IMF Executive Board Approves US$213.6 Million ECF Arrangement for Liberia

IMF News, December 11, 2019

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Canonical URL: IMF Executive Board Approves US$213.6 Million ECF Arrangement for Liberia

On December 11, 2019, the Executive Board approved a four-year arrangement under the Extended Credit Facility (ECF) for Liberia in an amount equivalent to SDR 155 million (60 percent of quota or about US$ 213.6 million).
The Executive Board’s decision enables an immediate disbursement of SDR 17 million (about US$ 23.4 million).
The program aims to help restore macroeconomic stability, provide a foundation for sustainable growth, and address weaknesses in governance.

Inflation and year-on-year exchange rate depreciation are high at 30 percent.
Growth is described as subdued.
Liberia’s external vulnerabilities are significant, and foreign reserve stocks have fallen to low levels.
Recent macroeconomic difficulties arose from a decline in external assistance, weak domestic revenue generation, limited expenditure adjustments (especially on wages), and an accommodative monetary policy stance, resulting in:
- An unsustainable fiscal stance,
- The emergence of arrears,
- Excessive central bank financing,
- Depletion of fiscal and external buffers,
- Pressure on inflation and the exchange rate.

Primary objectives:
- Restoring macroeconomic stability while protecting the poorest segment of the population from the burden of adjustment.
- Putting Liberia on a fiscally sustainable growth path, aligned with the objectives of the Pro-Poor Agenda for Prosperity and Development (PAPD).
- Addressing weaknesses in governance and institutions of the public sector to safeguard scarce resources.
The program also aims to catalyze substantial external support to ensure the programmed adjustment is politically and economically feasible and to ensure public and external debt sustainability.

Fiscal policy:
- The recent upfront fiscal tightening is welcome; full implementation of the recently instituted set of fiscal controls is important to preserve gains and maintain budget credibility.
- Strengthening tax policy and administration over the program period is critical to ensure that the public sector can operate effectively.
- The authorities are committed to adhere to the ceiling on non-concessional borrowing and to refrain from non-transparent collateralized agreements under the Fund-supported program.
Monetary policy:
- The monetary tightening by the Central Bank of Liberia (CBL) enacted in November 2019 was necessary to reduce inflation.
- A key prerequisite for success is full adherence to the program prohibition on government borrowing from the CBL.
- Building resilience will require containing the CBL’s operational expenses and limiting foreign exchange intervention.
Financial sector and governance:
- Ensuring financial sector stability is an important element of the program.
- Improving data reporting and obtaining an overview of the health of the banking system are necessary to identify and address financial sector vulnerabilities.
- Taking decisive measures as needed and enhancing the legal framework will ensure the CBL has the required instruments if remediation is necessary.
- Structural reforms aimed at improving governance will help reduce vulnerabilities to corruption and promote private-sector led growth.

President George Weah launched the Pro-Poor Agenda for Prosperity and Development (PAPD) in October 2018; its objectives of building roads and improving social services have largely been delayed due to lack of funding.
The IMF-supported program is intended to stabilize the economy, catalyze financing for the PAPD, and put Liberia on a sustainable medium-term growth trajectory.

Press Release No. 19/451 — December 11, 2019, International Monetary Fund.