## Public Information Notice: IMF Discusses Liberia's Post-Conflict Conditions and Economic Program for 2004/05 _IMF News, December 3, 2004_ ## Source details **Canonical URL:** [Public Information Notice: IMF Discusses Liberia's Post-Conflict Conditions and Economic Program for 2004/05](https://www.imf.org/en/news/articles/2015/09/28/04/53/pn04135) ## Other formats - [Markdown version](/en/news/articles/2015/09/28/04/53/pn04135/index.md) - [Structured JSON version](/en/news/articles/2015/09/28/04/53/pn04135/index.json) - [Bundle manifest](/en/news/articles/2015/09/28/04/53/pn04135/bundle-manifest.json) ## Bibliographic details - Published: December 3, 2004 --- ### Background - Peace agreement signed in August 2003 ended fifteen years of intermittent civil wars. - Two-year transitional government established with mandate to rebuild institutional capacity and prepare for elections in October 2005. - Security improvements: deployment of 15,000 UN peace-keepers and demobilization of 65,000 combatants. - Post-2003 recovery supported by donor assistance and related manufacturing and services activities. ### Macroeconomic performance and projections - Real GDP developments: - Following severe contraction in the second half of 2003, the economy started to recover. - Real GDP is projected to increase by about 21 percent in the second half of 2004, compared to the second half of 2003. - Expected to expand further, although at a slower pace, in the first half of 2005, driven by increasing donor support and a partial recovery of agriculture activities. - Price developments: - Consumer prices (annual average) reported as: 12.1, 14.2, 15.0, ..., 5.0 (for the listed periods). - Exchange rate: - Official exchange rate (Liberian dollar per U.S. dollar; end of period) listed as: 49.5, 65.0, 50.0. ### Fiscal and monetary developments - Fiscal execution and policy: - A basic economic program for the first half of 2004 was successfully implemented. - A cash-based budget was executed, without recourse to domestic financing. - Revenue-enhancing measures boosted revenue; some steps taken to strengthen the budget process, including expenditure controls. - For 2004/05, the budget continues to be cash-based, without recourse to domestic financing. - Spending plans geared toward social projects, reestablishment of security and the justice system, and some repayments of domestic arrears. - Monetary operations and banking system: - The Central Bank of Liberia (CBL) accommodated increased demand for local currency without affecting the exchange rate; reserves recovered modestly. - First steps toward a more transparent and market-based framework for banking operations included introduction of foreign exchange auctions and removal of ceilings on lending rates. - Scope for monetary policy constrained by high degree of dollarization; authorities intend to further develop instruments of monetary policy to be utilized as demand for local currency increases. - Recent slippages and risks: - Emergence of domestically financed budgetary deficits and measures that led to higher expenses at the CBL have put undue pressures on the financial position of the banking system. - Recent slippages in the fiscal and monetary areas noted as a concern; IMF is working with the authorities on a package of corrective measures. - Liberia has been in continuous arrears to the Fund since 1984; declaration of noncooperation issued in 1986; voting and related rights suspended in March 2003. - At end-July 2004, Liberia's arrears to the Fund amounted to SDR 506 million or 709 percent of quota. ### Governance, structural reforms, and external relations - Petroleum and timber: - Authorities intend to implement final steps to liberalize petroleum product imports, with technical support from the World Bank. - Working with external partners on measures that could lead to lifting of sanctions on timber exports. - Institutional agenda: - Focused agenda to reestablish a transparent budget process; accountable revenue-generating agencies; and a market-based and transparent framework for the operations of the CBL and banking system. - Technical assistance from the Fund expected to continue, in particular to improve statistical reporting. ### Executive Board assessment — Findings - Directors welcomed improvements in security and the incipient economic recovery. - Commended successful implementation of the basic economic program for the first half of 2004 based on a cash-based budget without recourse to domestic financing. - Welcomed steps to improve the budget process and CBL operating framework, including foreign exchange auctions and removal of ceilings on lending interest rates. - Regretted slippages since June 2004 caused by additional spending and reemergence of a cash deficit financed domestically. - Noted high degree of dollarization limiting scope of monetary policy. - Noted recent slippages in financial management of the CBL and irregularities in accounting of official reserves and data provided to the Fund as a setback; welcomed immediate corrective steps taken by authorities. ### Executive Board assessment — Policy recommendations and conditions - Fiscal policy and public finance: - Maintain a cash-based budget to foster fiscal discipline. - Make expenditure controls fully effective; Cash Management Committee should implement policies consistently to prevent circumvention of agreed procedures. - Develop an equitable strategy for settlement of domestic arrears, balancing treatment of domestic and external arrears. - Strongly caution against resorting to domestic borrowing given arrears and financial fragility of the CBL and domestic banking system. - Monetary policy and financial sector: - Develop monetary policy instruments with external assistance to expand policy scope as demand for local currency increases. - CBL should redouble efforts to strengthen its financial position and lay the ground for effective banking supervision in anticipation of financial sector recovery. - Governance and external cooperation: - Continue close cooperation with the Fund on corrective measures and ensure full and timely implementation of understandings reached with staff. - Emphasized importance of close cooperation with external partners and development of concrete and time-bound action plans to support the reform agenda. - Supported request for technical assistance from the Fund, particularly to improve statistical reporting. - Remedial measures and Fund relations: - Directors expressed willingness to consider initiation of de-escalation of remedial measures related to Liberia's overdue financial obligations to the Fund once steps to reverse recent policy slippages are fully implemented and understandings on a staff-monitored program for 2005 are reached. - A number of Directors expected the authorities to consider increasing monthly payments to the Fund as the international reserves position improves. ### Selected economic and financial indicators (selected figures from table) - Real GDP (annual percentage change, unless otherwise indicated): 4.9; 3.3; -29.5; 23.1; 20.5. - Consumer prices (annual average): 12.1; 14.2; 15.0; ...; 5.0. - Central government operations (In percent of GDP, calendar year): - Total revenue and grants: 13.0; 12.9; 10.8; 16.1; 13.7. - Of which: tax revenue: 11.4; 12.5; 9.5. - Total expenditure and net lending: 10.2; 17.2. - Of which: current expenditure: 7.6; 4.6; 5.5. - Capital expenditure: 6.1; 9.6. - Overall fiscal balance (cash basis): -0.7; -1.3; 0.7; -1.1; 0. - External sector (In percent of GDP): - Current account balance, including grants (deficit, -): -20.3; -7.6; -12.3; -9.0. - Of which: public interest payments due: -12.7; -8.0; -10.1; -13.5; -11.2; -26.3; -8.7; -12.0; -24.7; -18.7. - Trade balance (deficit, -): -2.7; -11.4; -70.1; -62.9. - Exports, f.o.b.: 23.9; 29.6; 21.4; 9.4; 8.3. - Imports, c.i.f.: -36.3; -32.3; -79.6; -71.2. - Public sector external debt outstanding (total): 455.3; 476.8; 613.3; 640.9; 588.8. - Selected monetary and nominal levels (In millions of U.S. dollars, unless otherwise indicated): - Current account balance including grants (deficit, -): -198.5; -6.1; -33.4; -26.5; -23.3; -65.9; -15.3; -50.4; -150.6; -163.3. - Nominal GDP: 534.4; 561.8; 442.2; 214.8; 259.8. - Official exchange rate (Liberian dollar per U.S. dollar; end of period): 49.5; 65.0; 50.0. *Public Information Notice: IMF Discusses Liberia's Post-Conflict Conditions and Economic Program for 2004/05 — December 3, 2004* --- ## References - [Liberia and the IMF](http://www.imf.org/external/country/LBR/index.htm) - [Public Information Notices](https://www.imf.org/en/news/searchnews) - [Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/pn04135_