## LIBERIA: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION ## Source details **Canonical URL:** [LIBERIA: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16238.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16238.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16238.pdf.json) --- ### Executive summary and short-term outlook - Double shock: Ebola epidemic (2014–15) and decline in commodity prices undermined revenues, reserves build-up, and financial sector resilience. - FY2016: - Overall government deficit estimated to have declined to 7 percent of GDP. - Growth in 2016 expected to rise to 2.5 percent. - Inflation expected to stay in the single digits; consumer prices (annual average) 8.4 in 2016. - Gross official reserves projected at 457 (millions of U.S. dollars) in 2016. - Medium-term baseline: growth projected to pick up to 4.7 in 2017 and average about 5.5 percent over the medium term. ### Key macro projections (selected figures, 2014–21) - Real GDP (annual percent change): 2014 = 0.7; 2015 = 0.0; 2016 = 2.5; 2017 = 4.7; 2018 = 5.2; 2019 = 5.7; 2020 = 6.0; 2021 = 6.5. - Real GDP excluding mining sector: 2014 = 0.3; 2015 = 2.6; 2016 = 4.3; 2017 = 4.1; 2018 = 5.7; 2019 = 6.1; 2020 = 5.3; 2021 = 5.4. - Nominal GDP (millions of U.S. dollars): 2014 = 2012; 2015 = 2035; 2016 = 2138; 2017 = 2289; 2018 = 2512; 2019 = 2767; 2020 = 3025; 2021 = 3249. - Consumer prices (annual average): 2014 = 9.9; 2015 = 7.7; 2016 = 8.4; 2017 = 8.3; 2018 = 7.7; 2019 = 7.1; 2020 = 7.1; 2021 = 7.5. ### Fiscal outlook and public debt (fiscal year percent of GDP unless indicated) - Total revenue and grants: 2014 = 27.4; 2015 = 32.5; 2016 = 32.1; 2017 = 30.3; 2018 = 27.1; 2019 = 27.5; 2020 = 27.6; 2021 = 27.6. - Total revenue: 2014 = 23.5; 2015 = 22.5; 2016 = 20.5; 2017 = 23.6; 2018 = 23.8; 2019 = 24.5; 2020 = 24.7; 2021 = 24.8. - Grants, including Ebola-related support: 2014 = 3.9; 2015 = 10.0; 2016 = 11.7; 2017 = 6.7; 2018 = 3.2; 2019 = 2.9; 2020 = 2.9; 2021 = 2.8. - Total expenditure and net lending: 2014 = 29.3; 2015 = 40.9; 2016 = 39.2; 2017 = 37.0; 2018 = 33.4; 2019 = 31.9; 2020 = 31.7; 2021 = 31.4. - Current expenditure: 2014 = 24.3; 2015 = 32.0; 2016 = 28.4; 2017 = 27.3; 2018 = 25.5; 2019 = 23.4; 2020 = 22.8; 2021 = 22.3. - Capital expenditure: 2014 = 5.0; 2015 = 8.8; 2016 = 10.8; 2017 = 9.7; 2018 = 8.0; 2019 = 8.5; 2020 = 8.9; 2021 = 9.1. - Overall fiscal balance, including grants: 2014 = -1.9; 2015 = -8.4; 2016 = -7.0; 2017 = -6.8; 2018 = -6.3; 2019 = -4.4; 2020 = -4.1; 2021 = -3.8. - Public external debt: 2014 = 13.2; 2015 = 23.0; 2016 = 28.2; 2017 = 32.3; 2018 = 35.9; 2019 = 37.5; 2020 = 38.2; 2021 = 38.5. - Central government domestic debt: 2014 = 14.1; 2015 = 14.6; 2016 = 13.0; 2017 = 12.1; 2018 = 10.2; 2019 = 8.8; 2020 = 7.5; 2021 = 6.9. ### External sector and reserves - Current account balance including grants (percent of GDP): 2014 = -32.5; 2015 = -33.6; 2016 = -31.3; 2017 = -27.7; 2018 = -26.6; 2019 = -26.6; 2020 = -26.5; 2021 = -27.0. - Current account balance excluding grants: 2014 = -95.1; 2015 = -88.8; 2016 = -76.6; 2017 = -54.1; 2018 = -51.0; 2019 = -49.1; 2020 = -47.4; 2021 = -44.7. - Trade balance: 2014 = -37.0; 2015 = -46.0; 2016 = -41.1; 2017 = -34.1; 2018 = -30.6; 2019 = -31.6; 2020 = -27.0; 2021 = -24.9. - Exports: 2014 = 24.0; 2015 = 13.1; 2016 = 12.4; 2017 = 12.2; 2018 = 11.8; 2019 = 11.6; 2020 = 12.2; 2021 = 13.5. - Imports: 2014 = -61.0; 2015 = -59.1; 2016 = -53.6; 2017 = -46.3; 2018 = -42.4; 2019 = -43.2; 2020 = -39.2; 2021 = -38.3. - Gross official reserves (millions of U.S. dollars): 2014 = 411; 2015 = 446; 2016 = 457; 2017 = 509; 2018 = 581; 2019 = 638; 2020 = 688; 2021 = 748. - Months of imports of goods and services: 2014 = 2.4; 2015 = 2.6; 2016 = 2.7; 2017 = 3.0; 2018 = 3.3; 2019 = 3.5; 2020 = 3.6; 2021 = 3.7. - CBL's net foreign exchange position (millions of U.S. dollars): 2014 = 178.6; 2015 = 164.4; 2016 = 189.1; 2017 = 227.0; 2018 = 302.2; 2019 = 373.1; 2020 = 433.4; 2021 = 493.3. ### Financial sector and stability indicators - Banking sector stress: - Non-performing loans (NPLs) rose to above 20 percent of total loans in 2015 (CBL Post-Ebola Review); reported NPLs series: 14.5 (Mar-14), 15.5 (Jun-14), 16.3 (Sep-14), 18.7 (Dec-14), 18.5 (Mar-15), 19.2 (Jun-15), 16.5 (Sep-15), 15.7 (Dec-15), 15.7 (Mar-16). - Provisions to classified loan net of interest in suspense: 52.5 (Mar-14), 38.9 (Jun-14), 44.3 (Sep-14), 51.8 (Dec-14), 47.7 (Mar-15), 51.9 (Jun-15), 56.4 (Sep-15), 63.6 (Dec-15), 67.8 (Mar-16). - Return on assets: -0.4 (Mar-14), -0.3 (Jun-14), -0.5 (Sep-14), 0.1 (Dec-14), -0.6 (Mar-15), -1.0 (Jun-15), -0.8 (Sep-15), -1.0 (Dec-15), -2.4 (Mar-16). - Return on equity: -2.6 (Mar-14), -2.0 (Jun-14), -3.4 (Sep-14), 1.0 (Dec-14), -5.2 (Mar-15), -8.1 (Jun-15), -6.7 (Sep-15), -9.0 (Dec-15), -18.0 (Mar-16). - Correspondent banking relationships: - All commercial banks have lost at least one CBR in the last three years; the most affected lost about 78 percent of their CBR accounts. - Losses attributed to perceived credit risk, AML/CFT concerns, and low volumes of transactions. - Crisis handling and central bank exposure: - CBL provided exceptional liquidity support to a non-systemic failing bank for more than two years in absence of proper ELA and resolution frameworks; bank later liquidated via a P&A transaction. - Policy recommendations for the financial sector: - Strengthen bank supervision and crisis management: establish ELA, a bank resolution framework, and deposit insurance. - Step up NPL resolution: mandatory write-offs for legacy NPLs, intensified on-field supervision, consider AMC with caution given limited fiscal space. - Urgent action on AML/CFT and tax transparency; strengthen FIU. ### Public financial management (PFM) and revenue measures - PFM gaps and progress: - TSA implementation delayed by technical issues and resistance; PFM Act amendment submitted to Ministry of Justice. - IFMIS coverage expanding to public investment; online procurement application launched; monitoring and evaluation units for public investment established. - FY2017 revenue measures (Text Table 2 — Millions of U.S. dollars): - Already implemented: Surcharge on fuel imports: 29.8. - Under discussion in the National Legislature: Goods and service tax: 20.0; Excise tax on beverages: 3.1; Excise tax on tobacco: 1.1; Surcharge on outbound mobile phone call: 6.0. - FY2017 fiscal composition: - Nominal wages and hiring frozen except selected hiring in health, education, and security. - Goods and services cut by about 10 percent from the revised FY2016 budget while maintaining health and education spending. - Current spending expected to decline from 28.4 percent of GDP in FY2016 to 27.3 percent of GDP in FY2017. - PSIP limited to ongoing projects; domestic and external off-budget debt financing to be sought for priority infrastructure. - Policy advice on fiscal management: - Deepen and make fairer domestic revenue mobilization; roll-out VAT in FY2018. - Strengthen revenue administration (LRA) with IMF TA. - Strengthen PFM, advance TSA, improve investment planning and execution, and consider a medium-term fiscal anchor. - Prioritize grants and concessional financing; adopt a prudent medium-term borrowing strategy. ### Debt sustainability, DSA findings and risks - DSA and risk assessment: - External debt rose sharply: external debt (nominal percent of GDP) 2014 = 13.6; 2015 = 23.4; 2016 = 29.2; 2017 = 33.2; 2018 = 36.5; 2019 = 38.3; 2020 = 39.1. - PV of external/public debt indicators increased; staff notes risk of debt distress rose from low to moderate and is "very close to the high risk category." - Debt is particularly vulnerable to export shocks; extreme stress tests dominated by terms-of-trade shocks and one-time depreciation. - Policy implications: - Adopt prudent borrowing policy, slow public debt accumulation, prioritize grants and concessional financing, strengthen debt management capacity, and update an MTDS. ### Medium-term drivers, diversification, and structural constraints - Medium-term drivers of growth: recovery in mining, infrastructure improvements (energy and roads), and higher agricultural productivity. - Diversification needs and opportunities: - Scope for horizontal diversification in mining and agriculture (e.g., rubber manufactured products; planned steel plant). - Quality upgrading (e.g., rice quality "below global average") and export diversification could yield potential growth gains of "more than 1 percentage point annually (SIP)." - Structural constraints: - Only 10 percent of the 10,000 km road network paved. - Government generating capacity 32 MW compared to pre-civil war 190 MW. - Electricity access: 14.4 percent of the population (3.7 percent in rural areas); LEC installed capacity: 32MW; government goal: 70 percent urban and 30 percent rural access by 2030. - Liberia ranks 179th out of 189 in World Bank Ease of Doing Business 2016. - Recommendations to boost competitiveness and inclusion: - Improve investment climate, affordable electricity (work with donors), judicial effectiveness for property rights, enact Land Rights Act. - Financial inclusion: strengthen supervision, reform collateral and credit registry, introduce national ID, reform collateral registration, develop deposit guarantee scheme. ### Risks, alternative scenarios and implications - Main downside risks: - Stronger-than-anticipated commodity price declines. - Worsening security after UNMIL withdrawal and 2017 elections. - Large-scale re-emergence of Ebola. - Policy slippages undermining medium-term growth. - Alternative scenario with weak policies: - Short-term higher real GDP than baseline; medium-term slower growth due to poor business environment. - Public debt would grow to well over 15 percent above the baseline at the end of the forecast period. - Current account deficit and CBL operational expenditures worsen, hampering reserve accumulation. ### Capacity building, data, and IMF role - Data and statistics issues: - National accounts, GFS, and BOP have significant shortcomings; CPI weights outdated (base year December 2005); LISGIS and CBL undertaking revisions with IMF and World Bank TA. - HIES: 2014 HIES interrupted by Ebola; full 12-month HIES started January 2016. - Capacity Building Framework (CBF): - Shift TA delivery toward hands-on capacity development; prioritize PFM, revenue administration, liquidity and crisis management, and statistics. - IMF engagement: - Provide TA on PFM, revenue administration, liquidity and crisis management, DSA and MTDS, banking resolution frameworks, and statistical improvements. ### Executive Board assessment and summarized policy recommendations - Directors' views: - Commended authorities’ measures; emphasized continued sound macroeconomic policies, stepped-up structural reforms, revenue mobilization, and stronger PFM. - Urged consideration of a medium-term fiscal anchor and strengthening the medium-term debt strategy. - Recommended boosting external buffers via CBL three-year financial plan, phasing out exceptional banking sector support, and limiting FX interventions to volatility smoothing. - Supported measures to enhance central bank independence, gradually de-dollarize in the long run, and address financial sector vulnerabilities (supervision, ELA, resolution, AML/CFT). - Key policy recommendations (executive summary): - Expand revenue mobilization and streamline current spending while preserving health and education. - Strengthen PFM, investment planning and execution; consider a fiscal anchor. - Limit external debt growth; prioritize grants and concessional financing; develop a medium-term borrowing strategy. - Rebuild external buffers and allow more exchange rate flexibility. - Increase financial sector resilience: strengthen supervision, establish emergency assistance framework, address AML/CFT shortcomings. - Promote economic diversification: improve business environment, explore export diversification, and strengthen financial inclusion. *Source: IMF staff report for the 2016 Article IV Consultation with Liberia (June 22, 2016).* ### 8.4 percent of GDP. The FY2016 deficit is estimated to have declined to 7 percent of GDP as ### LIBERIA: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION ### Executive Summary and Context - The Liberian economy was hit by a "double shock": the Ebola epidemic (2014–15) and a decline in commodity prices. - The shocks undermined government revenues, slowed the build-up of international reserves, and intensified vulnerabilities in the financial sector. - The authorities proposed a draft FY2017 budget law with ambitious revenue mobilization measures and significant spending cuts to mitigate the shocks. - The economy remains highly dependent on the natural resource sector, limiting medium-term growth prospects. ### Short-term developments and projections - FY2016: - The FY2016 deficit is estimated to have declined to 7 percent of GDP as continued revenue weakness forced the government to contain spending. - Growth in 2016 is expected to rise to 2.5 percent, supported by a rebound in services and the start of gold production. - Inflation is expected to stay in the single digits. - The overall government deficit is projected to remain broadly constant due to strong fiscal measures addressing lower natural resource revenues, declining external budget support, the cost of the 2017 elections, and the take-over of security from UNMIL. - 2014–21 selected projections (annual percent change unless otherwise indicated): - Real GDP: 2014 = 0.7; 2015 = 0.0; 2016 = 2.5; 2017 = 4.7; 2018 = 5.2; 2019 = 5.7; 2020 = 6.0; 2021 = 6.5. - Real GDP excluding mining sector: 2014 = 0.3; 2015 = 2.6; 2016 = 4.3; 2017 = 4.1; 2018 = 5.7; 2019 = 6.1; 2020 = 5.3; 2021 = 5.4. - Nominal GDP (millions of U.S. dollars): 2014 = 2012; 2015 = 2035; 2016 = 2138; 2017 = 2289; 2018 = 2512; 2019 = 2767; 2020 = 3025; 2021 = 3249. - Consumer prices (annual average): 2014 = 9.9; 2015 = 7.7; 2016 = 8.4; 2017 = 8.3; 2018 = 7.7; 2019 = 7.1; 2020 = 7.1; 2021 = 7.5. ### Fiscal outlook and public debt - Fiscal aggregates (percent of GDP, fiscal year): - Total revenue and grants: 2014 = 27.4; 2015 = 32.5; 2016 = 32.1; 2017 = 30.3; 2018 = 27.1; 2019 = 27.5; 2020 = 27.6; 2021 = 27.6. - Total revenue: 2014 = 23.5; 2015 = 22.5; 2016 = 20.5; 2017 = 23.6; 2018 = 23.8; 2019 = 24.5; 2020 = 24.7; 2021 = 24.8. - Grants, including Ebola-related support: 2014 = 3.9; 2015 = 10.0; 2016 = 11.7; 2017 = 6.7; 2018 = 3.2; 2019 = 2.9; 2020 = 2.9; 2021 = 2.8. - Total expenditure and net lending: 2014 = 29.3; 2015 = 40.9; 2016 = 39.2; 2017 = 37.0; 2018 = 33.4; 2019 = 31.9; 2020 = 31.7; 2021 = 31.4. - Current expenditure: 2014 = 24.3; 2015 = 32.0; 2016 = 28.4; 2017 = 27.3; 2018 = 25.5; 2019 = 23.4; 2020 = 22.8; 2021 = 22.3. - Capital expenditure: 2014 = 5.0; 2015 = 8.8; 2016 = 10.8; 2017 = 9.7; 2018 = 8.0; 2019 = 8.5; 2020 = 8.9; 2021 = 9.1. - Overall fiscal balance, including grants: 2014 = -1.9; 2015 = -8.4; 2016 = -7.0; 2017 = -6.8; 2018 = -6.3; 2019 = -4.4; 2020 = -4.1; 2021 = -3.8. - Overall fiscal balance, excluding grants: 2014 = -5.8; 2015 = -18.4; 2016 = -18.7; 2017 = -13.5; 2018 = -9.6; 2019 = -7.4; 2020 = -6.9; 2021 = -6.6. - Public external debt: 2014 = 13.2; 2015 = 23.0; 2016 = 28.2; 2017 = 32.3; 2018 = 35.9; 2019 = 37.5; 2020 = 38.2; 2021 = 38.5. - Central government domestic debt: 2014 = 14.1; 2015 = 14.6; 2016 = 13.0; 2017 = 12.1; 2018 = 10.2; 2019 = 8.8; 2020 = 7.5; 2021 = 6.9. ### External sector and reserves - External sector indicators (percent of GDP unless otherwise indicated): - Current account balance including grants: 2014 = -32.5; 2015 = -33.6; 2016 = -31.3; 2017 = -27.7; 2018 = -26.6; 2019 = -26.6; 2020 = -26.5; 2021 = -27.0. - Current account balance excluding grants: 2014 = -95.1; 2015 = -88.8; 2016 = -76.6; 2017 = -54.1; 2018 = -51.0; 2019 = -49.1; 2020 = -47.4; 2021 = -44.7. - Trade balance: 2014 = -37.0; 2015 = -46.0; 2016 = -41.1; 2017 = -34.1; 2018 = -30.6; 2019 = -31.6; 2020 = -27.0; 2021 = -24.9. - Exports: 2014 = 24.0; 2015 = 13.1; 2016 = 12.4; 2017 = 12.2; 2018 = 11.8; 2019 = 11.6; 2020 = 12.2; 2021 = 13.5. - Imports: 2014 = -61.0; 2015 = -59.1; 2016 = -53.6; 2017 = -46.3; 2018 = -42.4; 2019 = -43.2; 2020 = -39.2; 2021 = -38.3. - Grants (donor transfers, net): 2014 = 62.6; 2015 = 55.2; 2016 = 45.3; 2017 = 26.4; 2018 = 24.4; 2019 = 22.5; 2020 = 20.9; 2021 = 17.7. - Gross official reserves (millions of U.S. dollars): 2014 = 411; 2015 = 446; 2016 = 457; 2017 = 509; 2018 = 581; 2019 = 638; 2020 = 688; 2021 = 748. - Months of imports of goods and services: 2014 = 2.4; 2015 = 2.6; 2016 = 2.7; 2017 = 3.0; 2018 = 3.3; 2019 = 3.5; 2020 = 3.6; 2021 = 3.7. - CBL's net foreign exchange position: 2014 = 178.6; 2015 = 164.4; 2016 = 189.1; 2017 = 227.0; 2018 = 302.2; 2019 = 373.1; 2020 = 433.4; 2021 = 493.3. ### Medium-term outlook and drivers - Over the medium term, economic growth is expected to increase to 5.5 percent on average, driven by: - A recovery in mining. - Improvement in infrastructure, particularly energy and roads. - Higher agricultural productivity. - The fiscal position should improve due to the authorities’ commitment to improve domestic revenue mobilization and contain spending. - Resolution of the backlog of non-performing loans and improving bank profitability could support economic growth through higher credit, especially for small- and medium-size enterprises (SMEs). ### Risks to the outlook - Main downside risks identified: - A stronger-than-anticipated effect of the commodity price decline. - Worsening of security conditions, particularly after UNMIL withdrawal and the 2017 elections. - A large-scale re-emergence of the Ebola virus. - Policy slippages that could weigh on medium-term growth. ### Executive Board Assessment and Recommendations - Executive Directors noted the commodity price shock struck as Liberia began recovering from Ebola and emphasized downside risks, including commodity prices, Ebola reemergence, and security deterioration. - Directors commended authorities’ measures and stressed: - Continued sound macroeconomic policies and stepped-up structural reforms to boost growth, enhance resilience, and reduce dependence on natural resources. - Deepening and increasing fairness of the domestic revenue base, and continued strengthening of public financial management. - Considering a medium-term fiscal anchor to improve policy predictability and transparency. - Strengthening the medium-term debt strategy to prevent a further increase in the risk of debt distress. - Boosting external buffers by rigorously implementing the Central Bank of Liberia's three-year financial plan, phasing out exceptional support to the banking sector, and limiting foreign exchange interventions to volatility smoothing. - Enhancing central bank independence and coordination with fiscal authorities; gradual de-dollarization in the long run given dual currency constraints. - Addressing financial sector vulnerabilities by strengthening bank supervision and establishing a bank emergency assistance framework; reinforcing tax transparency and AML/CFT frameworks in light of correspondent banking relationship losses. - Improving economic resilience through business environment reforms to support private sector-led diversification and by improving financial inclusion. ### Key policy recommendations (as summarized in the Executive Summary) - Expand revenue mobilization efforts and streamline current spending while preserving key expenditures including health and education. - Strengthen public financial management, including investment planning and execution, and consider adopting a fiscal anchor to support fiscal sustainability. - Limit external debt growth by carefully selecting new projects, prioritizing grants and concessional financing, and developing a medium-term borrowing strategy. - Rebuild external buffers by implementing the Central Bank of Liberia medium-term operational budget and allowing more exchange rate flexibility. - Increase financial sector resilience by strengthening bank supervision, establishing an emergency assistance framework, and addressing AML/CFT shortcomings. - Promote economic diversification by improving the business environment, exploring horizontal and vertical export diversification, and strengthening financial inclusion. *Source: IMF staff report for the 2016 Article IV Consultation with Liberia (June 22, 2016).* ### 3.8 percent of GDP, highlighted Public Financial management (PFM) weaknesses, and quasi-fiscal activities ### 3.8 percent of GDP, highlighted Public Financial management (PFM) weaknesses, and quasi-fiscal activities ### Recent economic developments and short-term outlook - Growth: - Real GDP growth dropped from 8.7 percent in 2013 to 0.7 percent in 2014 and 0 percent in 2015. - Activity is expected to rebound to 2½ percent in 2016, underpinned by recovery of services and an expansion in gold production. - Inflation: - Projected to average 8.4 percent in 2016, up from 7.7 percent in 2015. - Fiscal performance and budgets: - End-December 2015 performance criterion (PC) on government revenue was missed by US$7 million because of lower tax revenues from the natural resource sector. - End-December 2015 PC on net foreign exchange reserves position was missed by US$20 million owing to exceptional liquidity support to the banking system, large foreign exchange interventions, and lower-than-programmed sales of foreign exchange from the government. - Cabinet submitted a revised FY2016 budget with both revenues and expenditures reduced by 3 percentage points of GDP or 11 percent of the original budget; overall FY2016 government deficit, including off-budget items, is projected to remain around 7 percent of GDP. - External sector and reserves: - Total export earnings declined by 45 percent in 2015 compared to 2014. - Current account deficit rose to 34 percent of GDP from 32 percent in 2014. - Exchange rate depreciated by about 7 percent in 2015. - Gross official reserves rose from US$411 million in 2014 to US$446 million in 2015 (2.6 months of imports). - CBL net foreign exchange position declined from US$179 million to US$164 million in 2015 due to operational losses and liquidity support to the banking sector. - Projected in 2016: gross reserves US$457 million and CBL net foreign exchange position US$189 million, assuming strong CBL policies and sufficient government foreign exchange sales. - Banking sector: - Non-performing loans (NPLs) rose to above 20 percent of total loans in 2015, weighing on profitability and credit growth. ### Medium-term outlook and risks - Growth and production: - Growth is expected to average 5½ percent over the medium term, down from the 8 percent previously projected before the crisis. - Recovery in iron ore and rubber production is expected as investment resumes and operations are restructured; infrastructure spending (notably Mount Coffee hydropower plant) and agricultural productivity under the Liberian Agricultural Transformation Agenda (LATA) should support activity. - Inflation and external balances: - Inflation expected to remain in single digits but vulnerable to oil price increases and currency weakness. - Current account deficit projected to stabilize at 27 percent of GDP; reserves cover expected to edge up towards 3⅓ months of imports. - Fiscal outlook: - Tax revenue measures are expected to lift domestic tax revenues; government spending as percent of GDP expected to return toward pre-Ebola levels after FY2017–18 election costs. - Overall deficit projected to stabilize at 4 percent of GDP as external support declines. - Financial sector and investment: - Recovery assumes efforts to resolve rising NPLs and improve bank profitability to promote lending to SMEs and households. - Downside risks (selected): - Stronger-than-expected commodity price decline and slower global growth. - Large-scale re-emergence of Ebola. - Security deterioration after UNMIL withdrawal in 2016. - Increasing financial sector vulnerabilities, including further loss of correspondent banking relationships (CBRs). - Weak policy implementation, particularly failure to maintain fiscal discipline and rebuild external buffers. - Alternative scenario with weak policies: - Assumes lower tax effort, sustained spending financed by external debt, resumption of quasi-fiscal activities by the central bank, and delays in structural reforms. - Short-term: higher real GDP than baseline; medium-term: slower growth due to poor business environment. - Public debt would grow to well over 15 percent above the baseline at the end of the forecast period. - Current account deficit and CBL operational expenditures would worsen, hampering international reserve accumulation. ### Fiscal policy measures, recent PFM actions, and key fiscal numbers - Shortfalls and external support: - Tax and non-tax revenues declined in FY2016 by an estimated 2.4 percent (US$11 million) compared to FY2015. - External budget support expected to decline from US$155 million on average in FY2015–FY2016 (including the ECF augmentation and the RCF disbursement) to US$30 million in FY2017. - FY2017 draft budget measures (revenue mobilization): - Increase in fuel storage charge from US$0.20 to US$0.50 per gallon (implemented starting January 2016). - Increase in goods and services tax (GST) from 7 percent to 10 percent, consistent with a planned VAT rate of 15–17 percent. - Surcharge of US$0.05 per minute on all calls. - Increase in beverage and tobacco excises, in line with harmonization towards the ECOWAS Common External Tariff (CET). - FY2017 fiscal composition and prioritization: - Nominal wages and hiring frozen except selected hiring in health, education, and security. - Goods and services cut by about 10 percent from the revised FY2016 budget while maintaining health and education spending. - Current spending, including off-budget spending, will decline from 28.4 percent of GDP in FY2016 to 27.3 percent of GDP in FY2017. - Public Sector Investment Program (PSIP) limited to ongoing projects; domestic and external off-budget debt financing to be sought for priority infrastructure. - Text Table 2 — FY2017 revenue measures (Millions of U.S. dollars): - Already implemented: - Surcharge on fuel imports: 29.8 - Under discussion in the National Legislature: - Goods and service tax: 20.0 - Excise tax on beverages: 3.1 - Excise tax on tobacco: 1.1 - Surcharge on outbound mobile phone call: 6.0 - PFM strengthening underway: - Submission of draft amendment of the PFM Act to the Ministry of Justice for review. - Establishment of monitoring and evaluation units for public investment. - Launch of online procurement application system. - Expansion of IFMIS coverage to public investment. - MFDP preparing comprehensive databases of PSIP and foreign-financed projects and systematically preparing feasibility studies for domestically-financed projects. ### Policy advice and recommended reforms - Revenue strengthening: - Deepen tax effort and improve fairness, including stronger property tax design and collection, streamlining of fuel import duty exemptions, and roll-out of the VAT in FY2018. - Liberia Revenue Authorities (LRA) to strengthen revenue administration, with IMF technical assistance, to improve compliance and audits. - Expenditure and SOE reform: - Review civil service payroll (ongoing with World Bank support) to help contain the wage bill. - Reform state-owned enterprises (SOEs), starting with closure of numerous dormant organizations. - Streamline current spending while protecting key social expenditure items. - Fiscal framework and medium-term approach: - Move from year-by-year fiscal stance to a medium-term budget framework; current legislation prevents funding multi-year projects and contributes to extra-budgetary spending. - Consider formalizing a fiscal anchor (e.g., explicit debt target or spending rule) to make fiscal policy more predictable and support fiscal discipline. - Initiate policy dialogue with domestic and external stakeholders on medium-term fiscal sustainability and anchors. - Monetary and financial sector vigilance: - Maintain CBL operational budget discipline and limit quasi-fiscal activities to support reserve accumulation. - Address financial sector vulnerabilities, including NPL resolution and preserving correspondent banking relationships. *Source: _cr16238 - 3.8 percent of GDP, highlighted Public Financial management (PFM) weaknesses, and quasi-fiscal activities.* ### 18. The authorities should push fiscal reform forward. The authorities have taken important ### 18. The authorities should push fiscal reform forward. The authorities have taken important steps to strengthen PFM, but much remains to be done, notably on the Treasury Single Account (TSA) ### Strengthening Public Financial Management (PFM) - Key gaps: - TSA implementation held back by technical issues and resistance from line ministries. - Development of a public investment database is constrained by limited capacity to monitor progress of each investment projects. - Reporting on SOEs finances needs strengthening. - Reform progress: - Important steps taken to strengthen PFM, including improvement of procurement processes (e.g., eProcurement Platform launched by Liberia Public Procurement and Concession Commission). - Authorities’ views: - Fiscal space is very tight because of exogenous shocks. - Increase in taxation deemed necessary to maintain a minimum level of expenditure. - Streamlining expenditure required difficult choices given adverse developmental impact of cutting spending items. - Level of capital investment seen as well below what is needed to rebuild Liberia’s infrastructure. - Authorities look forward to additional external assistance to finance big-ticket items such as the elections. - PFM reforms delayed by the Ebola crisis; capacity building needed to accelerate reforms. ### Debt Sustainability - Findings: - Liberia’s domestic and external public debt remains relatively low compared with regional average and other low income countries (Text Chart 2). - External debt rose from 11 percent of GDP at end-2013 to 23 percent at end-2015, and is expected to increase further over the medium term. - Worsened growth and export outlook makes the economy increasingly vulnerable to further shocks; any further deterioration in exports could push the risk of debt distress to high. - December 2015 DSA indicated risk of debt distress rising from low to moderate; updated DSA shows increased vulnerability (Annex V). - Policy advice: - Adopt a prudent borrowing strategy to preserve debt sustainability. - Slow down the pace of debt accumulation in the medium-term outlook. - Prioritize grants and concessional financing. - Carefully choose new borrowing through sound project appraisal and selection procedures. - Strengthen debt management capacity, particularly on costs and risks analysis of the debt portfolio. - Anchor borrowing by a new Medium-Term Debt Management Strategy (Annex VI). - Authorities’ views: - Committed to borrowing targets agreed in the context of the ECF for FY2016 and FY2017 to help maintain borrowing discipline. - Highlighted tension between debt sustainability and closing infrastructure gaps; expect growth dividends to help debt sustainability. - Called for more donor coordination as some externally-financed projects are not high priority but increase the debt burden. ### Improving the Effectiveness of Monetary Policy - Reserve and FX position: - CBL’s net foreign exchange position has weakened. - Gross reserves increased in 2015 but at end-year were still below three months of imports. - Net foreign exchange position declined due to: exceptional support to the banking sector; larger-than-planned foreign exchange sales interventions to stem depreciation of the Liberian dollar following the decline in export revenues; and large operational losses of the CBL arising from capital spending and poor returns from ultra-low global international interest rates. - Dollarization: - Both the Liberian dollar and U.S. dollar are legal tender, with more than 80 percent of banks’ deposits and 90 percent of lending in U.S. dollars (Text Chart 3). - Only a small portion of the monetary base is in local currency; CBL can rely on minimal seigniorage. - Coordination and legal constraints: - Joint Liquidity Working Group (LWG) meetings between CBL, MFDP, and LRA have improved coordination, but CBL’s liquidity management has largely been passive. - 2014 amendment to the CBL Act subjects issuance of currency to legislature approval, limiting liquidity management capacity. - Policy advice: - Increase external buffers: implement the three-year financial plan approved by the CBL Board in December 2015 to reduce CBL operational deficits. - Absorb unbudgeted costs for currency printing over the three-year financial plan. - Consider allowing more exchange rate flexibility as inflationary pressures remain limited; MFDP should maintain adequate foreign exchange sales to the CBL. - De-dollarization as a long-term objective: develop domestic financial markets; increase use of Liberian dollar for government and private sector transactions and salaries; adopt prudential regulations that encourage use of Liberian dollar. - Streamline reserve requirements: unify Liberian and U.S. dollar reserve requirements and allow banks to meet requirements on average over a maintenance period. - Joint LWG should take a more active approach to liquidity management. - Removal of parliamentary veto on currency printing should be a priority; authorities urged to seek Legislature’s reversal of the amendment affecting CBL autonomy. - Authorities’ views: - CBL progress contingent on government’s adequate sales of foreign currency, dependent on dollar revenue inflows undermined by the external shock. - De-dollarization viewed as important long-term goal but politically delicate; no space for major initiatives at this stage. - Concern about legal constraints from the CBL Act preventing modification of liquidity reserve requirement regime. - Undertook to seek legislative changes to equip the CBL with ability to manage domestic currency. ### Strengthening Financial Sector Stability and Development - Asset quality and profitability: - NPLs edged up to over 20 percent in 2015 (CBL’s Post-Ebola Review), significantly higher than NPLs reported by banks. - High provisioning for NPLs is a key factor for weak bank profitability, also hurt by high overhead costs and limited investment opportunities. - Balance sheet growth is constrained; banks likely to become more risk-averse and tighten lending standards, reducing credit to SMEs and households. - NPL write-offs held back by poor enforcement of guidelines, lengthy judicial processes, and absence of markets for distressed assets. - CBL plans to resume publication of non-compliant delinquent borrowers by early July 2016 and enforce directive barring them from accessing banking services. - CBL exploring setting up an Asset Management Company (AMC) to market distressed assets. - Crisis handling and CBR loss: - CBL intervened in a non-systemic failing bank, providing liquidity for more than two years in absence of a proper ELA and bank resolution frameworks, accumulating significant exposure and eroding international reserve position; bank later liquidated via a purchase and assumption (P&A) transaction transferring most assets and liabilities to a foreign investor. - All commercial banks have lost at least one Correspondent Banking Relationship (CBR) in the last three years; the most affected lost about 78 percent of their CBR accounts. - Loss of CBRs attributed to perceived credit risk, AML/CFT concerns, and low volumes of transactions; consequences include limited trade financing products, lower fees and commissions, difficulty transferring humanitarian aid, and complicated supervision of transfers. - AML/CFT and tax transparency issues: - Weak AML/CFT framework and tax transparency frameworks contribute to CBR loss. - Liberia downgraded from the “expedited” to the “enhanced” follow-up process by GIABA due to gaps in AML/CFT framework. - Liberia is listed as a tax haven by several EU members and has yet to sign U.S. Treasury FATCA. - Policy advice: - Prioritize stepped-up vigilance and clean-up of NPLs: intensify on-field visits and reporting to identify needs for business strategy improvements and recapitalization. - Resume and sustain “name and shame” initiative (short-term effect). - AMC could be valid in principle, but financing may be difficult given limited fiscal space and banks’ negative profitability. - Develop a long-term strategy to reduce NPLs centered on mandatory write-offs of legacy NPLs and punitive measures such as a capital surcharge graduated on NPLs holdings. - Strengthen crisis management framework urgently: establish ELA, bank resolution framework, and deposit insurance. - CBL should carry out a comprehensive assessment of its support to the troubled bank and the weak supervision that delayed resolution and deepened CBL exposure. - Urgent action on AML/CFT: address gaps relating to terrorist financing and criminalization of illicit trafficking; strengthen the Financial Intelligence Unit (FIU). - Authorities’ views: - Recognize institutional factors delaying NPL reduction: lack of secondary market for collateral, lack of an efficient credit bureau (no national identity system), and inefficient judicial system. - Working with the commercial court to reduce foreclosure inefficiencies. - With Fund TA support, CBL has started work on a crisis management and resolution framework, including ELA and deposit insurance. - FIU to be fully funded in the FY2017 budget amid broad cuts in a tight fiscal environment. - Selected financial soundness indicators (as reported by Liberian authorities): - Regulatory capital to risk-weighted assets: 20.5 (Mar-14), 21.4 (Jun-14), 23.6 (Sep-14), 20.3 (Dec-14), 23.8 (Mar-15), 18.0 (Jun-15), 18.8 (Sep-15), 15.5 (Dec-15), 16.2 (Mar-16). - Reported net capitalization: 14.3 (Mar-14), 15.2 (Jun-14), 15.0 (Sep-14), 12.6 (Dec-14), 13.1 (Mar-15), 12.3 (Jun-15), 13.1 (Sep-15), 11.8 (Dec-15), 11.6 (Mar-16). - Non-performing loans to total loans: 14.5 (Mar-14), 15.5 (Jun-14), 16.3 (Sep-14), 18.7 (Dec-14), 18.5 (Mar-15), 19.2 (Jun-15), 16.5 (Sep-15), 15.7 (Dec-15), 15.7 (Mar-16). - Provisions to classified loan net of interest in suspense: 52.5 (Mar-14), 38.9 (Jun-14), 44.3 (Sep-14), 51.8 (Dec-14), 47.7 (Mar-15), 51.9 (Jun-15), 56.4 (Sep-15), 63.6 (Dec-15), 67.8 (Mar-16). - Liquidity ratio - Liquid assets to deposits and designated liabilities: 25.4 (Mar-14), 41.6 (Jun-14), 45.9 (Sep-14), 50.4 (Dec-14), 44.9 (Mar-15), 41.8 (Jun-15), 39.7 (Sep-15), 36.8 (Dec-15), 34.7 (Mar-16). - Net Loans to deposits: 51.7 (Mar-14), 58.4 (Jun-14), 56.5 (Sep-14), 50.4 (Dec-14), 50.8 (Mar-15), 50.7 (Jun-15), 54.9 (Sep-15), 56.8 (Dec-15), 42.1 (Mar-16). - Return on assets: -0.4 (Mar-14), -0.3 (Jun-14), -0.5 (Sep-14), 0.1 (Dec-14), -0.6 (Mar-15), -1.0 (Jun-15), -0.8 (Sep-15), -1.0 (Dec-15), -2.4 (Mar-16). - Return on equity: -2.6 (Mar-14), -2.0 (Jun-14), -3.4 (Sep-14), 1.0 (Dec-14), -5.2 (Mar-15), -8.1 (Jun-15), -6.7 (Sep-15), -9.0 (Dec-15), -18.0 (Mar-16). ### Buttressing Resilience through Economic Diversification and Competitiveness - Need for diversification: - Slump in commodity prices underscores need for economic diversification to provide additional growth drivers and reduce growth volatility and vulnerability to exogenous shocks. - Liberia has not developed a robust alternative to rubber and mining-led growth; export diversification lags peers. - Infrastructure and business environment constraints: - Infrastructure severely lacking: only 10 percent of the 10,000 km road network is paved. - Electricity provision inadequate: government generating capacity is only 32 MW compared to pre-civil war 190 MW (Box 2). - Liberia ranks 179th out of 189 countries in the World Bank’s 2016 Ease of Doing Business Rating. - Recent WTO accession may benefit the investment climate through required legal reforms; trade benefits to come later. - Energy sector (Box 2 highlights): - Electricity access: 14.4 percent of the population (3.7 percent in rural areas). - LEC installed capacity: 32MW with a customer base of around 37,000 customers; total installed capacity higher including private generation. - Government goal: provide electricity access to 70 percent of the urban and 30 percent of the rural population by 2030. - Projects: HFO project started power generation; two more HFO plants expected to bring total capacity to around 60MW. Mount Coffee hydropower to increase capacity by 88MW; first unit (22MW) expected end-2016, three more units in 2017. - Transmission grid covers most of Monrovia; donor-financed projects to extend transmission to rural areas and connect with neighboring countries. - Electricity costs are among the highest in Africa: energy costs are 13 times average costs in South Asia and four times the average for Africa. - Government plans to reduce the price from 52 cents to around 25 cents per KW over the coming months. - A new electricity law is expected to facilitate more competition and a switch to hydropower. - Competitiveness constraints: - Standard exchange rate assessments point to an overvaluation of around 20 percent, likely due to large aid inflows and natural resource revenues. - Wages relatively high compared to regional peers, particularly in the public sector. - These cost factors are likely to hinder development of competitive non-natural resource exports. - Financial inclusion: - Physical access and usage lag: bank branches are four per 100,000 adults; ATMs are two per 100,000 adults — lower than fragile economy and ECOWAS averages. - CBL established rural community banks to ensure each county has at least one. - Non-bank financial institutions (microfinance institutions and credit unions) serve the biggest number of households; mobile banking covers all 15 counties. - Bottlenecks: high lending risks, weak rule of law, limited collateral options, low financial literacy. *Source: IMF staff report (chapter content).* ### 43. Policies to promote diversification could focus on new lines of economic activity and ### _cr16238 - 43. Policies to promote diversification could focus on new lines of economic activity and ### Diversification opportunities and constraints - Potential growth gains of improving export structure could be "more than 1 percentage point annually (SIP)." - Scope for horizontal diversification in mining and agriculture: - Produce rubber manufactured products beyond crude rubber. - A planned steel plant (by an investor) could expand iron ore usage and produce more products. - Horizontal diversification should be combined with quality upgrading of products: - Example: rice quality is "below global average" and below neighbors like Côte d’Ivoire. - Commodity price environment is a disincentive even for agriculture; though some products (e.g., cocoa) have continued to enjoy relatively high prices. ### Investment climate recommendations - Authorities should urgently improve the investment climate. - Priorities: - Continue to work with donors to facilitate affordable electricity for business and domestic use. - Improve judicial system effectiveness related to property rights and contract enforcement (long-term priority). - Land Rights Act submitted to the legislature would help secure land rights, especially in rural areas. - New energy projects, notably the Mount Coffee hydropower plant rehabilitation, are on schedule and would alleviate electricity problems, including lowering costs. - Government is working on judicial enforcement. ### Financial inclusion measures - Policies to improve financial inclusion: - Better banking supervision, leading to improved profitability. - Adequate infrastructure and reform of land registration to help physical expansion of the financial sector. - Introduction of a national identification system to boost usage of financial services, including borrowing. - Strengthening the credit registry. - Collateral regulation reform. - Planned deposit guarantee scheme may promote access to deposits. - Reforming collateral registration and increasing financial literacy. - Improvements in the judiciary process to support inclusion. - Financial inclusion role: - Supports diversification by promoting lending to SMEs and offering credit options to households. - Helps households better face economic and life events. ### Data, statistics, and capacity building - Data availability and quality is limited due to weak capacity, lack of adequate collection mechanisms, and limited cooperation among agencies. - Ongoing efforts to extend data coverage: - LISGIS updated poverty data based on the 2014 household income and expenditure survey (HIES), which was interrupted by Ebola. - LISGIS is revising national accounts estimates with IMF technical assistance and prepared preliminary estimates for 2008–13; these will be validated by a HIES for 2016. - With IMF and World Bank support, the HIES will inform revision of the CPI basket, now several decades old. - CBL is revising trade data following the introduction of the ASYCUDA customs system. - Substantial amounts of TA from the Fund; capacity building needs are high in PFM, revenue administration, liquidity and crisis management, and CPI and national account statistics. - Liberia is piloting the Capacity Building Framework (CBF) approach to enhance engagement with fragile and post-conflict countries; delivery of TA will shift in part from diagnostic missions to hands-on capacity development, such as training and workshop. ### Staff appraisal — shocks, risks, and policy assessment - Shocks and outlook: - Liberia was hit in sequence by the Ebola epidemic and the drop in global commodity prices. - Decline in commodity prices damaged government revenues, affected the build-up of international reserves, and intensified financial sector vulnerabilities. - Prolonged weakness of commodity prices has significantly lowered medium-term growth prospects. - Downside risks: - Stronger-than-estimated impact of weak commodity prices. - Deterioration of security conditions after the UNMIL withdrawal. - Large-scale re-emergence of Ebola. - Overarching risk: weakening of economic policies, which would significantly undermine the baseline scenario. - Assessment of authorities’ policies: - Policies to deal with shocks "go in the right direction." - Ebola has been overall contained, despite small-scale flare-ups; response capacity has significantly improved. - Strong fiscal measures for the FY2017 budget lay the ground for reduced dependence on natural resources and foreign assistance. - Authorities’ focus on diversification is the correct long-term answer, but structural reform, particularly in fiscal area and business environment, still falls short. ### Fiscal policy and public financial management - Measures addressing natural resource revenue shortfalls and decline in external assistance are appropriate: - Large tax effort and cuts in non-essential spending ensure sustainability of the FY2017 budget. - Recommendations to entrench fiscal sustainability: - Deepen domestic revenue mobilization while increasing its fairness component. - Shift resources from current to capital spending—while protecting key social items. - Take a longer-term approach to fiscal policy, including through the possible introduction of a fiscal anchor. - Progress and gaps in PFM: - Significant progress has been made but more is needed, particularly advancing the TSA, improving investment management, and tightening the grip on financial situation of SOEs. ### Debt, reserves, and liquidity management - Debt vulnerabilities: - External debt is relatively low, but borrowing pace has picked up and is projected to remain strong over the medium term, raising the risk of debt distress to moderate. - Worsened medium-term outlook has reduced debt space; further affected by any deterioration of exports. - Staff welcomes authorities’ commitment to adhere to the debt limits under the ECF and to strictly prioritize borrowing. - Recommendation: adopt a new medium-term debt strategy and consider establishing formal debt limits beyond the current ECF. - External buffers: - International reserves are still not at an adequate level for the highly-dollarized Liberian economy. - Needed build-up of reserves depends on rigorous implementation of the three-year CBL budget and phasing out support to the financial sector—key recommendations of the 2015 Safeguards Assessment update. - CBL should regularly report on implementation of the three-year financial plan, as committed under the ECF. - CBL should consider limiting foreign exchange interventions and allow more exchange rate flexibility. - Policies must be supported by an adequate provision of foreign exchange by the MFDP. - Liquidity management constraints and reforms: - Dual currency regime and high dollarization make strong liquidity management particularly important. - Recommended steps: - Further improve coordination among CBL, MFDP, and LRA, with a common effort towards the issuance of liquidity instruments. - Unify Liberian dollar and U.S. dollar reserve requirements. - Reform the reserve maintenance system. - Remove the Legislature approval of currency printing. - In the long run, a gradual process of de-dollarization would widen the space for CBL monetary policy. ### Banking sector, financial stability, and AML/CFT - Banking sector vulnerabilities: - Despite high reported capitalization, NPLs have "topped 20 percent in 2015" and profitability remains negative, largely because of provisioning. - Deterioration in asset quality and lack of viable business opportunities increase risks and hold back lending capacity. - Recommended banking sector actions: - CBL should step up supervision and create an emergency assistance framework given increased vulnerabilities. - Comprehensive strategy to tackle rising NPLs is needed, centering on enforcement of mandatory write-offs of fully provisioned NPLs. - CBL needs to set up a bank safety net package urgently, including ELA, bank resolution framework, and deposit insurance, to address possible banking difficulties while minimizing use of public resources and ensuring financial stability. - AML/CFT and tax transparency: - Urgent priority to avoid further loss of CBRs and to preserve links with the international financial system. - Authorities should: - Step up efforts to address AML/CFT legislative gaps. - Strengthen institutional capacity of the FIU. - Improve bank supervision—the key factor for credibility of the financial sector. *Source: _cr16238 - 43. Policies to promote diversification could focus on new lines of economic activity and (PDF chapter/section).* ### 62. It is proposed that the next Article IV consultation take place on the 24-month cycle. ### _cr16238 - 62. It is proposed that the next Article IV consultation take place on the 24-month cycle. ### Proposal on Article IV consultation timing - It is proposed that the next Article IV consultation take place on the 24-month cycle. ### Millennium Development Goals (selected indicators) - Employment to population ratio, 15+, total (%): 57 (1990), 57 (1995), 57 (2000), 58 (2005), 59 (2010), 59 (2014), 65 (SSA Goals 2014–2015) - Employment to population ratio, ages 15-24, total (%): 34 (1990), 34 (1995), 33 (2000), 33 (2005), 33 (2010), 33 (2014), 47 (SSA Goals 2014–2015) - Income share held by lowest 20%: 6 (2000), 6 (2014) - Malnutrition prevalence, weight for age (% of children under 5): 23 (1995), 20 (2000), 15 (2010), 17 (2014), 11.5 (SSA Goals 2014–2015) - Poverty gap at $1.90 a day (2011 PPP) (%): 28 (2010), 14 (2014) - Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population): 69 (2010), 33 (2014) - Vulnerable employment, total (% of total employment): 80 (1995), 79 (2000), 52 (2014) - Literacy rate, youth female (% of females ages 15-24): 54 (1995), 73 (2010), 81 (2014), 74 (SSA Goals 2014–2015), 100 (SSA Goals 2014–2015 repeated) - Literacy rate, youth male (% of males ages 15-24): 66 (1995), 69 (2000), 70 (2005), 81 (2014), 100 (SSA Goals 2014–2015) - Primary completion rate, total (% of relevant age group): 69 (2005), 62 (2010), 59 (2012), 72 (2014), 100 (SSA Goals 2014–2015) - Total enrollment, primary (% net): 47 (1995), 35 (2000), 41 (2005), 38 (2010), 80 (2014), 100 (SSA Goals 2014–2015) - Ratio of female to male primary enrollment (%): 74 (1995), 92 (2000), 91 (2005), 92 (2010), 96 (2014), 100 (SSA Goals 2014–2015) - Immunization, measles (% of children ages 12-23 months): 63 (1995), 63 (2000), 64 (2005), 58 (2010), 77 (2014) - Mortality rate, infant (per 1,000 live births): 161 (1990), 146 (1995), 112 (2000), 83 (2005), 61 (2010), 55 (2014), 107 (SSA Goals 2014–2015) - Mortality rate, under-5 (per 1,000 live births): 241 (1990), 219 (1995), 164 (2000), 117 (2005), 83 (2010), 73 (2014), 161 (SSA Goals 2014–2015) - Adolescent fertility rate (births per 1,000 women ages 15-19): 156 (1995), 149 (2000), 144 (2005), 127 (2010), 111 (2014), 96 (SSA Goals 2014–2015) - Births attended by skilled health staff (% of total): 51 (1995), 46 (2000), 61 (2010), 66 (2014) - Contraceptive prevalence (% of women ages 15-49): 10 (1995), 11 (2000), 20 (2010), 36 (2014) - Maternal mortality ratio (modeled estimate, per 100,000 live births): 1,200 (1990), 1,900 (1995), 1,300 (2000), 1,100 (2005), 770 (2010), 741 (2012), 496 (2014), 900 (SSA Goals 2014–2015) - Pregnant women receiving prenatal care (%): 84 (1995), 79 (2000), 96 (2010), 87 (2014) - Incidence of tuberculosis (per 100,000 people): 199 (1990), 219 (1995), 242 (2000), 266 (2005), 293 (2010), 308 (2014), 263 (SSA Goals 2014–2015), 100 (SSA Goals 2014–2015) - Prevalence of HIV, female (% ages 15-24): 0.7 (2005), 0.4 (2010), 2.2 (2014) - Prevalence of HIV, male (% ages 15-24): 0.3 (2005), 0.3 (2010), 1.3 (2014) - Prevalence of HIV, total (% of population ages 15-49): 0.3 (1990), 3.1 (1995), 3.3 (2000), 2.2 (2005), 1.5 (2010), 1.2 (2012), 0.5 (2014), 0 (SSA Goals 2014–2015) - Tuberculosis case detection rate (%, all forms): 46 (1990), 30 (1995), 22 (2000), 40 (2005), 56 (2010), 57 (2014), 56 (SSA Goals 2014–2015), 23 (SSA Goals 2014–2015) - Forest area (% of land area): 51 (1990), 48 (2005), 47 (2010), 45 (2014), 44 (SSA Goals 2014–2015), 30 (SSA Goals 2014–2015) - Improved sanitation facilities (% of population with access): 11 (1995), 12 (2000), 15 (2005), 18 (2010), 17 (2014), 35 (SSA Goals 2014–2015), 100 (SSA Goals 2014–2015) - Improved water source (% of population with access): 58 (1995), 61 (2000), 67 (2005), 73 (2010), 75 (2014), 73 (SSA Goals 2014–2015), 100 (SSA Goals 2014–2015) - Internet users (per 100 people): 0 (1995), 0 (2000), 0 (2005), 0 (2010), 2.3 (2014), 5.4 (2015), 14.4 (SSA Goals 2014–2015) - Mobile cellular subscriptions (per 100 people): 0 (1995), 0 (2000), 5 (2005), 39 (2010), 73 (2014), 79 (2015) - Fertility rate, total (births per woman): 7 (1990), 6 (1995), 6 (2000), 5 (2005), 5 (2010), 5 (2014) - GNI per capita, Atlas method (current US$): 280 (1990), 120 (1995), 150 (2000), 120 (2005), 250 (2010), 370 (2012), 2,346 (2014) - GNI, Atlas method (current US$) (billions): 0.6 (1990), 0.3 (1995), 0.5 (2000), 0.4 (2005), 0.8 (2010), 1.6 (2012), 35.3 (2014) - Life expectancy at birth, total (years): 42 (1990), 42 (1995), 46 (2000), 52 (2005), 56 (2010), 61 (2014), 60 (SSA Goals 2014–2015) - Literacy rate, adult total (% of people ages 15 and above): 43 (2000), 54 (2005), 59 (2010), 65 (2014) (Note: Source: World Development Indicators. Values in italics refer to a different year (+/- 1 year).) ### Macro outlook and projections (Table 2: Selected Economic and Financial Indicators, 2014–21) Real sector (annual percentage change) - Real GDP: 0.7 (2014), 0.0 (2015), 2.5 (2016 est.), 4.7 (2017 proj.), 5.2 (2018 proj.), 5.7 (2019 proj.), 6.0 (2020 proj.), 6.5 (2021 proj.) - Real GDP excluding mining sector: 0.3 (2014), 2.6 (2015), 4.3 (2016 est.), 4.1 (2017 proj.), 5.7 (2018 proj.), 6.1 (2019 proj.), 5.3 (2020 proj.), 5.4 (2021 proj.) - Agriculture & fisheries: -3.7 (2014), 0.7 (2015), 1.9 (2016 est.), 3.3 (2017 proj.), 5.6 (2018 proj.), 6.4 (2019 proj.), 6.2 (2020 proj.), 6.0 (2021 proj.) - Mining & panning: 3.3 (2014), -15.9 (2015), -11.5 (2016 est.), 10.4 (2017 proj.), 1.6 (2018 proj.), 1.3 (2019 proj.), 11.9 (2020 proj.), 16.5 (2021 proj.) - Services: 2.3 (2014), 4.3 (2015), 5.4 (2016 est.), 4.8 (2017 proj.), 5.7 (2018 proj.), 6.3 (2019 proj.), 5.0 (2020 proj.), 5.3 (2021 proj.) - Nominal GDP (millions of U.S. dollars): 201 (2014), 220 (2015), 352 (2016 est.), 138 (2017 est. shown in table formatting), 228 (2018 proj.), 925 (2019 proj.), 1,227 (2020 proj.), 6,730? (table shows 252349—preserve as presented) Inflation - Consumer prices (annual average): 9.9 (2014), 7.7 (2015), 8.4 (2016 est.), 8.3 (2017 proj.), 7.7 (2018 proj.), 7.1 (2019 proj.), 7.1 (2020 proj.), 7.5 (2021 proj.) Population (millions): 4.2 (2014), 4.3 (2015), 4.4 (2016 est.), 4.5 (2017 proj.), 4.6 (2018 proj.), 4.7 (2019 proj.), 4.8 (2020 proj.), 4.9 (2021 proj.) Central government operations (percent of GDP, fiscal year) - Total revenue and grants: 27.4 (2014), 32.5 (2015), 32.1 (2016 est.), 30.3 (2017 proj.), 27.1 (2018 proj.), 27.5 (2019 proj.), 27.6 (2020 proj.), 27.6 (2021 proj.) - Total revenue: 23.5 (2014), 22.5 (2015), 20.5 (2016 est.), 23.6 (2017 proj.), 23.8 (2018 proj.), 24.5 (2019 proj.), 24.7 (2020 proj.), 24.8 (2021 proj.) - Grants, including Ebola-related support: 3.9 (2014), 10.0 (2015), 11.7 (2016 est.), 6.7 (2017 proj.), 3.2 (2018 proj.), 2.9 (2019 proj.), 2.9 (2020 proj.), 2.8 (2021 proj.) - Total expenditure and net lending: 29.3 (2014), 40.9 (2015), 39.2 (2016 est.), 37.0 (2017 proj.), 33.4 (2018 proj.), 31.9 (2019 proj.), 31.7 (2020 proj.), 31.4 (2021 proj.) - Current expenditure: 24.3 (2014), 32.0 (2015), 28.4 (2016 est.), 27.3 (2017 proj.), 25.5 (2018 proj.), 23.4 (2019 proj.), 22.8 (2020 proj.), 22.3 (2021 proj.) - Capital expenditure: 5.0 (2014), 8.8 (2015), 10.8 (2016 est.), 9.7 (2017 proj.), 8.0 (2018 proj.), 8.5 (2019 proj.), 8.9 (2020 proj.), 9.1 (2021 proj.) - Overall fiscal balance, including grants: -1.9 (2014), -8.4 (2015), -7.0 (2016 est.), -6.8 (2017 proj.), -6.3 (2018 proj.), -4.4 (2019 proj.), -4.1 (2020 proj.), -3.8 (2021 proj.) - Public external debt (percent of GDP): 13.2 (2014), 23.0 (2015), 28.2 (2016 est.), 32.3 (2017 proj.), 35.9 (2018 proj.), 37.5 (2019 proj.), 38.2 (2020 proj.), 38.5 (2021 proj.) External sector - Current account balance including grants (percent of GDP): -32.5 (2014), -33.6 (2015), -31.3 (2016 est.), -27.7 (2017 proj.), -26.6 (2018 proj.), -26.6 (2019 proj.), -26.5 (2020 proj.), -27.0 (2021 proj.) - Exports (percent of GDP): 24.0 (2014), 13.1 (2015), 12.4 (2016 est.), 12.2 (2017 proj.), 11.8 (2018 proj.), 11.6 (2019 proj.), 12.2 (2020 proj.), 13.5 (2021 proj.) - Imports (percent of GDP): -61.0 (2014), -59.1 (2015), -53.6 (2016 est.), -46.3 (2017 proj.), -42.4 (2018 proj.), -43.2 (2019 proj.), -39.2 (2020 proj.), -38.3 (2021 proj.) - Grants (donor transfers, net): 62.6 (2014), 55.2 (2015), 45.3 (2016 est.), 26.4 (2017 proj.), 24.4 (2018 proj.), 22.5 (2019 proj.), 20.9 (2020 proj.), 17.7 (2021 proj.) - Gross official reserves (millions of U.S. dollars): 411 (2014), 446 (2015), 457 (2016 est.), 509 (2017 proj.), 581 (2018 proj.), 638 (2019 proj.), 688 (2020 proj.), 748 (2021 proj.) - Months of imports of goods and services: 2.4 (2014), 2.6 (2015), 2.7 (2016 est.), 3.0 (2017 proj.), 3.3 (2018 proj.), 3.5 (2019 proj.), 3.6 (2020 proj.), 3.7 (2021 proj.) - CBL's net foreign exchange position (millions of U.S. dollars): 179 (2014), 164 (2015), 189 (2016 est.), 227 (2017 proj.), 302 (2018 proj.), 373 (2019 proj.), 433 (2020 proj.), 493 (2021 proj.) Memoranda - Iron ore price (US$ per metric ton): 975 (2014), 547 (2015), 373 (2016), 374 (2017), 353? (table formatting shows 35), 3636 (table shows sequence 35 36 36; preserve as presented) - Gold (US$ per troy ounce): 1,266 (2014), 1,160 (2015), 1,215 (2016), 1,228 (2017), 1,241 (2018), 1,254 (2019), 1,264 (2020), 1,286 (2021) - Rubber (US cents per pound): 89 (2014), 71 (2015), 67 (2016), 67 (2017), 67 (2018), 67 (2019), 67 (2020) (Sources: Liberian authorities; and IMF staff estimates and projections. Fiscal year July–June. Notes on months of imports and valuation adjustments included in original.) ### Balance of Payments highlights (Table 3, 2014–18; millions of U.S. dollars) - Trade balance: -745 (2014), -841 (2015), -937 (2016 est.), -790 (2017 proj.), -879 (2018 proj.), -781 (2019 proj.), -770 (2020 proj.) - Exports, f.o.b.: 483 (2014), 259 (2015), 266 (2016 est.), 263 (2017 proj.), 266 (2018 proj.), 278 (2019 proj.), 296 (2020 proj.) - Iron ore: 275 (2014), 93 (2015), 115 (2016 est.), 77 (2017 proj.), 55 (2018 proj.), 51 (2019 proj.) - Gold: 185 (2014), 044? (table formatting shows 044), 83 (2016 est.), 87 (2017 proj.), 110 (2018 proj.), 116 (2019 proj.) - Imports, f.o.b: -1,228 (2014), -1,100 (2015), -1,203 (2016 est.), -1,053 (2017 proj.), -1,145 (2018 proj.), -1,060 (2019 proj.), -1,066 (2020 proj.) - Services (net): -1,015 (2014), -852 (2015), -925 (2016 est.), -810 (2017 proj.), -869 (2018 proj.), -564 (2019 proj.), -593 (2020 proj.) - Income (net): -345 (2014), -280 (2015), -283 (2016 est.), -262 (2017 proj.), -240 (2018 proj.), -256 (2019 proj.), -299 (2020 proj.) - Public interest payments due: -2 (2014), -3 (2015), -3 (2016 est.), -4 (2017 proj.), -4 (2018 proj.), -5 (2019 proj.), -7 (2020 proj.) - Current transfers: 1,451 (2014), 1,169 (2015), 1,461 (2016 est.), 1,067 (2017 proj.), 1,320 (2018 proj.), 967 (2019 proj.), 994 (2020 proj.) - Ebola-related grants: 564 (2014), 290 (2015), 0 (2016 est.), 8800? (table shows formatting "8800") - Current account balance: -654 (2014), -804 (2015), -684 (2016 est.), -795 (2017 proj.), -668 (2018 proj.), -634 (2019 proj.), -668 (2020 proj.) - Current account balance, excluding grants: -1,914 (2014), -1,775 (2015), -1,806 (2016 est.), -1,657 (2017 proj.), -1,638 (2018 proj.), -1,238 (2019 proj.), -1,282 (2020 proj.) - Capital and financial account (net): 617 (2014), 707 (2015), 591 (2016 est.), 818 (2017 proj.), 669 (2018 proj.), 685 (2019 proj.), 744 (2020 proj.) - Foreign direct investment (net): 275 (2014), 277 (2015), 257 (2016 est.), 243 (2017 proj.), 258 (2018 proj.), 271 (2019 proj.), 335 (2020 proj.) - Overall balance: -38 (2014), -97 (2015), -93 (2016 est.), 220 (2017 proj.), 5176? (table shows "176" for 2018) - Change in gross official reserves (increase -): -18 (2014), -20 (2015), -34 (2016 est.), -22 (2017 proj.), -12 (2018 proj.), -51 (2019 proj.), -73 (2020 proj.) - Net use of IMF credit and loans: 56 (2014), 80 (2015), 91 (2016 est.), 01? (table shows "0110"), -3 (2019 proj.) (Memorandum items preserve percent-of-GDP series as presented in tables.) ### Fiscal operations (Tables 4a and 4b, 2014–18) Fiscal levels (millions of U.S. dollars) - Total revenue and grants: 549 (2014), 646 (2015), 646 (2016 est.), 657 (2017 proj.), 670 (2018 proj.), 674 (2019 proj.), 650 (2020 proj.) - Revenue: 471 (2014), 447 (2015), 447 (2016 est.), 474 (2017 proj.), 427 (2018 proj.), 526 (2019 proj.), 572 (2020 proj.) - Tax revenue: 386 (2014), 369 (2015), 369 (2016 est.), 399 (2017 proj.), 381 (2018 proj.), 419 (2019 proj.), 461 (2020 proj.) - Grants: 78 (2014), 199 (2015), 199 (2016 est.), 183 (2017 proj.), 244 (2018 proj.), 149 (2019 proj.), 78 (2020 proj.) - Expenditure and net lending: 588 (2014), 809 (2015), 814 (2016 est.), 835 (2017 proj.), 817 (2018 proj.), 826 (2019 proj.), 803 (2020 proj.) - Current expenditure: 488 (2014), 637 (2015), 638 (2016 est.), 614 (2017 proj.), 592 (2018 proj.), 609 (2019 proj.), 611 (2020 proj.) - Wages and salaries: 200 (2014), 249 (2015), 255 (2016 est.), 258 (2017 proj.), 264 (2018 proj.), 259 (2019 proj.), 271 (2020 proj.) - Capital expenditure: 100 (2014), 173 (2015), 176 (2016 est.), 222 (2017 proj.), 224 (2018 proj.), 216 (2019 proj.), 191 (2020 proj.) - Overall balance including grants (millions): -39 (2014), -163 (2015), -167 (2016 est.), -178 (2017 proj.), -146 (2018 proj.), -151 (2019 proj.), -152 (2020 proj.) - Overall balance including grants (percent of GDP): -1.9 (2014), -8.1 (2015), -8.4 (2016 est.), -8.5 (2017 proj.), -7.0 (2018 proj.), -6.8 (2019 proj.), -6.3 (2020 proj.) - Excluding grants (percent of GDP): -5.8 (2014), -18.1 (2015), -18.4 (2016 est.), -17.2 (2017 proj.), -18.7 (2018 proj.), -13.5 (2019 proj.), -9.6 (2020 proj.) - Total public external debt (millions): 264 (2014), 458 (2015), 458 (2016 est.), 615 (2017 proj.), 588 (2018 proj.), 721 (2019 proj.), 861 (2020 proj.) Fiscal memo - Fiscal year nominal GDP (millions of U.S. dollars): 2,005 (FY2014), 2,001 (FY2015), 1,991 (FY2016), 2,104 (FY2017), 2,086 (FY2018), 2,229 (FY2019), 2,401 (FY2020) ### Monetary and financial sector indicators (Tables 5 and 6) Monetary Survey (millions of U.S. dollars) - CBL's gross official foreign reserves: 411 (Dec. 2015), 438 (2014), 446 (2016 prelim.), 457 (2017 proj.), 509 (2017 proj.) - CBL's net foreign exchange position (millions): 179 (Dec. 2015), 181 (2014), 164 (2015), 189 (2016 prelim.), 227 (2017 proj.) - Net domestic assets: -23 (2014), -78 (2015), -28 (2016 prelim.), -12 (2017 proj.), -39 (2018 proj.) - Monetary base (M0): 152 (2014), 116 (2015), 161 (2016 prelim.), 172 (2017 proj.), 203 (2018 proj.) - Broad money (M2): 697 (2014), 713 (2015), 709 (2016 prelim.), 718 (2017 proj.), 763 (2018 proj.) - Broad money (annual change): 2.1 (2014), 2.2 (2015), 1.7 (2016), 1.3 (2017), 6.4 (2018) Financial Soundness Indicators (percent, March 2014–March 2016) - Regulatory capital to risk-weighted assets: 20.5 (Mar 2014), 21.4 (Jun 2014), 23.6 (Sep 2014), 20.3 (Dec 2014), 23.8 (Mar 2015), 18.0 (Jun 2015), 18.8 (Sep 2015), 15.5 (Dec 2015), 16.2 (Mar 2016) - Non-performing loans to total loans: 14.5 (Mar 2014), 15.5 (Jun 2014), 16.3 (Sep 2014), 18.7 (Dec 2014), 18.5 (Mar 2015), 19.2 (Jun 2015), 16.5 (Sep 2015), 15.7 (Dec 2015), 15.7 (Mar 2016) - Return on assets: -0.4 (Mar 2014), -0.3 (Jun 2014), -0.5 (Sep 2014), 0.1 (Dec 2014), -0.6 (Mar 2015), -1.0 (Jun 2015), -0.8 (Sep 2015), -1.0 (Dec 2015), -2.4 (Mar 2016) - Return on equity: -2.6 (Mar 2014), -2.0 (Jun 2014), -3.4 (Sep 2014), 1.0 (Dec 2014), -5.2 (Mar 2015), -8.1 (Jun 2015), -6.7 (Sep 2015), -9.0 (Dec 2015), -18.0 (Mar 2016) - Liquid assets to deposits and designated liabilities: 25.4 (Mar 2014), 41.6 (Jun 2014), 45.9 (Sep 2014), 50.4 (Dec 2014), 44.9 (Mar 2015), 41.8 (Jun 2015), 39.7 (Sep 2015), 36.8 (Dec 2015), 34.7 (Mar 2016) ### Indicators of capacity to repay the Fund (Table 7, SDR millions; 2016–26) - Prospective drawings based on existing and prospective credit: 14.8 (2016; ECF) - Total obligations based on existing and prospective credit (charges and interest, SDR): 0.0 (2016), 0.0 (2017), 2.1 (2018), 10.7 (2019), 20.2 (2020), 23.1 (2021), 23.8 (2022), 21.9 (2023), 18.9 (2024), 7.7 (2025), 3.0 (2026) - Repayments and repurchases: 0.0 (2016), 0.0 (2017), 2.1 (2018), 0.5 (2019), 20.0 (2020), 23.0 (2021), 23.7 (2022), 21.8 (2023), 18.8 (2024), 7.7 (2025), 3.0 (2026) - Outstanding Fund credit (SDR): 130.5 (2016), 130.5 (2017), 128.4 (2018), 117.9 (2019), 97.9 (2020), 74.9 (2021), 51.2 (2022), 29.4 (2023), 10.6 (2024), 3.0 (2025), 0.0 (2026) - Outstanding Fund credit (percent of GDP): 8.6 (2016), 8.0 (2017), 7.2 (2018), 6.0 (2019), 4.6 (2020), 3.3 (2021), 2.0 (2022), 1.1 (2023), 0.4 (2024), 0.1 (2025), 0.0 (2026) - Quota (percent of GDP equivalent as presented): 50.5 (2016), 50.5 (2017), 49.7 (2018), 45.6 (2019), 37.9 (2020), 29.0 (2021), 19.8 (2022), 11.4 (2023), 4.1 (2024), 1.1 (2025), 0.0 (2026) (Notes: RCF of SDR32.3 million approved February 23, 2015. Disbursement schedule of ECF arrangement rephased reflecting delay in completing fourth review. Following 14th General Review, Liberia’s quota increased to SDR258.4 million.) ### Schedule of Disbursements under ECF and RCF (Table 8) - Total: SDR 83.98 million - SDR 7.382 million — November 19, 2012 — Executive Board approval of the three-year ECF arrangement - SDR 7.382 million — July 3, 2013 — Executive Board completion of the first review under the three-year ECF arrangement - SDR 7.382 million — December 11, 2013 — Executive Board completion of the second review under the three-year ECF arrangement - SDR 7.382 million — July 3, 2014 — Executive Board completion of the third review under the three-year ECF arrangement - SDR 32.300 million — September 26, 2014 — Executive Board approval of augmentation of access of 25 percent of quota under an ad hoc review - SDR 32.300 million — February 23, 2015 — Executive Board approval of access of 25 percent of quota under a Rapid Credit Facility - SDR 7.382 million — November 15, 2014 — Executive Board completion of the fourth review under the three-year ECF arrangement - SDR 7.382 million — March 30, 2016 — Executive Board completion of the fifth review under the three-year ECF arrangement - SDR 7.388 million — September 30, 2016 — Executive Board completion of the sixth review under the three-year ECF arrangement *Source: IMF staff estimates and the tables provided in the original document.* ### Annex I. Building Resilience in Liberia and ### Annex I. Building Resilience in Liberia and the Role of the Fund ### Context and current constraints - Liberia is a fragile economy with its economic base and institutional capital substantially damaged by a prolonged violent conflict. - Since the end of conflict in 2003 the government has promoted a reform agenda and made significant progress restoring infrastructure, public services, the economy, and consolidation of state authority with a long term goal of decentralized administration at county level. - The UN Mission in Liberia (UNMIL) has helped move Liberia toward sustainable peace and stability. - Persistent structural challenges: deep inequalities in financial resources and economic and social opportunities; tensions along ethnic lines; stark disparities between a rich minority and an impoverished majority; food insecurity. - Recent shocks exacerbating vulnerabilities: Ebola outbreak and lower commodity prices; political risks related to the 2017 presidential elections, mass youth unemployment, and anger at corruption. ### Key elements of a country strategy for building resilience - Increase economic opportunities. - Careful management of natural resource wealth. - Maintain peace and security. - Adequate public infrastructure investment. - Develop economic and legal institutions. - Promote political inclusion and checks on political power. - Improve governance and the anticorruption framework. - Continue donor support to aid economic recovery and expand fiscal space for public investment. ### Economic growth, diversification, and fiscal policy role - Growth needs to be broad based to meaningfully reduce poverty. - Near-term opportunities: agriculture and natural resource-based activities should be leveraged to establish conditions for diversification into light manufacturing and service exports (SIP). - Conditions required for private sector development: - Stable macroeconomic conditions. - A strong banking sector. - Well developed energy and transport infrastructure. - Predictable business environment. - Medium-term need: rebuild education and training programs to improve workforce skills. - Fiscal policy role: mobilize sufficient resources to fund growth interventions and social protection programs. ### Risk factors and mitigation options - Main risk factors that could derail program implementation and development objectives: - Slowdown of economic recovery from commodity price shock. - Resurgence of the Ebola outbreak. - Social turmoil related to the presidential elections in 2017. - Recommended mitigation policy responses if these risks materialize: - Maintain close communication with the government. - Flexibility in program implementation. - Remote program monitoring and deployment of resident advisors. - Additional financial support. ### Capacity development: past TA, constraints, and the Capacity Building Framework (CBF) - Liberia has received substantial technical assistance (TA) and training focused on: - Public financial management. - Revenue administration. - Monetary policy. - Financial sector supervision. - Statistics. - Delivery and implementation challenges: - Limited capacity. - Ebola crisis delayed TA delivery and implementation of TA recommendations. - Joint Fund-authorities initiative: development of a comprehensive capacity building framework (CBF) for the post-Ebola context. - Key elements of the capacity development strategy: - Improve expenditure control, project implementation capacity, and transparency. - Improve revenue administration and strengthen tax policy and natural resource management capacity. - Produce reliable GDP estimates and build requisite staff capacity. - Develop early warning systems for financial stability threats. - Build capacity for liquidity management to guide monetary policy. - CBF implementation priorities and modalities: - Maximize traction given expiration of the current ECF program and forthcoming presidential elections. - Target TA appropriately, link TA recommendations and training, and ensure stronger collaboration within government. - Shift delivery of TA from diagnostic missions to hands-on capacity development under the CBF. - Enhance coordination between donors and country authorities to better define TA priorities. *Prepared by Charles Amo-Yartey.* ### 5. Increasing debt vulnerabilities call for prudent borrowing policy and economic ### 5. Increasing debt vulnerabilities call for prudent borrowing policy and economic diversification, despite the moderate risk rating ### DSA findings and overall risk assessment - The DSA results indicate a rise in debt vulnerabilities compared with the previous review. - The deterioration is most notable in debt-to-exports and debt-to-GDP ratios in the extreme shock scenario. - The risk of debt distress remains "moderate" as confirmed by the probability approach. - The debt rating is "very close to the high risk category" and "particularly vulnerable to export shocks." - "In the case of a high risk rating caused by any further deterioration in debt and exports outlook, the debt limit conditionality would be reassessed in line with the new debt limit policy." ### Indicators under alternative scenarios (figures A1–A3) - Most extreme stress tests identified (highest ratio on or before 2025) correspond across figures to: - b. Terms shock - c. Terms shock - d. Terms shock - e. Non-debt flows shock - f. One-time depreciation shock - Figures (2015–35) track multiple indicators under Baseline, Historical scenario, and Most extreme shock: - Debt Accumulation (Rate of Debt Accumulation; Grant-equivalent financing % of GDP; Grant element of new borrowing % right scale) - PV of debt-to-GDP ratio - PV of debt-to-exports ratio - PV of debt-to-revenue ratio - Debt service-to-exports ratio - Debt service-to-revenue ratio - Probability of debt distress series (Figure A3) plotted for Baseline, Historical scenario, Most extreme shock, One-time depreciation, and Threshold across 2015–2035 for the same indicator set. ### Key baseline indicators and projections (Table A1: External DSA, baseline, 2012–35) - External debt (nominal) series (percent of GDP): 2012 9.4; 2013 10.9; 2014 13.6; 2015 23.4; 2016 29.2; 2017 33.2; 2018 36.5; 2019 38.3; 2020 39.1; 2025 35.1; 2035 27.2 - Change in external debt: -2.2; 1.5; 2.7; 9.8; 5.8; 4.0; 3.3; 1.8; 0.9; -1.2; -0.7 - Identified net debt-creating flows: -0.2; 2.6; 7.8; 12.8; 9.5; 6.4; 4.2; 2.9; 2.3; -0.6; 0.3 - Non-interest current account deficit: 24.3; 25.0; 30.2; 21.4; 11.7; 33.5; 32.3; 29.0; 26.9; 26.3; 30.3; 24.2; 28.3 (table lists series across years) - Exports (percent of GDP): 48.3; 48.4; 44.2; 39.1; 33.0; 28.3; 25.3; 24.0; 23.5; 25.8; 23.8 - Imports (percent of GDP): 125.6; 113.8; 118.1; 130.0; 119.5; 97.8; 81.7; 78.2; 74.7; 69.7; 57.1 - Net current transfers (negative = inflow): -66.5; -57.4; -61.7; -99.6; 38.2; -73.1; -66.7; -51.3; -40.8; -38.2; -35.7; -26.0; -15.9; -23.0 - of which: official: -26.7; -25.1; -32.2; -37.6; -31.1; -27.3; -25.4; -23.4; -21.7; -14.6; -8.7 - Net FDI (negative = inflow): -22.9; -21.5; -21.6; -13.9; 17.0; -21.2; -22.1; -21.8; -21.5; -21.9; -22.2; -28.9; -23.1; -26.7 - Endogenous debt dynamics: -1.6; -0.9; -0.7; 0.5; -0.7; -0.8; -1.1; -1.5; -1.7; -2.0; -0.8 - Contribution from nominal interest rate: 0.0; 0.1; 0.1; 0.1; 0.2; 0.2; 0.3; 0.3; 0.3; 0.4; 0.3 - Contribution from real GDP growth: -0.8; -0.7; -0.6; 0.4; -0.9; -1.0; -1.4; -1.8; -2.0; -2.4; -1.1 - Residual (3-4): -2.1; -1.2; -5.1; -3.0; -3.7; -2.4; -1.0; -1.1; -1.4; -0.6; -1.0 - PV of external debt: 8.0; 14.5; 17.6; 19.8; 21.5; 22.1; 22.2; 20.5; 16.4 (selected years series) - In percent of exports: 18.2; 37.1; 53.3; 69.7; 84.9; 92.2; 94.5; 79.5; 69.0 - PV of PPG external debt (same series as PV of external debt above) - In percent of government revenues: 34.2; 64.2; 84.5; 85.9; 83.7; 90.0; 90.3; 89.9; 83.5; 60.6 - Debt service-to-exports ratio (in percent): 0.1; 0.8; 0.4; 0.6; 0.9; 1.2; 2.3; 4.3; 6.2; 4.6; 5.1 - PPG debt service-to-revenue ratio (in percent): 0.2; 1.4; 0.8; 1.1; 1.4; 1.5; 2.4; 4.2; 5.9; 4.8; 4.5 - Total gross financing need (Millions of U.S. dollars): 24.1; 73.4; 175.9; 250.3; 218.4; 167.8; 142.7; 144.3; 158.8; 111.7; 226.2 - Non-interest current account deficit that stabilizes debt ratio: 26.5; 23.6; 27.4; 23.7; 26.4; 25.0; 23.6; 24.6; 25.4; 31.4; 24.9 - Key macro assumptions: - Real GDP growth (in percent): 7.9; 8.5; 5.7; 7.1; 1.8; -2.8; 3.9; 3.6; 4.5; 5.5; 5.8; 3.4; 7.1; 4.2; 6.1 - GDP deflator in US dollar terms (change in percent): 7.6; 4.0; 2.3; 6.3; 2.7; 2.2; 0.8; 3.1; 3.1; 4.3; 3.7; 2.9; 1.4; 3.8; 2.3 - Effective interest rate (percent): 0.1; 1.6; 0.7; 0.4; 0.6; 0.9; 0.8; 0.8; 0.8; 0.8; 0.9; 0.8; 1.2; 1.2; 1.2 - Growth of exports of G&S (US$ terms, percent): 26.1; 13.1; -1.4; 15.3; 16.5; -12.1; -11.6; -8.2; -3.9; 4.6; 7.4; -4.0; 10.6; 4.7; 8.6 - Growth of imports of G&S (US$ terms, percent): 9.3; 2.2; 12.2; 16.0; 23.9; 9.4; -3.7; -12.6; -10.0; 5.2; 4.9; -1.1; 4.6; 5.0; 6.6 - Grant element of new public sector borrowing (in percent): 46.9; 53.2; 52.1; 52.7; 53.9; 53.9; 52.1; 44.6; 44.6; 44.0 (series begins later in projections) - Government revenues (excluding grants, percent of GDP): 26.2; 27.5; 23.5; 22.5; 20.5; 23.6; 23.8; 24.5; 24.7; 24.6; 27.0; 25.8 - Aid flows (Millions of US$): 28.3; 45.7; 77.6; 199.1; 243.6; 148.6; 77.9; 77.7; 82.8; 87.5; 196.7 - of which: Grants (same series as Aid flows) - of which: Concessional loans: 0.0 across listed years - Grant-equivalent financing (percent of GDP): 15.5; 15.1; 9.8; 6.5; 6.0; 5.6; 3.1; 3.0; 3.3 (series begins in projections) - Grant-equivalent financing (percent of external financing): 71.4; 83.5; 77.1; 69.0; 69.7; 70.4; 69.2; 70.3; 68.3 (series begins in projections) - Memorandum items: - Nominal GDP (Millions of US$): 1,643.1; 1,853.7; 2,004.7; 1,991.4; 2,085.6; 2,228.6; 2,400.9; 2,639.8; 2,896.3; 4,372.7; 9,836.6 (series) - PV of PPG external debt (Millions of US$): 156.5; 283.4; 353.5; 428.5; 506.2; 572.8; 628.0; 882.6; 1,588.1 - (PVt-PVt-1)/GDPt-1 (in percent): 6.3; 3.5; 3.6; 3.5; 2.8; 2.1; 3.6; 1.3; 0.9; 1.3 ### Sensitivity analysis highlights (Tables A2–A4) - Table A2 (External DSA sensitivity): - Baseline and alternatives for PV of debt-to-GDP+remittances, PV of debt-to-exports+remittances, PV of debt-to-revenue, and debt service ratios presented for 2015–35. - Selected scenario outcomes (examples preserved as listed): - PV of debt-to-exports+remittances ratio (baseline series): 375; 370; 859; 294; 796; 9 (table contains year-by-year series) - Alternative A2 (less favorable financing) increases ratios (e.g., listed values 375; 578; 0; 104; 118; 125; 122; 125) - Bound tests (B1–B6) include shocks such as: - B1: Real GDP growth at historical average minus one standard deviation in 2016–2017 - B2: Export value growth at historical average minus one standard deviation in 2016–2017 - B4: Net non-debt creating flows at historical average minus one standard deviation in 2016–2017 - B6: One-time 30 percent nominal depreciation relative to the baseline in 2016 - Table A4 (Public debt sensitivity): - PV of Debt-to-GDP Ratio baseline: 16; 18; 20; 22; 22; 22; 20; 22; 22; 20; 16 (series) - Alternative scenarios and bound tests show substantial variation: - A2 (Primary balance unchanged from 2015): PV of Debt-to-GDP reaches values such as 61; 92; 224; 272; 943; 67 (table lists multi-year impacts) - B4 (One-time 30 percent real depreciation in 2016) yields higher PV ratios (examples in table) - Memo: "Grant element assumed on residual financing (i.e., financing required above baseline)" equals 6/4/4/2/4/2/4/2/4/2/4/2/4/2/4/2 across listed columns (series shown as "4242424242424242") ### Policy implications and recommended priorities (drawn from assessment) - Prudent borrowing policy is needed given rising vulnerabilities and close proximity to the high risk category. - Economic diversification is emphasized to reduce pronounced vulnerability to export shocks. - If the debt rating moves to "high risk" due to further deterioration in debt and exports outlook, the debt limit conditionality will be reassessed "in line with the new debt limit policy." *Source: IMF staff estimates and projections as presented in _cr16238 - 5. Increasing debt vulnerabilities call for prudent borrowing policy and economic diversification, despite the moderate risk rating.* ### Annex VI. Liberia: Public Debt Management—Enhancing the ### Annex VI. Liberia: Public Debt Management—Enhancing the Debt Management Unit ### A. Policy Context for Public Debt Management (PDM) - The debt carrying capacity of Liberia has weakened, underlining the need to further develop the capacity to analyze the costs and risks of the debt portfolio. - The macroeconomic outlook has been affected by Ebola and the commodity price shock, with exports hit hard and growth slowing down. - External borrowing has accelerated since 2012, with the external debt stock about to rise above regional and developing country averages. - Debt sustainability analysis indicates that the debt ratios breach the high-risk threshold in shock scenarios, with the debt outlook particularly vulnerable to shocks to borrowing terms, growth and exports. ### B. Toward an Updated Medium Term Debt Strategy (MTDS) - Need to develop capacity to analyze the costs and risks of the debt portfolio due to differing characteristics across domestic and external debt (lenders, currency denominations, interest rates and repayment profiles). - Risks inherent in the debt structure should be carefully evaluated and mitigated. - Once analytical capacity is strengthened, update the MTDS based on clear debt management objectives. - A formal MTDS update, informed by the recently concluded DeMPA, should include: - A rigorous analysis of cost and risk. - How the debt portfolio is likely to evolve through time. - Clear specification of sources of financing through external or domestic sources. ### C. Legal and Institutional Arrangements - Adopt a law on PDM (under preparation) that would: - Specify the borrowing regime for the Government. - Define the role of the Debt Management Unit (DMU). - Current responsibilities: - Debt management activities are carried out by the Ministry of Finance and Development Planning (MFDP) and the Central Bank of Liberia (CBL), with inputs from executing ministries/agencies. - Cash planning is carried out by the MFDP; loan servicing to creditors is carried out by the CBL. - Pursuant to Section 28 of the PFM law of 2009, the minister of finance is responsible to oversee all borrowing activities on behalf of the Government of Liberia, subject to the limit granted by the Legislatures in approving the budget. - The minister carries out these functions through the Debt Management Committee (Chair), with the Executive Governor of the CBL, the Minister of State without Portfolio and the Minister of Justice as members. - The new law would include elements of the current regime and the functions of an enhanced and reorganized DMU. - DMU structure and core functions to be established: - Front office: carrying out primary issues and other portfolio management operations, negotiating and managing loans and conditional liabilities. - Middle office: developing the portfolio strategy and an annual financing plan, monitoring implementation of the plan and reporting on activities. - Back office: recording, reconciling, confirming, effecting payment of transactions, providing IT support and strategies, and managing the database. - A new law is required to empower the DMU to achieve PDM objectives, building on current strengths and expert support by the CBL on issuing debt. ### D. DMU Best-Practice Elements (Organization, Staffing, Procedures) - Key elements of importance in line with DMU best practices: - The head of the DMU must be a Director General, who reports directly to the Minister. - Management and reporting of external and domestic debt should be integrated. - The Ministry of Finance must decide how best to target the recruitment process, including upgrading the qualifications of current staff through training programs. - The DMU’s operations should be based on a new procedures manual to be prepared, covering internal management, including communication and dealing with operational risk. - New procedures will be needed to cover the new analytical functions (including preparing and monitoring the MTDS) for when the upgraded DMU becomes fully operational. ### E. Transparency and Accountability - Debt-related, financial and economic statistics should be regularly provided by the Debt Management Office (DMO) to stakeholders: senior financial and economic management, the Legislature, the public and investors. - Debt recording: - Currently primarily carried out in the DMU using the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS). - Utilized by the Comptroller and Accountant General and the Budget Department. - Should be strengthened to include any arrears and should also be used for publication. - Market and institutional transparency improvements: - Regular publication of an issuance calendar would benefit the securities market and provide clarity. - Draw up an agreement between the MoF and the CBL on the use of T-bills for both fiscal and monetary operations purposes. - Prepare a Memorandum-of-Understanding for the securitization of government debt currently on the CBL balance sheet to enhance transparency and the functioning of the primary market for government securities. - Develop the secondary market for government securities and strengthen investor relations year-round with adoption of best practices. ### F. Technical Assistance (TA) Needs, Program and Coordination - Identified TA needs can be met by the IMF, the World Bank (WB) and regional TA training centers. - Planned TA and capacity-building activities and requests: - Organize and enhance operations of the DMU and draft an operations manual. - Training for Debt Sustainability Analysis (DSA) preparation. - Training for evaluation of the risk of the debt portfolio. - Update the MTDS (jointly with the World Bank). - Development of the capital markets. - Identification and backstopping of a long-term resident expert (LTX) in PDM; authorities plan to seek financing for the Advisor from the U.S. Treasury. - IMF and regional training centers support: - IMF to provide TA for training for Debt Sustainability Analysis (DSA) preparation, together with regional TA training centers: the West African Institute of Financial and Economic Management (WAIFEM) and the Tunisia IMF regional training center. - WAIFEM: DMU staff will attend a course on public debt statistics in July 2016. - IMF ready to provide TA in enhancing debt management capacity of the DMU, drafting a procedures manual, evaluating risk of the debt portfolio, updating the MTDS (together with the World Bank), and developing capital markets. - IMF will help identify and backstop a LTX in PDM; authorities plan to seek financing for the Advisor from the U.S. Treasury. *Prepared by George Anayiotos.* ### 2. IMF Relations Note As needed ### 2. IMF Relations Note As needed ### RELATIONS WITH THE WORLD BANK GROUP (As of June 2, 2016) - Country Partnership Strategy (CPS) for Liberia discussed by the Board of the World Bank Group on July 30, 2013; CPS period: 2013 -2017. - CPS overarching objective: support the Government’s Agenda for Transformation (AfT) to contribute to sustained growth, poverty reduction and shared prosperity while exiting fragility and building resilience. - CPS pillars aligned with three AfT pillars: - (i) Economic Transformation; - (ii) Human Development; - (iii) Governance and Public Sector Institutions. - Cross-cutting themes: capacity development and gender equity to be mainstreamed throughout the Bank Group’s portfolio. - World Bank Group program under CPS: combination of development policy lending, investment lending and analytical work. - IDA allocation for CPS period: approximately US$308 million, including IDA 16 (up to June 2014) and the full IDA 17 allocation. - Majority of IDA financing focus: investment in the energy and transport sectors; support for building institutional and human capacity for AfT implementation and the country’s long-term vision plan. - IFC expected investment over CPS period: US$25–35 million per year. - Current IFC portfolio (amounts as stated): - US$24.4 million in equity; - US$37.3 million credit and trade lines; - US$13 million seed investment in the West Africa Venture Fund (US$6.8 million allocated for Liberia and balance for Sierra Leone); - US$33.5 million debt financing approved and committed to the rubber and cocoa sectors. - IFC priority sectors: agribusiness, infrastructure including power, financial services and mining. - IFC advisory services: investment climate improvement, leasing, finance services infrastructure and private sector development. - World Bank Group Ebola response: commitment of some US$177 million from the Crisis Response Window (CRW); rapid review of strategy and portfolio post-Ebola to ensure alignment with development needs. ### ACTIVE IDA PROJECTS (summary) - Total active IDA projects: twelve active projects (including three regional projects). - Total commitment: approximately US$594.4 million. - Undisbursed: approximately US$219.7 million. - Three new projects approved in FY2016 totaling US$30.0 million (summarized below): - Liberia Urban Water Supply Project - Approval date: March 24, 2016. - Amount: US$10 million. - Development objectives: increase access to piped water supply services in the project area in Monrovia and improve operational efficiency of Liberia Water and Sewer Corporation (LWSC). - Components: (a) infrastructure improvements in Monrovia (targeted repairs, rehabilitations, distribution network extension); (b) capacity building for LWSC including project management and monitoring and evaluation arrangements. - Liberia Social Safety Net Project - Approval date: April 28, 2016. - Amount: US$10 million. - Development objective: establish building blocks of a basic national safety net delivery system and provide income support to households who are both extremely poor and food insecure in the Republic of Liberia. - Components: - (i) Strengthening of the National Social Safety Net System (information system, data collection, household registration, eligibility screening); - (ii) Cash Transfers to Extremely Poor and Food Insecure Households (income support to about 10,000 households through regular cash transfers); - (iii) Project Management and Capacity Building (capacity building of the Ministry of Gender, Children and Social Protection and strengthening coordination at national and subnational levels). - Liberia Youth Opportunities Project - Approval date: November 6, 2015. - Amount: US$10 million. - Development objectives: improve access to income generation opportunities for targeted youth and strengthen government capacity to implement its cash transfer program. - Components: - (i) Pre-employment Social Support and Household Enterprises for Urban Youth; - (ii) Productive Public Works and Life Skills Support for vulnerable rural youth; - (iii) Capacity Building for Cash Transfer Program (improving targeting; strengthening ICT systems and electronic payments; establishing information management systems; ensuring a functional M&E system; strengthening social accountability and grievance redress systems); - (iv) Project Implementation and Coordination (supporting implementation and coordination across ministries and agencies). ### ECONOMIC AND SECTOR WORK - Public Expenditure Review (PER) (2013): comprehensive PER exploring options for fiscal space enlargement to accommodate additional expenditure required for AfT implementation. - PER focuses on: (a) improving efficiency of public expenditure; (b) increasing external grants; (c) mobilizing greater revenue from taxes, non-tax revenue and natural resources; (d) public sector borrowing. - Human development PER (2012): covers education, health and social protection sectors. - Notes public spending on human development is low by Sub-Saharan Africa (SSA) standards. - Examines sources and levels of funding, budgetary allocations across and within sectors, and quality, equity and efficiency of public expenditure on human development. - Policy note on Jobs: “Creating More and Better Jobs in Liberia: Issues and Options (2014).” - Motivation: concern over relatively high rates of joblessness post-conflict. - Constraints: lack of critical knowledge; limitations of traditional labor market metrics to capture informal sector and underemployment. - Data sources: 2007 and 2010 Core Welfare Indicator Questionnaires Survey (CWIQS); 2010 Labor Force Survey; 2012 Poverty Note; other quantitative and qualitative analyses. - Focus: systematic analysis of labor market on demand and supply sides and effects of employment protection legislation. ### FINANCIAL RELATIONS (as at June 2, 2016) - Active and Disbursing Projects (U.S. Dollars): aggregate figures and project-level balances as presented. - Total approved amount (sum listed): 594,400,000.00 - Undisbursed Balance: 219,696,870.54 - Disbursed Outstanding Balance: 327,815,975.46 - Selected project-level entries (project — Approved Amount — Approval Date — Closing Date — Undisbursed Balance — Disbursed Outstanding Balance): - Ebola Emergency Response Project — 115,000,000.00 — 18-Nov-14 — 30-Sep-16 — 486,180.00 — 108,651,666.00 - Liberia Health Systems Strengthening — 10,000,000.00 — 30-May-13 — 30-May-18 — 3,804,224.49 — 5,594,535.51 - Liberia: Public Sector Modernization Project — 2,000,000.00 — 10-Feb-14 — 30-Sep-19 — 131,989.62 — 1,831,930.38 - Liberia Accelerated Electricity Expansion Project (LACEEP) — 35,000,000.00 — 30-May-13 — 30-Jun-18 — 27,377,389.76 — 5,448,130.24 - LR Smallholder Tree Crop Revitalization Support Project — 15,000,000.00 — 5-Jun-12 — 30-Nov-18 — 6,363,537.04 — 7,243,622.96 - WAPP APL4 (Phase 1) - Cote d'ivoire, Sierra Leone, Liberia, and Guinea Power System Re-development — 144,500,000.00 — 31-May-12 — 31-Oct-19 — 108,516,497.96 — 22,364,742.04 - Liberia Integrated Public Financial Management Reform Project — 5,000,000.00 — 15-Dec-11 — 30-Jun-16 — 21,827.96 — 4,467,132.04 - Liberia Road Asset Management Project - LIBRAMP — 50,000,000.00 — 20-Sep-12 — 30-Jun-22 — 31,233,439.79 — 15,058,960.21 - Liberia Road Asset Management Project - LIBRAMP — 67,700,000.00 — 7-Jun-11 — 30-Jun-22 — 28,884,088.14 — 31,576,591.86 - LIBERIA Electricity System Enhancement Project (LESEP) — 22,000,000.00 — 26-Jan-12 — 31-May-17 — 4,611,518.97 — 15,308,241.03 - LIBERIA Electricity System Enhancement Project (LESEP) — 10,000,000.00 — 30-Nov-10 — 31-May-17 — 195.55 — 9,118,004.45 - West Africa Regional Communications Infrastructure Program — 25,600,000.00 — 20-Jan-11 — 30-Sep-16 — 1,050,722.41 — 21,814,917.59 - West Africa Regional Fisheries Program — 9,000,000.00 — 20-Oct-09 — 15-Sep-16 — 13,866.43 — 8,122,373.57 - LR-Urban and Rural Infrastructure Rehabilitation Project — 19,600,000.00 — 24-Jan-14 — 30-Jun-17 — 3,153,943.60 — 14,801,896.40 - LR-Urban and Rural Infrastructure Rehabilitation Project — 20,000,000.00 — 29-Jun-10 — 30-Jun-17 — 51,550.46 — 19,026,529.54 - LR-Urban and Rural Infrastructure Rehabilitation Project — 44,000,000.00 — 21-Apr-09 — 30-Jun-17 — 3,995,898.36 — 37,386,701.64 - Note: "Amounts may not add up to original principal due to changes in the SDR/US exchange rate since signing." - IDA Disbursements and Debt Service (Since HIPC Completion Point) — US$ Million (by period): - Jul 2010–Jun 2011: Total disbursements 61.83; Repayments 0.33; Net disbursements 61.49; Interest and fees 0.05 - Jul 2011–Jun 2012: Total disbursements 55.27; Repayments 0.00; Net disbursements 55.27; Interest and fees 0.12 - Jul 2012–Jun 2013: Total disbursements 40.18; Repayments 0.00; Net disbursements 40.18; Interest and fees 0.25 - Jul 2014–Jun 2015: Total disbursements 183.6; Repayments 0.00; Net disbursements 183.6; Interest and fees 0.79 - Jul-Sept 2015: Total disbursements 17.5; Repayments 0.00; Net disbursements 17.5; Interest and fees 0.17 - Oct-Dec 2015: Total disbursements 64.4; Repayments 0.00; Net disbursements 64.4; Interest and fees 0.34 - Jan-Mar 2016: Total disbursements 24.4; Repayments 0.0; Net disbursements 24.4; Interest and fees 0.07 - Apr-Jun 2016: Total disbursements 12.7; Repayments 0.0; Net disbursements 12.7; Interest and fees 0.38 - Projected*: (header present in source; no numeric projection listed) ### RELATIONS WITH THE AFRICAN DEVELOPMENT BANK (As of May 15, 2016) - Active AfDB projects: 18 active projects plus trust-funded projects. - Portfolio total commitment: approximately UA 273.86 million, equivalent to US$377.93 million. - Disbursement rate: about 30 percent disbursed. - Selected AfDB-supported projects and key details: 1. Integrated Public Financial Management Reform Project (IPFMRP) - AfDB grant: UA 3.0 million; approved September 10, 2012. - Total project amount reported: US$28.55 million (pooled funding with World Bank, USAID, and SIDA). - Five components: (i) enhancing budget planning and credibility; (ii) strengthening budget execution, accounting and reporting; (iii) strengthening revenue administration; (iv) enhancing transparency and accountability; (v) project management and capacity building. - Support ends on March 31, 2017. 2. Regional Payment Systems Development Project - UA 5 million supplementary grant enabling Liberia to join WAMZ Payments System Development Project. - Components: Real Time Gross Settlement (RTGS); Retail Payments Automation (RPA); Automated Checks Processing (ACP); Automated Clearing House (ACH); Central Banking Applications (CBA); telecommunication infrastructure. - Objective: improve financial sector infrastructure in WAMZ and increase participation in formal financial sector. 3. Liberia–Urban Water Supply and Sanitation Project (UWSSP) - UA 26.1 million grant. - Objectives: improve water and sanitation in Monrovia, Buchanan, Kakata, and Zwedru; enhance institutional, operational, management capability, and long-term financial viability of LWSC. - Components: (i) Rehabilitation and augmentation of water treatment and distribution systems; (ii) Provision of public sanitation facilities; (iii) Institutional support; (iv) Environmental and Sanitation Sensitization. 4. Agriculture Sector Rehabilitation Project (ASRP) - UA 18.4 million project financed by UA 12.5 million grant from AfDB, UA 3.4 million grant from IFAD, and in-kind government funding. - Covers eight of fifteen counties. - Goal: contribute to food security and poverty reduction by increasing incomes of smallholder farmers and rural entrepreneurs (including women). - Components: Agriculture Infrastructure Rehabilitation (60 percent of cost); Agricultural Production and Productivity Improvement; Project Management. 5. Smallholder Agricultural Productivity Enhancement and Commercialization (SAPEC) Project - UA 34.08 million total: UA 29.08 million GAFSP grant, UA 4.0 million ADF loan, UA 1.0 million in-kind government contribution. - Coverage: 12 of 15 counties over 2014 to 2017; scales up ASRP. - Components: (i) Sustainable Crop Production Intensification; (ii) Value Addition and Marketing; (iii) Capacity Building and Institutional Strengthening; (iv) Project Management. 6. Maryland Oil Palm Plantation (MOPP) – Private Sector - Location: Maryland and Grand Kru Counties. - Activities: rehabilitate and operate 9,000 hectare plantation; develop two nurseries; 6,000 hectare out grower scheme for 750 families; construct oil mill with 90 tons fresh fruit bunches per hour capacity. - Total project cost: USD 203.3 million (USD 164.9 million industrial component; USD 38.4 million out grower scheme). 7. Equity investment in Access Bank (ABL) - Equity: US$1.2 million in share capital. - Capital increase of US$209,000 approved in 2012. - Access Bank benefiting from US$460,000 grant from FAPA approved in 2015 for technical assistance. 8. Fostering Innovative Sanitation and Hygiene in Monrovia - Grant: Euro 1.2 million from the African Water Facility administered by ADB. - Objectives: increase access to sustainable and affordable sanitation services; reduce WASH-related disease vulnerability; implement FS management system producing affordable FS fertilizer. 9. Paving Fish Town – Harper Road Project (Phase I) - Objective: provide efficient road transport access to South East Counties and neighboring Mano River Union States. - Upgrading: Fish Town–Harper Road (Phase 1): Harper–Karloken section (50km). - Estimated cost: UA 43.04 million (including GoL counterpart of UA 1.0 million). - Expected outcomes: improved socio-economic inclusion; investment attraction and employment creation; facilitated cross-border trade; employment generation during and after construction. 10. Mano River Union (MRU) Road Development and Transport Facilitation Program - Program scope: upgrade to bitumen standard 276.35 km of roads across eastern Guinea, West and South-West Côte d’Ivoire, and eastern Liberia. - Execution: June 2015 to June 2019. - Estimated net total cost: UA 221.97 million. - Liberia’s portion: UA 76.88 million loan from ADF and TSF covering Karloken-Fish Town (80 km) and Harper-Cavalla junction (16 km). - Includes construction of joint border control posts. 11. Regional Electricity Interconnection Project: Cote d’Ivoire, Liberia, Sierra Leone and Guinea (CLSG) - Infrastructure: construct a 1,357-km-long double circuit high voltage (225 kV) line connecting national networks of the four countries. - Overall project cost: UA 331.51 million; implementation over 2014–17. - Bank Group contribution (ADF, FSF and NTF): UA 128.15 million (38.7 percent of total cost). - Expected beneficiaries: some 24 million residents in the impact area. - Projected impact: raise average electricity access rate in the four countries from 28 percent in 2012 to 33 percent by 2017. *Prepared by the World Bank and the African Development Bank as indicated in the source.* *Document prepared by the World Bank and African Development Bank (as noted in the content).* ### 12. Ebola Response Projects: Between 2014 and 2015, the AfDB prepared various multinational ### 12. Ebola Response Projects: Between 2014 and 2015, the AfDB prepared various multinational projects in response to the Ebola Virus Disease (EVD) ### Ongoing Ebola-related AfDB Operations (2014–2015) - Ebola Fight Back Budget Support Program: - Total: UA 100.2 million multinational program across Côte d’Ivoire, Guinea, Liberia and Sierra Leone. - Liberia’s portion: UA 40.2 million loan. - Purpose: address fiscal gap created by the epidemic, support crisis response measures, and address longer term issues to develop economic resilience. - Strengthening West Africa Public Health Systems (SWAPHS): - Total: UA 40 million multinational project. - Liberia allocation: USD 11.4 million grant directly allocated to Liberia. - Strategic outcomes: (i) build human resource capacity and systems for emergency response and preparedness; (ii) infrastructure development; (iii) strengthen governance and regional institutions. - Post Ebola Recovery Social Investment Fund (PERSIF): - Financing: UA 2 million grant. - Purpose: seed funding to establish a Social Investment Fund to finance demand-driven, small-scale activities via calls for proposals; catalytic role in improving community response to outbreaks; contribute to inclusive growth, gender equality and poverty reduction in the three affected countries. ### Technical Assistance from Fragile States Facility and Other Trust Funds - Promoting local, participatory governance for County Development Funds: - Grant: UA 114,833. - Objectives: minimize corruption and ensure effective delivery of development initiatives in the 15 counties of Liberia by: (i) increasing public awareness of County Development and Social Development Funds; (ii) building capacity of 750 youths to engage decision makers and fund managers; (iii) active participation in planning, monitoring, and reporting on the funds. - Capacity Building and Technical Support to the National Housing Authority: - Grant: UA 240,000. - Focus: develop capacity for architects, engineers, draftsmen and surveyors; improve internal functions including budgeting, monitoring, procurement, financial reporting and IT systems. - Technical Assistance and Capacity Building Support to the Liberia Institute of Statistics and Geo-Information Services (TCB-LISGIS): - Grant: UA 500,000. - Purpose: strengthen institutional and staff capacity; conduct analysis, publish and disseminate results from the HIES and other surveys; data use to monitor Agenda for Transformation 2012–2017 and the Bank’s Country Strategy Paper 2013–17. - Program of Assistance to Trade Support Institutions in Liberia (PATSIL): - Project amount: UA 658,735. - Focus: human capacity building for key trade support institutions; analyze and enhance trade policy framework; improve institutional productivity of Ministry of Commerce and Industry and National Ports Authority through logistical support. ### Key Statistical Issues (As of June 21, 2016) - General: - Data have serious shortcomings that significantly hamper surveillance; most serious in national accounts, government finance, and balance of payments statistics. - National Accounts: - Comprehensive national accounts data, including GDP, are not available due to limited capacity. - Fund staff estimate GDP by activity using production approach and primary source data from LISGIS; GDP by expenditure estimates not available. - NAAS 2012 processing completed in June 2014 but identified issues; GDP estimates for 2008–13 present serious inconsistencies. - AFRITAC West 2 and World Bank assisted LISGIS to develop more robust GDP estimates based on NAAS 2012 and administrative data; authorities preparing to publish these estimates. - HIES activity: - With World Bank support, HIES conducted January–July 2014 but ceased in August due to Ebola. - Full 12-month HIES started January 2016; data processed and will be used to develop preliminary household final consumption expenditure (HFCE) estimates. - Price Statistics: - LISGIS CPI base year: December 2005. - Prices collected only in Monrovia; weights last updated in 2006 based on neighboring countries’ data. - AFRITAC West 2 and EDDI2 projects assisting LISGIS to introduce in 2016 a new market basket based on six month 2014 HIES. - By 2019, weights expected to be updated based on full 12-month HIES and national price collection introduced. - PPI: not currently compiled; Economic Census planned for 2016. - Government Finance Statistics (GFS): - Liberia reported annual GFS to STA up to 2013 for budgetary central government and central government excluding social security. - Ministry of Finance phasing in GFSM 2001 framework. - 2013 GFS TA mission found: lack of legal framework to collect GFS; limited data sharing; inconsistent institutional coverage of general government; omission of some externally funded flows and nonmonetary transactions; lack of government financial balance sheet (Table 6 in GFSY). - DFID-funded TA mission scheduled for September 2016 to address some issues. - Monetary and Financial Statistics (MFS): - MFS mission in April 2013 assisted implementation of standardized report forms (SRFs); SRF project has not moved forward since then. - Data submission suspended March 2014; resumed April 2016 with reporting of central bank, other depository corporations’ and interest rate data until January 2016, but with gaps in central bank reporting form. - Financial Sector Surveillance: - Authorities provide some basic FSIs but data insufficient for stress tests or Balance Sheet Approach analysis. - Cross border exposure data for financial corporations not available. - External Sector Statistics: - Balance of payments compiled on BPM5 basis; CBL making efforts to adopt BPM6. - International Investment Position (IIP) statistics not compiled. - Areas needing improvement: primary source data, methodology, compilation practices, frequency and timeliness. - Coverage gaps: current (investment income), capital (development aid, remittances), financial accounts (direct investment, portfolio investment, reserve assets). - August 2015: CBL developed a three year work plan to address issues and conduct new surveys to improve coverage and accuracy. - Data Standards and Quality: - Participant in GDDS since October 2005; metadata updated January 2013. - No Data ROSC mission conducted. - Reporting to STA: - Authorities report annual BOP and GFS for IFS, GFSY, BOPSY. - Some FSIs provided for IMF database but not all core FSIs; reported indicators not timely. - Reserves data have not been reported for many years. ### Table of Common Indicators Required for Surveillance (selected entries) - Exchange Rates: - Date of Latest Observation: 5/30/2016 - Date Received: 6/4/2016 - Frequency of Data: D - Frequency of Reporting: M - Frequency of Publication: D - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: - Date of Latest Observation: 4/2016 - Date Received: 6/3/2016 - Frequency: M (data), M (reporting), Q (publication) - Reserve/Base Money; Broad Money; Central Bank Balance Sheet; Consolidated Balance Sheet of the Banking System; Interest Rates; Consumer Price Index: - Date of Latest Observation: 4/2016 - Date Received: 6/3/2016 (interest rates and CPI received 6/3/2016) - Frequency: M (data), M (reporting), Q (publication) - GDP/GNP: - Date of Latest Observation: 2008 - Date Received: 3/1/2011 - Frequency of Data: A - Frequency of Reporting: I - Frequency of Publication: I - Notes on frequency codes: Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); not available (NA). ### Statement by the Executive Director for Liberia (July 8, 2016) — Key points - Introduction: - Authorities broadly agree with staff assessment; view discussions as consistent with Agenda for Transformation (AFT 2012–2017). - Recent Economic Developments and Macroeconomic Outlook: - Commodity price shock and Ebola impact: - GDP growth: 8.7 percent in 2013 to 0 by 2015. - Economic activity expected to rebound to 2.5 percent in 2016. - Medium term average growth: 5.5 percent. - Risks: possible resurgence of Ebola. - Health sector: targeted investment; Bill submitted to establish a National Health Institute. - Inflation: remained in single digits due to lower international food and oil prices, improved domestic food production, and exchange rate stability. - Current account: deteriorated in 2015 due to decline in export earnings; exports declined by about 40 percent relative to 2014. - Politics: general and presidential elections scheduled October 2017; first elected leader transfer of power to another expected. - Security: investment in recruiting and training additional security personnel in line with UNMIL drawdown. - Fiscal Policy and Public Financial Management: - 2016/17 Budget resource envelope declined by 11 percent compared to 2015/16. - Budget anchored in Medium Term Expenditure Framework; measures to boost revenue include amendments to the Revenue Code focusing on strengthening indirect taxation. - Recurrent expenditures being streamlined to safeguard social spending; capital spending limited to ongoing PSIP projects. - Legal framework requires budgets submitted to Legislature to be “balanced”; one-off election and security costs plus revenue shortfall create challenges. - Need for additional funding from development partners and highly concessional financing for critical projects. - PFM reforms: IFMIS roll-out, payroll verification, new procurement regulations, progress on Treasury Single Account (TSA). - Debt Management: - Authorities aware of risks of debt thresholds escalating to high risk; committed to borrowing limits agreed with the Fund. - Consultations on new debt management manual ongoing. - Preference: grants first, then highly concessional financing. - Monetary and Exchange Rate Policies: - Monetary policy stance: support low inflation and exchange rate stability. - CBL Board approved three-year financial plan in December 2015 targeting gross reserves at about 3 months of prospective imports by end-2016. - Improved collaboration between fiscal and monetary authorities; institutionalized liquidity management framework. - Government intends to continue discussions to reverse CBL Act amendment mandating issuance of currency subject to Legislature approval to strengthen central bank autonomy. - Financial Sector Policies: - Authorities committed to preserving banking sector stability; CBL engaged IMF to set up macroprudential supervision framework. - CBL launched Financial Sector Development Implementation Project (FSDIP) to reform capital adequacy and stress testing frameworks consistent with Basel Committee standards. - To address high NPLs: strengthen CBL enforcement and supervisory capacities and explore an Asset Management Company for distressed assets. - Correspondent banking: heavy loss of relationships noted. - AML/CFT: authorities committed to fully fund the FIU in FY2017 budget; joint effort with U.S. Treasury OTA to strengthen AML/CFT regime. - Financial inclusion: development of regulatory framework for additional delivery channels; 11 rural community finance institutions (RCFIs) established to boost rural access to finance. - Structural Reforms: - Authorities committed to reforms for economic diversification, infrastructure improvement, and business environment. - Agriculture prioritized under Liberia Agriculture Transformation Agenda. - Electricity constraints: - Consumption cost above $0.54 per kilowatt hour. - First HFO power plant operating; two more plants expected to start in coming months. - Mount Coffee hydropower project expected to produce electricity from December 2016. - Grant agreement signed with Millennium Challenge Corporation (MCC) to boost transmission, distribution and access. - WTO accession ratified by Senate in April 2016; awaiting House concurrence. - Conclusion: - Authorities reaffirm commitment to capacity building and prudent policies for economic recovery. - Collaboration with development partners and continued Fund engagement and technical assistance in implementing the Ebola Economic Recovery Plan. *Source: IMF staff report and accompanying statement (as provided in the content unit).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16238.pdf_