars)
- Total Education and Health 112.6
  - Education 65.4
    - Ministry of Education 39.1
    - University of Liberia 11.8
    - Monrovia Consolidated School System (MCSS) 3.3
    - Booker Washington Institution (BWI) 1.9
    - Forestry Training Institution (FTI) 0.5
    - Cuttington University (CUC) 1.0
    - National Commission on Higher Education (NCHE) 1.6
    - W. V. S. Tubman Technical College (WVSTC) 3.4
    - West African Examination Council (WAEC) 2.1
    - Liberia Institute for Public Administration 0.7
  - Health 47.2
    - Ministry of Health and Welfare 36.2
    - JFK Medical Center (JFKMC) 6.9
    - Phebe Hospital 1.8
    - LIBR 0.7
    - Jackson F. Doe Medical Hospital 1.6

### Program Monitoring, Reporting, and Data Requirements
- Program–Monitoring Committee: senior officials from Ministry of Finance, CBL, and other relevant agencies; IMF Resident Representative observer.
- Monthly reporting requirements (selected):
  - Detailed monthly revenue and expenditure reports on cash and commitment basis (monthly, within three weeks after the end of the month).
  - Daily balances in GoL accounts at the CBL (daily, within three days from the date of the statement).
  - Balance sheet of the CBL in the monthly monetary survey (monthly, within three weeks after the end of the month).
  - Detailed table of commercial banks loans and advances by sector (monthly, within three week of end of month).
  - Core set of financial soundness indicators by individual financial institution, including overall profitability of the banking sector (quarterly, within three weeks after the end of the quarter).
  - Report on foreign exchange auctions held by the CBL (weekly).

### Monetary and Financial Quantitative Indicators (selected series and projections)
- Real GDP growth rates (annual percentage change): 4.6 (2009 Prel.), 5.5 (2010), 6.8 (2011 6th Rev), 6.9 (2011 Proj.), 9.6 (2012), 9.5 (2013), 7.2 (2014).
- Nominal GDP (millions of US dollars): 879.3 (2009), 987.3 (2010), 1,153.9 (2011 6th Rev), 1,155.3 (2011 Proj.), 1,353.0 (2012), 1,373.0 (2013), 1,527.1 (2014).
- Consumer prices (average): 7.4 (2009), 7.3 (2010), 8.1 (2011 6th Rev), 7.4 (2011 Proj.), 5.8 (2012), 3.1 (2013), 4.2 (2014).
- Broad money (M2) annual change: 24.1 (2009), 33.5 (2010), 15.2 (2011 6th Rev), 15.5 (2011 Proj.), 16.5 (2012), 17.8 (2013), 11.3 (2014).
- Broad money (M2) levels (millions of US$): 322.4 (2010), 430.6 (2011), 496.0 (2012 6th Rev), 497.3 (2012 Proj.), 578.0 (2013), 585.8 (2014), 652.2 (2015).
- Gross official reserves (millions of US dollars): 312.2 (CBL gross official reserves in one table), 391.4 (2010), 375.0 (2011 6th Rev), 377.3 (2011 Proj.), 390.4 (2012), 389.6 (2013), 397.7 (2014).
- Import coverage of reserves excluding UNMIL imports (months): 3.2 (2009), 3.4 (2010), 2.7 (2011 6th Rev), 2.7 (2011 Proj.), 2.1 (2012), 2.1 (2013), 2.1 (2014).
- Private sector credit (12 months percent change): 31.5 (2009), 40.1 (2010), 16.1 (2011 6th Rev), 16.1 (2011 Proj.), 16.5 (2012), 17.3 (2013), 18.8 (2014).
- Current account balance (including official grants, percent of GDP): -38.3 (2009), -43.6 (2010), -37.8 (2011 6th Rev), -39.4 (2011 Proj.), -62.9 (2012), -58.1 (2013), -58.7 (2014).
- Trade balance (percent of GDP): -47.9 (2009), -46.5 (2010), -54.6 (2011 6th Rev), -51.2 (2011 Proj.), -56.0 (2012), -50.8 (2013), -34.6 (2014).
- Exports, f.o.b. (percent of GDP): 17.4 (2009), 21.8 (2010), 26.4 (2011 6th Rev), 29.2 (2011 Proj.), 41.9 (2012), 45.2 (2013), 56.1 (2014).
- Imports, f.o.b. (percent of GDP): -65.3 (2009), -68.3 (2010), -80.9 (2011 6th Rev), -80.4 (2011 Proj.), -97.9 (2012), -96.0 (2013), -90.7 (2014).

### Balance of Payments and Financing Tables (selected)
- Table 8: Total financing requirement (US$ millions): -4,754 (2010 Est.), -1,450 (2011), -1,697 (2012), -1,700 (2013), -1,351 (2014), -649 (2015).
- Table 8: Total available financing (US$ millions): 3,047 (2010 Est.), 1,436 (2011), 1,690 (2012), 1,700 (2013), 1,351 (2014), 649 (2015).
- Exceptional financing (US$ millions): 1,707 (2010 Est.), 147 (2011), 0 (2012 onward).

### Fund Financing, Disbursements, and Debt Service to the Fund
- Total ECF/EFF arrangements: SDR 550.03 million (ECF: SDR 207.26 million; EFF: SDR 342.77 million).
- Schedule of ECF disbursements (selected entries):
  - ECF: SDR 7.00 million (December 29, 2008)
  - ECF: SDR 7.00 million (May 14, 2009)
  - ECF: SDR 4.44 million (December 21, 2009)
  - ECF: SDR 4.44 million (July 2, 2010)
  - ECF: SDR 4.44 million (December 22, 2010)
  - ECF: SDR 4.44 million (June 27, 2011 — sixth review)
  - ECF: SDR 4.44 million (November 11, 2011 — seventh review)
  - ECF: SDR 4.44 million (March 15, 2012 — eighth review)
- Prospective drawings (Table 6): ECF: 8.80 (2011), 4.40 (2012).
- Projected debt service to the Fund (Millions of SDRs): 0.10 (2012), 1.10 (2013), 4.20 (2014), 6.79 (2015), 9.54 (2016), 12.75 (2017), 15.68 (2018), 13.05 (2019), 12.45 (2020), 11.67 (2021), 10.44 (2022).
- Fund credit outstanding (percent of GDP): 37.6 (2011), 42.0 (2012), 42.0 (2013), 39.9 (2014), 36.2 (2015), 30.8 (2016), 23.1 (2017), 13.5 (2018), 7.4 (2019), 3.0 (2020), 0.3 (2021), 0 (2022).
- Projection assumption: Effective on January 7, 2010 interest on ECF credit outstanding would be zero in 2010 and 2011; assumed ECF interest rate at 0.25% from 2012 onward.

### Banking System Indicators — Box 1 (Regional Perspective)
- Banking sector structure and performance:
  - Most banks in Liberia are foreign-owned branches or subsidiaries of transnational African banks.
  - Liberia shares regional characteristics: weak credit environment with elevated non-performing loans, limited financial intermediation relative to GDP, and a comfortable regulatory capital to risk-weighted asset ratio (CAR).
  - More than half of banks’ revenue is from non-interest income.
- Profitability pressures and lending conditions:
  - Commercial bank profits are squeezed by relatively narrow lending margins, lack of profitable investment instruments, and a difficult credit environment.
  - Authorities prioritize keeping interest rates low for under-served SMEs and are exploring ways to improve SME access to credit.
- Supervisory, legal, and risk management reforms:
  - CBL implementing risk-based supervision with more frequent surveillance and on-site credit examinations.
  - New Commercial Code in force and a fast-track commercial court set to begin operations to improve loan collection and asset recovery.
- Financial intermediation developments:
  - Mobile banking services in local currency launched in September 2011 by a large commercial bank in partnership with a cell-phone operator.
  - CBL developing regulatory framework for non-bank financial institutions; roadmap for capital market development to be completed by early 2012.
  - CBL-backed collateralized lending scheme to SMEs (at below-market rates) has lent more than half of the US$5 million allocated as of end-August.
- Safeguards and institutional arrangements:
  - Safeguards assessment update (mid-2011) found strengthened safeguards; recommended formalizing rights and obligations relating to Liberia’s transactions with the IMF in a memorandum of understanding between the CBL and the Ministry of Finance.

### Program Review, Board Action, and Authorities’ Request
- Staff supports completion of the seventh program review under the Extended Credit Facility (ECF).
- Authorities request completion of the seventh review and approval of the eighth disbursement of SDR 4.44 million.
- Letter dated Monrovia, November 15, 2011 from authorities requests completion based on program performance and envisaged policy.
- IMF Executive Board action (Press Release No. 11/442, December 5, 2011):
  - Executive Board completed the seventh review of Liberia’s program under the ECF.
  - Disbursement enabled: SDR 4.44 million (about US$6.9 million).
  - Cumulative disbursements under the arrangement: SDR 243.5 million (about US$379 million).

### Data, Statistical Issues, and Technical Assistance
- National accounts: comprehensive national accounts data not available; SUT for 2008 considered experimental; reliable GDP estimates expected by 2014 with improved data sources.
- Price statistics: CPI for Monrovia compiled since 2005; Harmonized CPI adopted in 2007.
- Government finance statistics: monthly disaggregated data provided, but gaps remain in coverage and stocks.
- Monetary statistics: reporting suspended since September 2010; CBL agreed to start reporting SRFs by end-December 2011.
- Balance of payments: reporting not comprehensive; Fund staff prepare provisional statistics for surveillance.
- Liberia participates in GDDS since October 2005.

*Sources: Liberian authorities; World Food Programme; African Development Bank; and IMF staff estimates, projections, staff appraisal, MEFP, and related tables and letters in the supplied document.*

### Appendix I comprises the authorities’ Letter of Intent, Supplementary Memorandum of

### _cr11345 - Appendix I comprises the authorities’ Letter of Intent, Supplementary Memorandum of

### Recent Developments
- Social and political:
  - Presidential and legislative elections on October 11, 2011 and second-round presidential elections on November 8 resulted in the election of President Johnson Sirleaf to a second six-year term while her political party remained short of an overall majority in the legislature.
  - Due to continuing poor security conditions in western Côte d'Ivoire a significant number of refugees (138,000) remain in Liberia.
- Output and external sector:
  - GDP growth was robust, led by increased rubber production and the first post-war iron-ore exports.
  - Timber shipments have picked up; infrastructure bottlenecks remain a limiting factor.
  - Off-shore oil drilling by three international companies has begun.
  - Terms of trade have improved and gross official reserves remain stable at about 2¾ months of import cover.
- Prices and poverty vulnerability:
  - Consumer price inflation temporarily rose above 10 percent in mid-year before dropping back in September.
  - Inflation was boosted by the pass-through of international fuel prices and markedly higher market prices for imported rice.
  - Vulnerability to high food prices particularly falls on the urban poor, who are targeted by donor-funded school feeding and food-for-work initiatives.
- Monetary and financial sector trends:
  - Broad money and official reserves increased in line with program projections through end-June.
  - Private credit and deposits have both grown rapidly.
  - A substantial portion of the loan portfolio is rated non-performing; bank profitability is low.
  - The banking system is well-capitalized and highly liquid despite operating challenges.
- Fiscal implementation:
  - FY2011 showed improved revenue mobilization and better execution of capital spending relative to FY2010.
  - The tax revenue to GDP share improved by 2¾ percentage points over FY2010 due to buoyant corporate income taxes and receipt of a one-off withholding payment associated with the transfer of an oil concession.
  - Domestically financed capital spending increased substantially to more than 6 percent of GDP.
  - Following attainment of the HIPC completion point in 2010, highly concessional external borrowing commenced in FY2011 with disbursements amounting to just below 1 percent of GDP.
- Program performance:
  - All performance criteria were observed through end-June 2011; end-September indicative monetary targets were observed; preliminary data suggest fiscal policies remained on track at end-September.
  - One structural benchmark for the seventh review—the extension of the ASYCUDA system to the Monrovia oil terminal and international airport—was met; two others are in progress.
  - Delay in establishing regular financial reporting by state-owned enterprises (SOE) is being addressed, with resolution expected by March 2012.

*Sources: World Food Programme; and IMF staff estimates.*

### Program and Policy Discussions

#### Macroeconomic Outlook
- Near- to medium-term growth:
  - GDP growth is expected to be in the 7–10 percent range in 2011–12, buttressed by the restart of iron-ore production.
  - Forestry activity is expected to rise following the opening in FY2012–13 of an additional port that would lift an export bottleneck.
  - Iron ore and logging are expected to sustain high rates of growth over the medium term.
- Inflation and reserves:
  - Staff and authorities anticipate that inflation will deccelerate from around 7½ percent in 2011 to 3 percent in 2012 based on a moderation of international food and fuel prices.
  - Modest gross foreign reserve accumulation, excluding government deposits, is expected to continue, though increased FDI-financed imports will reduce import cover.
- Risks and policy advice:
  - Principal downside risks: a downturn in commodity export prices and related FDI; a reduction of aid due to donor country austerity.
  - Staff advised considering means to mitigate volatility from commodity price fluctuations and stressed advantages of transitioning from a cash-based budget to a medium-term expenditure framework with mechanisms for expenditure smoothing, including a stabilization fund.

#### Poverty Reduction Strategy
- Authorities have begun consultations for a successor medium-term growth and development strategy (see Appendix III).
- The exercise is within the national visioning Liberia Rising–2030 with prime objective “to become a middle-income country by 2030 characterized by sustainable and inclusive economic growth with improved quality of life for each citizen”.
- It will be informed by the report on implementation of PRS1 currently in preparation.

#### Fiscal Policies
- FY2012 budget design and contingent resources:
  - Authorities considered potential revenue and grants amounting to 4½ percent of GDP to be contingent on specific actions or decisions.
  - The FY2012 budget is divided into core and contingent components: the core budget consists only of expenditure funded by secure revenue and financing; contingent revenue will fund mapped, mainly non-recurrent, quick disbursing expenditure items released on receipt of corresponding revenue.
  - Staff saw merit but warned that a large contingent budget could create unrealistic expenditure expectations and administrative complexity; suggested allocating revenue over-performance through supplementary budgets or saving it.
- Fiscal program framing:
  - The fiscal program is defined as the core budget plus expenditure financed through World Bank lending.
  - The program remains anchored by the authorities’ debt management strategy: with external borrowing substantially below the maximum level consistent with long-run debt sustainability (3 percent of GDP in net present value terms).
  - Financing is currently limited to highly concessional World Bank lending, with revenues and grants broadly unchanged from FY2011.
- Tax and revenue outlook:
  - Tax policy changes and one-off factors will reduce tax revenue significantly in FY2012, with offsetting increases mostly in non-tax revenue and grants.
  - Tax reductions include: full-year effect of cuts in income tax rates; fall in one-time withholding tax receipts; trade tax declines from adoption of GATT valuation and tariff reductions towards the ECOWAS common external tariff; waiver of fuel import duties for health and education institutions.
  - Offsetting increases: iron-ore payments including royalties, increased excises, higher sales tax on cell-phone usage, and additional commodity grants.
- Expenditure priorities:
  - Expenditure concentrated in health, education, and infrastructure.
  - Health and education are budgeted to amount to 25 percent of core spending (actual health and education spending is an indicative target under the ECF).
  - Budget-funded project spending concentrated on a few large priority projects—mainly in the port, electricity, and road sectors.
  - Central government wage bill set to increase by 16 percent due to a rise in the minimum wage and adoption of a new salary structure reducing the number of grades from 15 to 10.
  - Going forward, wage growth will need to be addressed given low civil service salaries and challenging excess staffing issues.
- Revenue code reform:
  - Extensive amendments to the Liberia Revenue Code were published—and entered into force—in November 2011 (prior action for the seventh review). The amendments cover most major taxes and support medium-term fiscal sustainability.

- Liberia: Outturn FY2011 and Budget FY2012 (Percent of GDP)
  - 2010/11 Actual; 2011/12 Program (Includes core budget plus World Bank lending and associated expenditure)
  - Total revenue and grants: 35.0; 35.1
  - Total revenue: 31.2; 30.4
  - Tax revenue: 25.1; 21.3
  - Trade: 9.8; 8.1
  - Income: 10.4; 8.0
  - Withholding on equity sales: 1.4; 1.1
  - Other: 4.9; 5.2
  - Non-tax revenue: 6.1; 9.1
  - Grants: 3.8; 4.7
  - Total Expenditure: 35.7; 36.5
  - Current expenditure: 28.9; 27.2
  - Capital expenditure: 6.9; 5.2
  - Unallocated expenditure: 0.0; 4.1
  - Overall balance: -0.7; -1.4
  - Financing: 0.7; 1.4
  - Foreign financing (net): 0.4; 1.0
  - Gross borrowing: 0.9; 1.4
  - Domestic Financing (net): 0.4; 0.4

#### Monetary and Financial Policies
- Financial deepening and monetization:
  - Monetization is steadily increasing.
  - Commercial bank deposits have increased at annual rate of over 30 percent while credit to the private sector is also growing rapidly.
  - Foreign exchange reserve accumulation has been in line with program objectives; the CBL uses foreign exchange auctions to limit excess volatility in the exchange rate.
  - Authorities are considering issuance of CBL notes to enhance central bank policy toolkit as the FY2012 budget does not envisage issuance of treasury bills.
- Credit risk and supervision:
  - Non-performing loans (NPLs) to total gross loans have declined but remain high, including in a regional perspective.
  - Some credit risk is mitigated by high liquidity in the banking system and limited channels for contagion given absence of interbank lending.
  - One of the largest banks brought in new capital from a parent bank to meet capital requirements and write off bad loans.
  - Authorities consider adequate measures taken: CBL advising banks on risk management; all banks compliant with capital and provisioning requirements at end-August 2011; on-site risk-based supervision is advancing.
  - Staff noted that if the economic situation deteriorates causing increased bad debt, higher provisioning, and erosion of bank capital, confidence could weaken and further bank recapitalization may be needed.

*Appendix I comprises the authorities’ Letter of Intent, Supplementary Memorandum of Economic and Financial Policies, and the Technical Memorandum of Understanding.*

### Box 1. Banking System Indicators in a Regional Perspective

### Box 1. Banking System Indicators in a Regional Perspective

### Banking sector structure and performance
- Most banks in Liberia are foreign-owned branches or subsidiaries of transnational African banks.
- Liberia shares regional characteristics: a weak credit environment with elevated non-performing loans, limited financial intermediation relative to GDP, and a comfortable regulatory capital to risk-weighted asset ratio (CAR).
- Returns are particularly low in Liberia:
  - More than half of banks’ revenue is from non-interest income.
  - Charts in the source show return on assets and return on equity for 2007–2010 with Liberia underperforming regional peers (Ghana, Nigeria, Sierra Leone), but no additional numeric values are provided in the text.

### Profitability pressures and lending conditions
- Commercial bank profits are being squeezed by:
  - Relatively narrow lending margins—partly due to moral suasion by the authorities to keep rates low.
  - Lack of profitable investment instruments.
  - A difficult credit environment.
- Authorities prioritize keeping interest rates low for under-served small and medium-sized enterprises (SME) and are exploring ways to improve SME access to credit.

### Supervisory, legal, and risk management reforms
- Banks’ lending practices, risk management, and loan collection need strengthening.
- The Central Bank of Liberia (CBL) actions:
  - Implementing risk-based supervision with more frequent surveillance and on-site credit examinations (MEFP ¶12).
  - Requiring banks to tighten risk management practices.
- Legal and judicial improvements:
  - A new Commercial Code is in force.
  - A fast-track commercial court is set to begin operations to improve loan collection and asset recovery.

### Financial intermediation developments and initiatives
- Mobile banking and sector diversification:
  - Mobile banking services in local currency were launched in September 2011 by a large commercial bank in partnership with a cell-phone operator.
  - Mobile banking is expected to expand public access to banking services and provide a future new source of income for banks.
- Non-bank finance and capital market development:
  - The CBL is developing a regulatory framework for non-bank financial institutions.
  - A roadmap for capital market development is being designed, set to be completed by early 2012 (MEFP ¶17).
- SME collateralized lending scheme:
  - A CBL-backed collateralized lending scheme to SMEs (at below-market rates) has lent more than half of the US$5 million allocated to the initiative as of end-August.

### Safeguards and institutional arrangements
- A safeguards assessment update (mid-2011) found that the safeguards framework has been strengthened.
- The assessment noted that rights and obligations relating to Liberia’s transactions with the IMF, including the obligation for servicing repayments under the ECF, should be clarified and formalized in a memorandum of understanding between the CBL and the Ministry of Finance. The authorities agreed action was needed.

### Policy considerations and staff appraisal (implications for stability)
- Staff observations and advice:
  - While some financial stability indicators have improved, low banking sector profitability creates vulnerability, particularly if downside risks materialize.
  - The policy of moral suasion by the Central Bank to keep lending rates low may need to be reconsidered in light of profitability and stability concerns.
  - Staff will monitor uptake of mobile banking as a potential income source and means to expand access to services.
- Broader macro and fiscal context influencing the banking sector:
  - With resource revenues expected to rise substantially over the medium term, staff advised mitigation of commodity price volatility through an early transition to medium-term budgeting and adoption of stabilization mechanisms.
  - The current rate of increase in the wage bill is not sustainable and needs to be slowed over time.
  - The FY2012 budget uses a large contingent budget to address revenue uncertainty; coverage of the budget needs to be expanded to include all projects financed by external borrowing.

*Source: IMF staff estimates; World Bank; national authorities; IMF staff appraisal and MEFP references as cited in the source document.*

### 32.      Staff supports the completion of the seventh program review, taking into account

### 32.      Staff supports the completion of the seventh program review, taking into account the authorities’ record of good progress in economic management in a volatile external environment alongside significant efforts at capacity building.

### Program review recommendation and authorities' request
- Staff supports completion of the seventh program review under the Extended Credit Facility (ECF).
- Authorities request completion of the seventh review and approval of the eighth disbursement of SDR 4.44 million.
- Letter dated Monrovia, November 15, 2011 from authorities requests completion based on program performance and envisaged policy.

### Recent economic developments (key indicators and trends)
- Real GDP growth rates (annual percentage change): 4.6 (2009 Prel.), 5.5 (2010), 6.8 (2011 6th Rev), 6.9 (2011 Proj.), 9.6 (2012), 9.5 (2013), 7.2 (2014).
- Nominal GDP (millions of US dollars): 879.3 (2009), 987.3 (2010), 1,153.9 (2011 6th Rev), 1,155.3 (2011 Proj.), 1,353.0 (2012), 1,373.0 (2013), 1,527.1 (2014).
- Consumer prices (average): 7.4 (2009), 7.3 (2010), 8.1 (2011 6th Rev), 7.4 (2011 Proj.), 5.8 (2012), 3.1 (2013), 4.2 (2014).
- Consumer prices (end of period): 9.7 (2009), 6.6 (2010), 6.1 (2011 6th Rev), 6.1 (2011 Proj.), 5.4 (2012), 1.6 (2013), 4.7 (2014).
- GDP deflator (US dollars): -1.2 (2009), 6.4 (2010), 9.2 (2011 6th Rev), 9.5 (2011 Proj.), 7.0 (2012), 8.5 (2013), 3.7 (2014).
- Exports, f.o.b. (annual percentage change): -39.7 (2009), 40.3 (2010), 41.3 (2011 6th Rev), 56.6 (2011 Proj.), 86.2 (2012), 83.9 (2013), 38.2 (2014).
- Imports, f.o.b. (annual percentage change): -19.0 (2009), 17.4 (2010), 38.5 (2011 6th Rev), 37.8 (2011 Proj.), 41.9 (2012), 41.9 (2013), 5.1 (2014).
- Terms of trade (deterioration -): -9.3 (2009), 77.0 (2010), 9.7 (2011 6th Rev), 20.7 (2011 Proj.), 0.2 (2012), 0.4 (2013), 0.3 (2014).
- Average exchange rate (local currency per U.S. dollar): 68.3 (2009), 71.4 (2010). (Further years not provided.)

### Fiscal position and outlook (cash basis, percent of GDP and levels)
- Total revenue and grants (percent of GDP): 27.2 (FY2009), 30.9 (FY2010), 34.5 (FY2011 6th Rev), 35.0 (FY2011 Proj.), 29.0 (FY2012), 35.1 (FY2013), 31.7 (FY2014).
- Total revenue (percent of GDP): 24.4 (FY2009), 29.5 (FY2010), 31.0 (FY2011 6th Rev), 31.2 (FY2011 Proj.), 25.9 (FY2012), 30.4 (FY2013), 27.4 (FY2014).
- Total expenditure and net lending (percent of GDP): 28.8 (FY2009), 30.2 (FY2010), 33.2 (FY2011 6th Rev), 35.7 (FY2011 Proj.), 30.1 (FY2012), 36.5 (FY2013), 33.8 (FY2014).
- Current expenditure (percent of GDP): 24.9 (FY2009), 26.8 (FY2010), 28.1 (FY2011 6th Rev), 28.9 (FY2011 Proj.), 24.6 (FY2012), 27.2 (FY2013), 25.5 (FY2014).
- Capital expenditure (percent of GDP): 3.9 (FY2009), 3.4 (FY2010), 5.1 (FY2011 6th Rev), 6.9 (FY2011 Proj.), 5.4 (FY2012), 5.2 (FY2013), 8.3 (FY2014).
- Overall fiscal balance (including grants, percent of GDP): -1.6 (FY2009), 0.6 (FY2010), 1.3 (FY2011 6th Rev), -0.7 (FY2011 Proj.), -1.1 (FY2012), -1.4 (FY2013), -2.1 (FY2014).
- Overall fiscal balance (excluding grants, percent of GDP): -4.4 (FY2009), -0.8 (FY2010), -2.2 (FY2011 6th Rev), -4.5 (FY2011 Proj.), -4.2 (FY2012), -6.1 (FY2013), -6.4 (FY2014).
- Fiscal year nominal GDP (millions of US dollars): 865.0 (FY2009), 933.3 (FY2010), 1,071.5 (FY2011 6th Rev), 1,071.3 (FY2011 Proj.), 1,253.4 (FY2012), 1,264.2 (FY2013), 1,450.1 (FY2014).
- Iron ore-related revenues (millions): 0.0 (FY2009), 29.9 (FY2010), 38.6 (FY2011 6th Rev), 32.0 (FY2011 Proj.), 36.8 (FY2012), 44.8 (FY2013), 51.4 (FY2014).
- Total public external debt (millions of US dollars): 191 (percent of GDP) listed as 191.0 (FY2009) and in later tables values shown as 370.3, 180.0, 10.5, 10.7, 11.2, 11.2, 11.9 depending on table context (see source tables).

### Monetary and financial developments
- Broad money (M2) annual change: 24.1 (2009), 33.5 (2010), 15.2 (2011 6th Rev), 15.5 (2011 Proj.), 16.5 (2012), 17.8 (2013), 11.3 (2014).
- Reserve money (annual change): 2.1 (2009), 32.0 (2010), 7.2 (2011 6th Rev), 7.2 (2011 Proj.), 13.4 (2012), 13.4 (2013), 11.8 (2014).
- Broad money (M2) levels (millions of US$): 322.4 (2010), 430.6 (2011), 496.0 (2012 6th Rev), 497.3 (2012 Proj.), 578.0 (2013), 585.8 (2014), 652.2 (2015).
- Gross official reserves (millions of US dollars): 312.2 (CBL gross official reserves in one table), 391.4 (2010), 375.0 (2011 6th Rev), 377.3 (2011 Proj.), 390.4 (2012), 389.6 (2013), 397.7 (2014).
- Import coverage of reserves excluding UNMIL imports (months): 3.2 (2009), 3.4 (2010), 2.7 (2011 6th Rev), 2.7 (2011 Proj.), 2.1 (2012), 2.1 (2013), 2.1 (2014).
- Private sector credit (12 months percent change): series show brisk growth; specific figures include Credit to private sector (annual change) 31.5 (2009), 40.1 (2010), 16.1 (2011 6th Rev), 16.1 (2011 Proj.), 16.5 (2012), 17.3 (2013), 18.8 (2014), 11.2 (2015 in some tables).
- Nonperforming loans to total loans declined but remain high (no single numeric series isolated beyond charts).
- Banks remain well-capitalized and highly liquid despite low profitability (charts indicate Liquid Assets to Net Assets, Net Loans to Deposits, Regulatory Capital Adequacy Ratio with upward liquidity and adequate capital).

### Balance of payments and external financing
- Current account balance (including official grants, percent of GDP): -38.3 (2009), -43.6 (2010), -37.8 (2011 6th Rev), -39.4 (2011 Proj.), -62.9 (2012), -58.1 (2013), -58.7 (2014).
- Current account balance (excluding official grants, percent of GDP): -142.9 (2009), -142.6 (2010), -121.6 (2011 6th Rev), -123.1 (2011 Proj.), -127.8 (2012), -122.0 (2013), -110.2 (2014).
- Trade balance (percent of GDP): -47.9 (2009), -46.5 (2010), -54.6 (2011 6th Rev), -51.2 (2011 Proj.), -56.0 (2012), -50.8 (2013), -34.6 (2014).
- Exports, f.o.b. (percent of GDP): 17.4 (2009), 21.8 (2010), 26.4 (2011 6th Rev), 29.2 (2011 Proj.), 41.9 (2012), 45.2 (2013), 56.1 (2014).
- Imports, f.o.b. (percent of GDP): -65.3 (2009), -68.3 (2010), -80.9 (2011 6th Rev), -80.4 (2011 Proj.), -97.9 (2012), -96.0 (2013), -90.7 (2014).
- Current transfers and donor transfers (net, millions and percent of GDP): Donor transfers (net, percent of GDP) 104.6 (2009), 99.0 (2010), 83.8 (2011 6th Rev), 83.8 (2011 Proj.), 64.9 (2012), 63.8 (2013), 51.5 (2014).
- Balance of payments: Change in gross official reserves (increase -) -183 (2009), -79 (2010), -24 (2011 6th Rev), -24 (2011 Proj.), -17 (2012), -17 (2013), -10 (2014) (millions of US$).
- Table 8: Total financing requirement (US$ millions): -4,754 (2010 Est.), -1,450 (2011), -1,697 (2012), -1,700 (2013), -1,351 (2014), -649 (2015).
- Table 8: Total available financing (US$ millions): 3,047 (2010 Est.), 1,436 (2011), 1,690 (2012), 1,700 (2013), 1,351 (2014), 649 (2015).
- Exceptional financing (US$ millions): 1,707 (2010 Est.), 147 (2011), 0 (2012 onward).

### Fund financing, disbursements, and repayment schedule
- Total ECF/EFF arrangements: SDR 550.03 million (ECF: SDR 207.26 million; EFF: SDR 342.77 million).
- Schedule of ECF disbursements includes ECF: SDR 7.00 million (December 29, 2008), ECF: SDR 7.00 million (May 14, 2009), ECF: SDR 4.44 million (December 21, 2009), ECF: SDR 4.44 million (July 2, 2010), ECF: SDR 4.44 million (December 22, 2010), ECF: SDR 4.44 million (June 27, 2011 — sixth review), ECF: SDR 4.44 million (November 11, 2011 — seventh review), ECF: SDR 4.44 million (March 15, 2012 — eighth review).
- Table 6: Prospective drawings ECF: 8.80 (2011), 4.40 (2012), - (subsequent years blank).
- Projected debt service to the Fund (Millions of SDRs): 0.10 (2012), 1.10 (2013), 4.20 (2014), 6.79 (2015), 9.54 (2016), 12.75 (2017), 15.68 (2018), 13.05 (2019), 12.45 (2020), 11.67 (2021), 10.44 (2022).  
- Fund credit outstanding (in percent of GDP, table): 37.6 (2011), 42.0 (2012), 42.0 (2013), 39.9 (2014), 36.2 (2015), 30.8 (2016), 23.1 (2017), 13.5 (2018), 7.4 (2019), 3.0 (2020), 0.3 (2021), 0 (2022).
- Projection assumption: Effective on January 7, 2010 interest on ECF credit outstanding would be zero in 2010 and 2011; assumed ECF interest rate at 0.25% from 2012 onward.

### Policy commitments and program monitoring
- Authorities affirm policies adequate to achieve program objectives and commit to take further measures if appropriate.
- Authorities will continue consultations with Fund staff and provide information necessary to monitor program implementation.
- Authorities consent to publication of the letter, the accompanying memorandum of policies, and the related staff report for the Seventh Review under the ECF arrangement.

_Source: Liberian authorities; and IMF staff estimates and projections (excerpted tables, charts, and letters in the supplied content)._

### 1.      Recent economic developments are broadly encouraging. Growth in 2011 is

### _cr11345 - 1.      Recent economic developments are broadly encouraging. Growth in 2011 is

### Recent economic developments
- Growth in 2011 is accelerating, supported by the resumption of iron-ore production, and increased production in the rubber and forestry sectors; and exports are up sharply.
- Foreign investment commitments remain strong, the terms of trade are improving and gross official reserves have remained stable at about 2¾ months of import coverage.
- Inflation is above previous projections due primarily to higher-than-expected food prices.

### Financial sector developments
- The financial sector continues to expand rapidly with improving financial soundness indicators.
- Broad money and commercial bank deposits expanded by nearly one third over the 12 months to June 2011.
- Growth of credit to the private sector was strong.
- A recent episode of deterioration in banking system credit quality was addressed by capital infusions that strengthened bank balance sheets, allowing nonperforming loans (NPLs) to be written off alongside other measures to improve the credit environment.

### Fiscal outturn FY2011
- The overall budgetary position at end-year was close to balance with debt service and domestic arrears repayments financed by the use of government deposits.
- Total revenue and grants exceeded estimates by about half a percentage point of GDP, and represented a 4 percentage point of GDP increase over FY2010.
- Tax revenue rose nearly 3 percentage points of GDP above its FY2010 outturn.
- The related increase in expenditure was on social and other priority spending, and on capital spending which doubled relative to FY2010 (year ending June 2010). Domestically executed infrastructure projects exceeded 2 percent of GDP.
- The expansion in capital spending largely reflects efforts in the latter half of FY2011 to expand project implementation capacity.

### Program performance and structural benchmarks
- All quantitative performance criteria and indicative targets under the program through end-June 2011 were met.
- Progress is ongoing on all five remaining structural benchmarks for the seventh and eighth reviews of the Extended Credit Facility (ECF).
- Two out of three structural benchmarks for the seventh review were fully or largely met: ASYCUDA is in place at Roberts International Airport, and the integrated financial management information system (IFMIS) has been launched.
- Many state owned enterprises (SOE) are not yet capable of reporting regular financial statements; measures to accelerate progress are being taken.

### Administrative, legal, and systems reforms
- Amendments to the Liberia Revenue Code (LRC) were passed into law in advance of the seventh ECF review Board meeting; the amended LRC:
  - centralizes all revenue legislation,
  - provides standard terms for mining taxation,
  - enhances taxpayer protection,
  - reduces administrative discretion in the granting of tax incentives.
- A comprehensive public financial management (PFM) reform strategy and Medium-Term Action Plan submitted for cabinet approval.
- The integrated tax administration system (ITAS) has been launched.
- FY2011 fiscal accounts were prepared according to the international public sector accounting standards (IPSAS).
- Draft payment system legislation prepared and the Central Bank of Liberia (CBL) established a payment system department.
- The Commercial Code has been published and a fast-track commercial court is operational.
- The Central Bank of Liberia issued guidelines on mobile banking and services have begun.

### Poverty Reduction Strategy (PRS)
- PRS implementation advanced: social and other priority spending exceeded the PRS target of 65 percent of total spending in FY2011.
- The 2010/11 PRS implementation report is close to finalization.
- Preparations have begun for a successor to the PRS, the Liberia Economic Growth Strategy, beginning 2012, aiming at middle-income status by 2030.
- Stakeholder discussions in September 2011 focused on fostering broad-based, labor-intensive economic growth in an environment historically dominated by enclave commodity production.

### Macroeconomic outlook and risks
- The outlook for 2012 is broadly positive though vulnerable to adverse global economic developments.
- Expected boosts to growth and exports from iron ore, rubber and timber.
- Inflation will moderate if international food and fuel prices decline as expected.
- Risks center on a potential slowdown in global economic growth affecting commodity exports, particularly iron and rubber.

### Fiscal policies and FY2012 budget
- Approved FY2012 budget anticipates an overall deficit of about 1½ percent of GDP, financed by a drawdown of government deposits and concessional donor financing.
- FY2012 fiscal program revenues and grants are expected to be broadly unchanged as a percent of GDP compared to the FY2011 outturn.
- The fiscal program is based on a core budget funded by secure revenue and grants, matched by an equal amount of core expenditure.
- The fiscal program excludes 4½ percent of GDP of contingent revenue and grants and corresponding contingent expenditures.
- Core spending priorities: health, education, and infrastructure investment.
- The wage bill rises by 16 percent mainly due to an increase in the minimum wage and re-grading.
- The core project budget is US$21 million focused on the power, ports, and transportation sectors.
- Tax policy changes in the FY2012 budget remain as described in the June 2011 Memorandum of Economic and Financial Policies.

### Contingent budget and revenue management
- A contingent budget prepared to accommodate expenditures financed with potential additional revenues (agriculture concession payments, oil sector-related payments, monetization of commodity grants, dividends from SOEs).
- Contingent revenues will be mapped to corresponding contingent expenditures, mainly non-recurrent and quick disbursing items.
- Provided core revenue is on track, contingent funds will be released when a critical mass of contingent revenue is accumulated; recipient spending units will prepare separate cash and procurement plans.

### State-owned enterprise (SOE) reforms
- An inter-ministerial SOE Reform Working Group established; reviewed legislation, proposed revised classification of enterprises, and investigated governance framework.
- All SOEs are required to begin reporting financial statements to the Ministry of Finance as required under the PFM law.
- To date, eight SOE have supplied annual statements for 2010.
- Enterprise managing directors are responsible for filing annual financial reports by December 2011 and to begin reporting on a quarterly basis by March 2012.
- Compliance with reporting requirements under the PFM act would be a precondition for authorizing a SOE to contract foreign or domestic debt (as stipulated in the borrowing guidelines approved by the Debt Management Committee).

### Consolidation of fiscal administrative reforms
- Revisions to the LRC significantly reduce administrative discretion for granting investment tax incentives; technical assistance from the Fund requested to review the investment incentive regime.
- Financial and technical assistance identified to support establishing a small specialized resource tax division in the Large Taxpayer Directorate (structural benchmark, eighth review).
- ASYCUDA to be extended to the remaining 14 major customs ports by December 2013.
- ITAS expected to be fully functional in the large taxpayer unit by June 2012.
- Since July 2011, IFMIS used by the Ministry of Finance to process transactions and produce financial and budget performance reports; IFMIS expected to be connected to the central bank and other users by end-January 2012.
- External audits of consolidated government accounts for FY2009 and FY2010 expected to be submitted to the Legislature in early November 2011; FY2011 accounts prepared for submission to the General Auditing Commission by end-October 2011.

### Monetary and financial policies
- The CBL will maintain its strategic focus on price stability.
- The exchange rate has remained broadly stable, helped by foreign exchange interventions in the weekly auctions.
- The CBL’s liquidity management toolkit will expand with planned introduction of Treasury bills and CBL notes.
- End-2011 projections for broad money and net domestic assets are broadly unchanged.
- The net foreign exchange position is expected to remain comfortable.

### Measures to strengthen the credit environment and supervision
- CBL measures to improve credit information and dissemination through enhancements to its credit reference system; require banks to strengthen risk management capacity; establish a collateral registry with technical assistance; and get the Commercial Court properly functioning.
- NPLs declined following a write off of bad loans and capital injections; at end-August 2011 all commercial banks met the regulatory Capital Adequacy Ratio (CAR), and NPLs were fully provisioned.
- CBL supervisory capacity being strengthened with adoption of risk-based supervision; five pilot on-site examinations completed and three remaining banks scheduled to be completed by end-2011.
- Joint examinations with the Central Bank of Nigeria improving understanding and assessment of cross-border linkages.

### Financial sector development and CBL safeguards
- Road map towards capital market development (structural benchmark, eighth review) under preparation.
- Improvements to non-bank financial institutions regulatory and supervisory framework, an insurance sector action plan, revised guidelines for foreign exchange operators, and establishment of a consumer protection unit underway.
- The 2011 Safeguards Assessment update of the CBL found strengthened safeguards in place, including IFRS, independent external audits, and effective oversight of audit and control matters by the Board and its audit committee.
- The CBL will continue to enhance safeguards for cash operations and reserve management.

### Debt management and external policy progress
- Debt restructuring negotiations with remaining creditors have continued.
- All Paris Club bilateral agreements have been signed.
- Following agreement with Kuwait, efforts continue to reach agreements with BADEA, Saudi Arabia and ECOWAS.
- No progress has been registered with Taiwan, Province of China.
- Debt Management Committee (DMC) guidelines for SOE borrowing and government guarantees will be published shortly.
- Procedures developed to promote effective selection of projects and related financing instruments and to strengthen collaboration among the Ministry of Finance, the Ministry of Planning and Economic Affairs and the DMC.

### Trade policy and WTO accession
- Progress towards WTO accession and adoption of the ECOWAS tariff system.
- A memorandum on the foreign trade regime provided to the WTO working group on Liberia’s accession.
- A dedicated unit responsible for WTO accession established in the Ministry of Commerce.
- Approved changes to the Customs Code to adopt the harmonized coding system of the World Customs Organization to accelerate convergence towards the ECOWAS tariff system.

### Quantitative performance criteria and indicative targets (high-level results reported)
- Floor on total revenue collection of the central government: Program and actual outcomes reported (examples: Dec. 11 Program 210.6; Dec. 11 Actual 197.6; Mar. 12 Program 248.1; Mar. 12 Actual 327.1; Jun. 12 Program 314.9; Jun. 12 Actual 334.6).
- Ceiling on gross borrowing by the public sector in foreign currency: Program 46.0 (multiple period targets and projections).
- Ceiling on new domestic borrowing of the central government: Program 7.5 (Dec. target), 10.0 (Mar. target), 12.5 (Jun. target); Actual outcomes 0.0 for reporting periods.
- Floor on CBL’s net foreign exchange position: Program and actual outcomes reported (examples: Dec. 11 Program 267.0; Dec. 11 Actual 257.1; Mar. 12 Program 299.6; Mar. 12 Actual 276.5; Jun. 12 Program 310.6; Jun. 12 Actual 279.0).
- Indicative targets on net domestic assets of the CBL reported (examples: Dec. 11 Program -82.9; Dec. 11 Actual -73.0; Mar. 12 Program -87.3; Mar. 12 Actual -77.6; Jun. 12 Program -68.7; Jun. 12 Actual -68.7).
- Floor on social and other priority spending (percent of total revenue and grants collected): FY2011 target 65.0; outcome 69.6 (Met).
- Memorandum item: Programmed receipt of one-time signing bonuses and Social Development Fund contributions from new iron ore projects: examples reported (37.4, 24.4, 42.5, 30.3, 22.7, 26.0, 53.8).
- Memorandum item: Programmed receipt of external budget support and ratified concession payments: examples reported (54.4, 44.5, 92.6, 72.8, 51.1, 72.3, 100.1).

### Structural benchmarks (status highlights)
- Publication of validated national accounts data for 2008 by LISGIS (Benchmark, February 2011): Not met.
- Publication of the revised Liberian Revenue Code 2011 (Prior action, Seventh Review): Met. November 14, 2011.
- Extend ASYCUDA to Monrovia oil terminal and international airport (Benchmark, Seventh Review): Met. ASYCUDA in place at the oil terminal in 2010 and airport at September 2011.
- Regular quarterly reporting of SOE financial operations to Ministry of Finance (Benchmark, Seventh Review): Not met; poor compliance by SOEs; corrective measures identified.
- Launch pilot phase of IFMIS linking Ministry of Finance, Civil Service Agency, Central Bank and GAC (Benchmark, Seventh Review): Delayed. Launched in Ministry of Finance; links to other agencies to be completed by end-January 2012.
- Create a small mining tax assessment team in the Large Taxpayer Unit (Benchmark, Eighth Review): Ongoing. Technical assistance identified.
- Development by the CBL of a road map and interim regulations for capital market development (Benchmark, Eighth Review): Ongoing. Technical assistance identified.

*Source: _cr11345 - 1.      Recent economic developments are broadly encouraging. Growth in 2011 is*

### 1.      For the purposes of the program, the Government is defined as the central

### _cr11345 - 1.      For the purposes of the program, the Government is defined as the central

### Definitions of Government and Public Sector
- Government (GoL) is defined as the central Government of Liberia (GoL).  
- Definition excludes legally autonomous state-owned enterprises whose budgets are not included in the central government budget.  
- Public sector comprises:
  - the central government,
  - the Central Bank of Liberia (CBL),
  - public enterprises (enterprises and agencies in which the government holds a controlling stake—typically owns more than 50 percent of the shares, but which are not consolidated in the budget),
  - and other official sector entities.  
- Central government operations are presented in U.S. dollars with revenues and expenditures denominated in Liberian dollars converted at the end of period exchange rate.

### Revenue Measurement and GoL Accounts
- Total revenue collection includes all tax and nontax receipts transferred into the U.S. dollar GoL accounts at the CBL, including income and transfers from state-owned enterprises and public institutions (excluding external loans and grants).  
- GoL accounts at the CBL include:
  - the GoL General Account No. 2,
  - the GoL Special Rice Fund,
  - and the Liberian dollar account at the CBL comprising the GoL General Account.  
- Any new accounts opened by the GoL at the CBL or at any other local financial agency shall be reported to the IMF.  
- For program purposes, revenues of the GoL are measured on the basis of cash deposits in the four accounts specified above converted to U.S. dollars using the end of period exchange rate.

### Program Floor Adjustments: Signing Bonuses and Social Development Fund Payments
- The program floor on total revenue collection will be adjusted downward to the extent that signing bonuses and payments into Social Development Funds from new iron-ore projects fall short of the program schedule, cumulative within the fiscal year.  
- Program Schedule for Cumulative Signing Bonuses and Social Development Fund Payments from New Iron-Ore Projects (In millions of U.S. dollars, cumulative from start of fiscal year) — Program path:
  - September 2011 0.0
  - December 2011 22.7
  - March 2012 26.0
  - June 2012 53.8

### FY2012 Education and Healthcare Spending (Core Budget)
- Education and healthcare spending is defined as total spending from the FY2012 budget of specified units (payment vouchers approved by the Ministry of Finance). Evaluated as a share of total budgeted expenditure, where total budget expenditure excludes contingency expenditure, off budget expenditure, and project expenditure financed by external borrowing.
- FY2012 Education and Healthcare Spending in the Core budget (Millions of US dollars):
  - Total Education and Health 112.6
  - Education 65.4
    - Ministry of Education 39.1
    - University of Liberia 11.8
    - Monrovia Consolidated School System (MCSS) 3.3
    - Lofa Community College 0.0
    - Nimba Community College 0.0
    - Booker Washington Institution (BWI) 1.9
    - Gbarnga Central High 0.0
    - Forestry Training Institution (FTI) 0.5
    - Cuttington University (CUC) 1.0
    - National Commission on Higher Education (NCHE) 1.6
    - W. V. S. Tubman Technical College (WVSTC) 3.4
    - West African Examination Council (WAEC) 2.1
    - Liberia Institute for Public Administration 0.7
  - Health 47.2
    - Ministry of Health and Welfare 36.2
    - JFK Medical Center (JFKMC) 6.9
    - Phebe Hospital 1.8
    - LIBR 0.7
    - Jackson F. Doe Medical Hospital 1.6

### Fiscal Balance Definitions
- Overall fiscal balance of the central government through end-June 2010:
  - difference between (a) revenue including grants and earmarked external loans; and (b) government current expenditure, plus capital expenditure plus payment of arrears, amortization, and payments to the domestic trust fund.
- From July 1, 2010 the overall fiscal balance of the central government:
  - difference between (a) total revenue including grants; and (b) total expenditure, excluding payment of arrears, amortization, and payments to the domestic trust fund on a commitment basis (payment vouchers approved by the Ministry of Finance).

### Definitions: Arrears, Noncash Payments, and Borrowing
- Noncash tax/duty payment: any noncash settlement of duty/tax obligations to the GoL through the exchange of goods or services.
- Gross borrowing by the public sector in foreign currency: cumulated new foreign currency claims by residents and non-residents from July 1, 2010 on the public sector excluding borrowing for reserve management purposes by the CBL.
- New domestic borrowing of the central government:
  - new claims on the central government since the start of the program in domestic and foreign currency,
  - measured by the change in the stock of all outstanding claims on the central government (loans, advances, and any government debt instruments, such as long-term government securities) by the banking system plus the net issuance of debt instruments by the GoL to the nonbank sector.
  - All claims in Liberian dollars will be converted to U.S. dollars at the end of period exchange rate for measurement.
- New domestic arrears/payables of the central government:
  - calculated as the difference between government payment commitments and the actual payments made on such commitments, providing for a processing period of no more than 15 days from the date of commitment.
  - Actual payments are defined as having taken place on the date of issuance of the checks by the Ministry of Finance.
  - Government payment commitments include all expenditure for which commitment vouchers have been approved by the Ministry of Finance, and expenditure that are automatically approved (wages and salaries, pensions, debt payments to the CBL and commercial banks, CBL bank charges, and transfers of ECOWAS levies into the ECOWAS account).
- Government commitment on external arrears:
  - The government undertakes not to incur payments arrears on external debt that it owes or guarantees, except arrears arising from government debt being renegotiated with creditors, including Paris Club creditors.
  - Arrears on external debt are defined as any unpaid obligation on the contractual due date; if a creditor grants a grace period after the contractual due date, arrears are incurred following the expiration of the grace period.

### External Debt and Concessionality
- Contracting or guaranteeing of new external debt by the public sector:
  - applies to borrowing with non-residents with original maturities of one year or more.
  - external debt definition includes commitments contracted or guaranteed for which value has not been received, in addition to the definition in Decision No. (79/140).
- Concessionality determination:
  - based on the commercial interest reference rates published by the OECD.
  - A debt is concessional if, on the date of signature, the ratio between the present value of debt computed on the basis of reference interest rates and the face value of the debt is less than 65 percent (equivalent to a grant element of at least 35 percent).
- Ceiling for contracting and guaranteeing non-concessional external debt by the public sector:
  - set at zero continuously throughout the program period except as agreed with Fund staff.
  - excludes short-term import-related credits, rescheduling arrangements, borrowing from the Fund.

### CBL Monetary Definitions and Measurement Conventions
- CBL gross credit to central government:
  - sum of claims on central government, including loans, advances, accounts receivable, and any government debt instrument as defined in the monetary survey template excluding CBL purchases of treasury bills in the secondary market and non-competitive purchases in the primary market.
  - Expressed in U.S. dollars.
  - Claims denominated in Liberian dollars are valued at a fixed rate of L$/US$72.00 as of September 30, 2009.
  - Other currencies are valued at cross-rates against the U.S. dollar as of September 30, 2009.
- Net foreign exchange position of the CBL:
  - difference between (a) the CBL’s gross foreign reserves including SDR holdings, as currently defined in the monthly monetary survey and (b) the sum of its gross foreign liquid liabilities and liquid liabilities denominated in U.S. dollars, as currently defined in the monthly monetary survey.
  - The net foreign exchange position floor at end-June 2011 and end-December 2011 is US$25 million below the projected net foreign exchange position.
  - In the event of delays to ECF disbursement, the floor will be adjusted down by the cumulative amount of financing relative to the programmed schedule of disbursements.
  - Net foreign exchange position presented in the U.S. dollar.
  - SDR holdings are valued at a fixed rate of the U.S. dollar against SDR, 1.5844 as of September 30, 2009.
  - Other currencies are valued at cross-rates against the U.S. dollar as of September 30, 2009.
- Net domestic assets of the CBL:
  - defined as base money minus the net foreign assets of the CBL converted into United States dollars at program exchange rates as defined in paragraph 14.
  - Base money = currency in circulation + reserve deposits of commercial banks at the CBL + sight deposits of commercial banks at the CBL + vault cash of commercial banks.
  - Net foreign assets of the CBL = foreign assets minus foreign liabilities of the CBL balance sheet.

### External Financing Adjustor
- Program ceilings for CBL gross credit to government and CBL net domestic assets will be adjusted upward and the program floor on the net foreign exchange position of the CBL will be adjusted downward by the amount of the difference between actual and programmed external budget support and ratified concession signature payments up to a maximum of US$20 million.
- The adjuster is calculated on a cumulative basis from the start of the financial year (July 1).
- Cumulative Program External Budget Support and Ratified Concession Signature Payments (In millions of U.S. dollars):
  - September 2011 0.0
  - December 2011 51.1
  - March 2011 72.3
  - June 2012 100.1

### Program Monitoring and Data Reporting Requirements
- Program–Monitoring Committee:
  - Liberian authorities shall maintain a program-monitoring committee composed of senior officials from the Ministry of Finance, the CBL, and other relevant agencies.
  - The IMF Resident Representative will have observer status.
  - Committee responsibilities: monitor program performance, recommend policy responses, inform the IMF regularly about program progress, and transmit supporting materials necessary for evaluation of benchmarks.
  - Committee shall provide the IMF with a progress report on the program on a monthly basis within four weeks of the end of each month, using the latest available data.
- Data reporting to the IMF (Ministry of Finance coordinates and regularly reports):
  - Detailed reports on monthly revenue and expenditure on both a cash and a commitment basis by budget line and a completed summary table on central government operations (monthly, within three weeks after the end of the month).
  - Outstanding appropriations, allotments and commitments, and disbursements for line ministries and agencies (monthly, within three weeks after the end of the month).
  - Disbursements of budget support grants and loans by donor (monthly, within three weeks after the end of the month).
  - Daily balances in the GoL accounts at the CBL: U.S. dollar GoL General Account No. 2; the GoL Special Rice Fund; and Liberian dollar accounts: the GoL/CBL Civil Servant Payroll Account No.2, and the GoL General Account. Any new accounts opened by the GoL at the CBL or at any other local financial agency shall be reported to the IMF also (daily, within three days from the date of the statement).
  - End-of-month balances of all operating and other accounts of the line ministries and agencies receiving budgetary appropriations (monthly within three weeks after the end of the month).
  - Table providing the end-of-period stock of domestic arrears accumulated and payments made on arrears during the program period, by budget category (monthly, within three weeks after the end of the month).
  - The amount of new domestic debt contracted or guaranteed by the public sector (monthly, within three weeks after the end of the month).
  - A report on monthly payments on domestic debt by category and the domestic debt stock (monthly, within three weeks after the end of the month).
  - A report on monthly payments on foreign currency debt by category and the domestic debt stock (monthly, within three weeks after the end of the month).
  - The amount of new external debt contracted or guaranteed by the public sector (monthly, within three weeks after the end of the month).
  - The balance sheet of the CBL in the monthly monetary survey (monthly, within three weeks after the end of the month).
  - The full monthly monetary survey of the monetary sector (monthly, within three weeks after the end of the month).
  - Detailed table of commercial banks loans and advances by sector (monthly, within three week of end of month).
  - Core set of financial soundness indicators by individual financial institution, including the overall profitability of the banking sector (quarterly, within three weeks after the end of the quarter).
  - CBL cash revenues and expenditures in U.S. dollar and Liberian dollar terms, on an aggregated basis (including both recurrent and capital expenditure), and CBL expenditures on a commitment basis (periodically in the context of program reviews).
  - Report on foreign exchange sales/purchases by the CBL through foreign exchange auctions held by the CBL (weekly), including U.S. dollars offered and sold, the auction rate, the number of accepted and rejected bids, the total value of bids and of rejected bids, foreign exchange auction sales to non-bank customers.
  - Regular sale of U.S. dollars by the Ministry of Finance to the CBL, including amount date, and rate of exchange (monthly, within three weeks after the end of the month).
  - Indicators of overall economic trends, including:
    - detailed tables of the monthly harmonized consumer price index (within three weeks after the end of the month);
    - daily foreign exchange rates (weekly);
    - export volumes and values by major commodity, import values by SITC, import volumes of rice (by commercial and non-commercial use) and petroleum products (monthly, within three weeks after the end of the month);
    - interest rates and commercial bank remittance inflows and outflows (monthly, within three weeks after the end of the month);
    - production data in value and volume (monthly, within six weeks after the end of the month).
  - Quarterly reports of state owned enterprise financial operations submitted to Ministry of Finance.
  - Report on the status of implementation of the structural performance criteria and benchmarks specified in Table 2 of the MEFP (monthly, within three weeks after the end of the month).
- Submission channels:
  - Data and reports to be provided in hard copies and electronically to the IMF Resident Representative to Liberia, with copies to the local IMF economist, Mr. Deline (adeline@imf.org) for further transfer to the African Department of the IMF in Washington, D.C.

*Source: _cr11345 - 1.      For the purposes of the program, the Government is defined as the central*

### APPENDIX II. LIBERIA: FISCAL TERMS OF IRON-ORE PROJECTS

### APPENDIX II. LIBERIA: FISCAL TERMS OF IRON-ORE PROJECTS

### Overview of the LRC-based fiscal regime
- Since 2009, the authorities have been increasingly successful in applying the standardized fiscal terms for mining concessions set out in the Liberian Revenue Code (LRC).
- These terms were developed with IMF assistance and are described as comparable to regional norms.
- The LRC terms are designed to balance short- and long-term revenue concerns while providing sufficient financial incentives to attract foreign investors.
- The fiscal regime in the LRC has been the basis of negotiation for four of the last five concessions.

### Comparative outcomes across projects
- Fiscal terms for the Bong mining project agreed in 2009 were less advantageous to the government than those for the 2006 Yekepa mine.
  - The 2006 terms were heavily influenced by poor global conditions at the time and reflected different geological conditions.
- With rising iron-ore prices, the authorities have been able to increase their share of value added from successive projects.

### Recent concessions and key fiscal features
- The terms of the last two concessions (Goe/ Kitoma/ St John River/ Toto and Western Cluster) are described as broadly equivalent to those stipulated in the LRC.
- For the first time, these recent concessions include a resource rent tax.

*Source: APPENDIX II. LIBERIA: FISCAL TERMS OF IRON-ORE PROJECTS (extracted from the provided document).*

### 11.    Article IV Consultation

### 11. Article IV Consultation

### Article IV mission
- The 2010 Article IV consultation discussions were held in Monrovia during September 21–October 1, 2010.
- The staff report (Country Report No. 10/373, December 2010) was discussed by the Executive Board on December 8, 2010 and is posted on the IMF website.

### Resident Representative
- A resident representative has been posted in Monrovia since April 2, 2006.
- Mr. Sobolev assumed the position in July 2009.

*Source: _cr11345 - 11.    Article IV Consultation*

### 21.      Economic Governance and Competitiveness Support Program: The African

### Economic Governance and Competitiveness Support Program: The African

### AfDB Economic Governance and Competitiveness Support Program
- AfDB approved a grant of US$ 48 million to finance the Economic Governance and Competitiveness Support Program.
- Program objectives:
  - Improve public financial management systems.
  - Strengthen tax and customs administration including transparency and accountability of revenue from the extractive industry.
  - Improve business enabling environment for private sector development.
- Expected fiscal effect: increase government’s fiscal space for pro-poor expenditure in line with the poverty reduction strategy.
- Program linkage: integral part of broader AfDB interventions on financial and economic governance; complemented by ongoing PFM capacity building project and additional support being considered to strengthen capacity in core state functions related to public financial management.

### WAMZ Payments System Development Project — Liberia inclusion
- AfDB approved a supplementary grant of UA 5.0 million to include Liberia in the West Africa Monetary Zone (WAMZ) Payments System Development Project.
- Project aim: improve basic infrastructure of the financial sector in the WAMZ region through upgrade of payments systems for The Gambia, Guinea, Sierra Leone, and Liberia.
- Rationale: Liberia acceded to WAMZ in February 2010; was not ready in 2008 due to post-conflict priorities.
- Project components:
  - Real Time Gross Settlement (RTGS) system—including Scrip-less Securities Settlement System (SSSS).
  - Retail Payments Automation (RPA): Automated Checks Processing (ACP); Automated Clearing House (ACH).
  - Central Banking Applications (CBA) system.
  - Telecommunication infrastructure; standby generators that operate satisfactorily.
  - Project Management.
- Expected outcomes: increased participation of private sector and private citizens in the formal financial sector and enhanced regional financial flows.
- Strategic fit: Pillar I of the Bank’s proposed Regional Integration Strategy for West Africa 2011–15.

### Institutional Support Project for Governance, Economic Management and Poverty Reduction (ISP)
- Approved October 2006 for an ADF grant of UA 3 million.
- Implementation status: overall satisfactory; disbursement ratio reached 90 percent by end September 2011.
- Initial results: enhanced organizational and human resources capacity of the Macro Fiscal Unit, Revenue (Tax and Customs), and Budget Departments.
- Project completion: completed by end September 2011.
- Follow-up: a second capacity building project to be prepared before the end of 2011 for Board presentation in the first quarter 2012.

### Liberia Statistical Capacity Building Program—Phase II (SCB II)
- LISGIS is the official National Statistical Agency.
- Bank commitment: USD 552,400 toward statistical capacity building in Liberia.
- Focus areas:
  - Price statistics, National accounts, design and implementation of the National Strategy for Development of Statistics (NSDS).
  - Social statistics including MDG monitoring, civil registration and vital statistics databases, infrastructure statistics.
  - Earmarked funds for gender statistics and cross-cutting areas: environment/climate change, and labour statistics.

### Monrovia Water and Sanitation Rehabilitation Project
- Financed by DFID and managed by AfDB at total cost of 3.06 million British Pounds.
- Project purpose: emergency water and sanitation facilities’ rehabilitation in Monrovia.
- Components:
  - Rehabilitation of the distribution system in central Monrovia area A.
  - Construction of the waste stabilization pond.
- Expected development outcomes:
  - Improved water supply distribution and sanitation systems to serve about 50,000 people.
  - (Original project aim noted) rehabilitate Monrovia Water system to 50 percent of its prewar capacity and deliver services to 700,000 people.
  - Improved awareness and attitudes on sanitation and hygiene practices.
  - Improved capacity of Liberia Water and Sewer Corporation (LWSC) to manage services.
- Implementation timeline and status:
  - Launched March 2008; substantially completed.
  - Training, O&M manuals, consumer enumeration, and maps completed in 2009.
  - Rehabilitation works substantially completed in March 2011.
  - Waste Stabilization Ponds construction completed in June 2011; works in defects liability period.
  - Completion Report preparation underway in September and October 2011.

### Liberia—Urban Water Supply and Sanitation Project (UWSSP)
- Approved May 19, 2010 for US$ 40.4 million.
- Complementary to Monrovia Rehabilitation Project; focuses on central Monrovia area “B”.
- Objectives:
  - Provide access to adequate, safe and reliable water supply and public sanitation services in Monrovia, Buchanan, Kakata and Zwedru on a sustainable basis.
  - Enhance institutional, operational, management capability, and long-term financial viability of LWSC.
- Project components:
  - Rehabilitation and augmentation of water treatment and distribution systems in Monrovia, Buchanan, Kakata and Zwedru.
  - Provision of public sanitation facilities.
  - Institutional support to LWSC and capacity development for sector staff.
  - Social Connection Revolving Fund.
  - Environmental and Sanitation Sensitization.
- Expected development outcomes:
  - Provide reliable and affordable water and sanitation services to 50 percent of the population in Monrovia, and 75 percent coverage in Buchanan, Kakata, and Zwedru totaling 691,700 people.
  - Social Connection Revolving Fund to enable access by the poor.
  - Improved project implementation by sector staff.
  - Improved management and operation and maintenance of facilities in the 4 towns.

### Water Sector Reform Study
- Approved January 13, 2009; funded for €2.5 million by the African Water Facility.
- Study objectives:
  - Foster improved governance and comprehensive long-term development of the water sector.
- Study components:
  - Development and implementation of water and sanitation sector Policy and Strategy, Institutional Reform, and Capacity Building.
  - Development of tools to support water sector planning.
  - Reinforce national capacities to undertake sector reform process.
- Expected development outcomes:
  - Improved policy and restructured institutions.
  - Improved implementation efficiency of WSS programs and projects.
  - Faster development and effective utilization of resources.
  - Improved capacity of the water sector to manage and develop water resources.
- Status:
  - Contract for consultants signed in 2010; launching Workshop June 2010; inception report presented August 2010.
  - Final report delayed and expected for February 2012.

### Emergency Assistance for Humanitarian Relief at the Liberia-Cote d’Ivoire Border
- Grant amount: US$ 630,000 for direct and immediate humanitarian response.
- Rationale: current emergency exceeds State capacity; Liberia still recovering from civil war; compounded by fuel and food crisis due to drought and poor weather patterns.
- Food security data point: Liberia’s domestic rice production estimated at about 150,000mt/year versus requirement of about 350,000mt.
- Market impact example: price of rice in Nimba County increased by 180 percent over the last three months as a direct consequence of demand-push by Ivorian refugees.

### Agriculture Sector Rehabilitation Project
- Approved April 29, 2009; launched March 24, 2010.
- Total project cost: UA 18.4 with Bank’s share of UA 12.5 million, co-financing from IFAD of UA 3.4 million; balance financed in kind by the Government of Liberia.
- Geographic coverage: targets eight (4) of the fifteen counties; Bank financing targets four south eastern counties: Grand Kru, Grand Gedeh, Maryland and River Gee. IFAD targets four western counties: Bomi, Grand Bassa, Grand Cape Mount and Montserrado.
- Objectives:
  - Contribute to food security and poverty reduction.
  - Increase income of smallholder farmers and rural entrepreneurs including women on a sustainable basis.
- Components:
  - Agriculture Infrastructure Rehabilitation (constituting 60 percent of the cost).
  - Agricultural Production and Productivity Improvement.
  - Project Management.
- Implementation note: first development intervention implemented directly by the Ministry of Agriculture.
- Complementarity: complements Bank-supported Labour-Based Public Works Program (OSHD) and other donor operations implemented by FAO, WFP, NGOs.

### Labour-Based Public Works Project (LBPWP)
- Funded by an ADF grant of UA15.24 million approved December 18, 2007; Grant Agreement signed February 29, 2008.
- First disbursement: May 2009. Last disbursement date: December 31, 2013.
- Sector goal: improve productive livelihoods and service delivery.
- Specific objective: rehabilitate socio-economic infrastructure and improve capacities for infrastructure maintenance.
- Components:
  - Rehabilitation of Socio-Economic Infrastructure.
  - Capacity Development for Infrastructure Maintenance.
  - Project Management.
- Supplementary financing:
  - Need identified during 2010 supervision for additional costs due to improved designs.
  - Supplementary grant of UA5.00 million from the Fragile States Facility (FSF) processed and approved June 29, 2011; signature took place August 10, 2011.

### Liberia Bank for Development and Investment (LBDI) financing and equity actions
- Proposed ADB credit facility: up to USD 5 million in the form of a subordinated debt to provide long-term financing to SMEs, services, construction, agribusiness and light manufacturing.
- LBDI fundraising program:
  - Planned share offering of 500,000 new common stocks of USD 20 each.
  - Book value per share: USD 17.23 as per Audited Statement at December 31, 2008.
  - Shares offered at a 16.08 percent premium to book value.
  - If fully subscribed, share offer will increase company’s share capital to USD 15.4 million.

### Equity investment in Access Bank Liberia (ABL)
- Equity investment: USD 0.9 million in the share capital of Access Bank (ABL).
- ABL description: start-up microfinance bank sponsored by Access Microfinance Holding AG (Germany), with co-support by IFC and EIB.

### Liberia — Statistical Issues (As of October 26, 2011)
- General assessment: Data have serious shortcomings that significantly hamper surveillance; most serious in national accounts and balance of payments statistics.
- National accounts:
  - Comprehensive national accounts data are not available.
  - Fund staff estimate GDP by sector using production approach and primary source data from LISGIS; GDP by expenditure estimates not available.
  - High uncertainty regarding level and growth rate of real GDP, sectoral components, and all ratios to nominal GDP.
  - Liberia participates in National Accounts Module of the Enhanced Data Dissemination Initiative (EDDI).
  - National business register and national accounts questionnaires established in December 2008.
  - Second round of national accounts establishment survey completed after low response rates from the first; data being compiled.
  - STA technical assistance ongoing; Household Expenditure and Income Survey planned for 2012 to support informal sector estimates.
  - Supply and use tables (SUT) for 2008 independently estimated; STA assessment concluded SUT estimates for 2008 are not sufficiently robust to be published as official statistics and should be considered experimental.
  - With improved data sources, reliable GDP estimates expected by 2014.
- Price statistics:
  - Consumer price index for Monrovia compiled since 2005.
  - Harmonized Consumer Price Index providing national coverage officially adopted in 2007.
- Government finance statistics:
  - Ministry of Finance provides monthly disaggregated data on budgetary central government revenue (cash basis) and expenditure (cash and commitment basis).
  - Areas needing improvement: lack of legal framework to collect statistics; limited data sharing and coordination among agencies; inconsistent institutional coverage with other datasets; omission of nonmonetary transactions; limited data on stocks of financial assets, liabilities, and arrears; incorrect reference exchange rate for conversions from Liberian dollars to U.S. dollars.
- Monetary statistics:
  - Data provision adequate for surveillance, progress adopting MFSM methodology.
  - Reporting of monetary and financial statistics (MFS) suspended since September 2010.
  - STA missions March 2010 and August 2011 assisted in introducing standardized report forms (SRFs) and data collection; CBL agreed to start reporting SRFs by end-December 2011.
- Balance of payments:
  - Reporting not comprehensive; Fund staff prepare provisional balance of payments statistics for surveillance.
  - Areas needing improvement: primary source data, compilation, timeliness, especially for trade and services, foreign direct investment, government expenditures, remittances, and nonresident deposits data.
- Data standards:
  - Participant in the General Data Dissemination System (GDDS) since October 2005.
  - No Data Module of the Reports on the Observance of Standards and Codes (data ROSC) available.
- Reporting to STA:
  - Authorities report annual balance of payments data and government finance statistics to related publications (IFS, GFSY, and BOPSY).

### IMF Executive Board — Seventh Review under ECF for Liberia (Press Release No. 11/442, December 5, 2011)
- Action: Executive Board completed the seventh review of Liberia’s program under the Extended Credit Facility (ECF).
- Disbursement enabled: SDR 4.44 million (about US$6.9 million).
- Cumulative disbursements under the arrangement: SDR 243.5 million (about US$379 million).
- ECF arrangement history:
  - Initially approved March 2008 for SDR 239.02 million.
  - Liberia reached HIPC Initiative Completion Point in June 2010 and received debt relief equivalent to more than 90 percent of debt outstanding.
  - June 2011: IMF Executive Board approved extension of the arrangement through March 31, 2012 and an augmentation of access of SDR 8.88 million.
- Decision modality: taken on a lapse of time basis.

*Prepared by the African Development Bank and IMF material as presented in the source document.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr11345.pdf_