IMF Staff Concludes Visit to Liberia

IMF News, June 26, 2019

Source details

Press Release No. 19/243
Date: June 26, 2019
Mission leader: Mika Saito
Mission dates: visited Monrovia June 12 - 24, 2019
Purpose: to discuss possible financial support under the Extended Credit Facility and to support the authorities’ objectives of restoring macroeconomic balance, addressing governance and public sector institutional weaknesses, improving the business climate, and putting Liberia on a fiscally sustainable and inclusive growth path.
Principal interlocutors: His Excellency President George Manneh Weah; Speaker of the House of Representatives Dr. Bhofal Chambers; President Pro Tempore of the Senate Albert Chie; Finance Minister Samuel D. Tweah; Central Bank Governor Nathaniel R. Patray; Minister of Commerce Wilson K. Tarpeh; Members of the House and Senate; senior government and central bank officials; development partners.
IMF Communications Department media relations contact: PRESS OFFICER: Meera Louis; Phone: +1 202 623-7100; Email: MEDIA@IMF.org

External shocks identified: a fall in key commodity prices, lingering effects of Ebola, and a rapid depreciation of the exchange rate.
Economic outcomes noted:
- Growth has slowed.
- Reserve stocks have come under significant pressure.
- Macroeconomic imbalances have increased.
- Inflation accelerated, and now stands at about 23 percent.
Immediate priority: macroeconomic stabilization, particularly a lowering of inflation.
Social impact: difficult economic conditions and loss of purchasing power are being felt particularly by the most vulnerable members of society, many of whom are experiencing significant hardship.

Credible and executable budget for FY2020 and beyond is essential for the success of the reform agenda.
Key fiscal requirements:
- Expenditure must be held to a level consistent with realistic estimates of the resource envelope to enable predictable and efficient budget execution and to avoid accumulation of domestic arrears.
- Securing enough resources will require both additional revenue measures and reforms to reallocate expenditure.
- The public sector wage bill currently accounts for almost 65 percent of total budget expenditure and is effectively crowding out needed spending in other areas.
- Full implementation of a credible and equitable wage restructuring program is essential to the success of the overall reform agenda.

The mission noted the importance of rebuilding foreign exchange reserves to improve resilience to external shocks, consistent with Fund-supported program objectives.
Exchange rate guidance:
- The mission highlighted the importance of allowing the exchange rate to remain flexible.
- The mission also highlighted the importance of improving the transparency of CBL’s foreign exchange operations.
The mission welcomes the new monetary policy framework developed by the Central Bank of Liberia (CBL), aiming to better manage monetary conditions to achieve price stability.
The mission supports the CBL’s intention to achieve greater alignment of interest rates on its newly introduced monetary policy instruments.
A caveat: success of the new monetary policy framework will hinge on a successful fiscal program and the elimination of additional government borrowing from the CBL.

The reform agenda will place requirements on:
- Managing the CBL’s operational budget.
- Improving internal controls and oversight.
- Strengthening governance.
The mission welcomed the recent appointment of non-executive Governors of the CBL and the two acting deputy governors—as essential for improvement in the bank’s operational efficiency and governance.

Discussions included a package of growth-enhancing structural reforms to:
- Strengthen public financial management.
- Reduce corruption.
- Improve the business climate.
The mission noted the need to improve private sector confidence in the reform agenda, attain better economic outturns in the years ahead, and for the government to work closely with business to remove unnecessary administrative barriers and reduce corruption.

Good progress was made in several areas, including the contours of the FY2020 budget, the stance and modalities of monetary policy, and a structural reform program consistent with the Government’s Pro-Poor Agenda for Prosperity and Development.
Discussions will continue over the period ahead.
Mission closing statement excerpt: “The Mission would like to thank the authorities for the excellent cooperation it received, and for the candid and constructive discussions that facilitated a productive exchange of views. It looks forward to further discussions to follow in the period ahead.“

IMF Communications Department — End-of-Mission press release