Press Release: IMF Executive Board Completes Fourth Review under the Extended Credit Facility Arrangement for Liberia and Approves US$10.2 Million Disbursement
IMF News, December 21, 2015
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- Press Release: IMF Executive Board Completes Fourth Review under the Extended Credit Facility Arrangement for Liberia and Approves US$10.2 Million Disbursement
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- Published: December 21, 2015
Review completion and disbursement
- The Executive Board completed the fourth review under an Extended Credit Facility (ECF) arrangement for Liberia on December 21, 2015.
- Completion of the review enables the disbursement of SDR 7.38 million (about US$10.2 million).
- Total disbursement under the arrangement after this payment: SDR 69.21 million (about US$95.8 million).
Waivers, re-phasing, and extension
- The Board approved waivers for the nonobservance of the performance criteria on government revenues and central bank net foreign exchange position.
- The Board approved the re-phasing and extension of the arrangement to end-2016 in light of delays caused by the Ebola outbreak.
- The ECF arrangement for Liberia was originally approved by the IMF’s Executive Board on November 19, 2012 (Press Release No 12/449) for SDR 51.68 million (about US$71.6 million).
- The arrangement was extended on October 14, 2015 to allow for completion of the fourth review.
Ebola-related assistance and total financing
- The IMF provided an ad hoc disbursement of SDR 32.3 million (about US$44.7 million) in augmentation of access under the current ECF Arrangement (see Press Release No 14/441).
- The Board approved an SDR 32.3 million (about US$44.7 million) disbursement under the Rapid Credit Facility (RCF).
- The Board approved debt relief under the Catastrophe Containment and Relief (CCR) Trust.
- Total financing provided to help the country meet urgent balance of payments and fiscal needs resulting from the epidemic: SDR 90.44 million (about US$125.2 million).
IMF assessment and policy guidance (statement by Mr. David Lipton, First Deputy Managing Director and Acting Chair)
- Progress and challenges:
- Liberia has largely overcome the Ebola epidemic, credited to decisive policy actions, unprecedented international support, and strong community engagement.
- The sharp decline in global commodity prices is holding back the economic recovery.
- Performance under the authorities’ Fund-supported program has been uneven due to the epidemic and, to a lesser extent, policy slippages.
- Policy priorities to sustain recovery and macroeconomic stability:
- Strong program implementation is important to sustain macroeconomic stability, improve policy credibility, and secure additional donor financing.
- Fiscal policy next year will remain accommodative to support the recovery.
- Reallocation of resources toward the health and education sectors is appropriate.
- In light of limited fiscal space, caution is needed in considering tax relief for companies in the commodity sector.
- Authorities should press ahead with addressing public financial management weaknesses and further strengthen revenue administration.
- Debt and financing strategy:
- Borrowing policies should remain prudent in the context of lower growth prospects.
- Financing needs, particularly for large investment projects, should be covered mostly with grants and concessional loans to facilitate capital projects while preserving debt sustainability.
- External buffers, monetary policy, and financial stability:
- Rebuilding external buffers in Liberia’s dual currency regime requires containing the central bank’s operational expenses and limiting foreign exchange intervention only to smoothing volatility.
- More effective liquidity management and further development of monetary policy instruments will help safeguard price stability.
- Strengthening the prudential oversight of the banking system and the framework for crisis management remains critical to tackle threats to financial stability.
Program instruments and features (as noted in the press release)
- ECF: The ECF replaced the Poverty Reduction and Growth Facility as the Fund’s main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.
- RCF: The RCF provides rapid financial support in a single, up-front payout for low-income countries facing urgent financing needs. Financial assistance under the RCF is provided as an outright disbursement to Poverty Reduction and Growth Trust (PRGT)-eligible members that face an urgent balance of payments need, and where a full-fledged economic program is either not necessary or not feasible.
IMF Press Release No. 15/583 — December 21, 2015