IMF Executive Board Concludes 2018 Article IV Consultation with Liberia
IMF News, June 13, 2018
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- Published: June 13, 2018
Context and baseline scenario
- Mission and timing:
- The Executive Board concluded the Article IV consultation with Liberia on June 8, 2018; press release dated June 13, 2018.
- The baseline scenario is staff’s interpretation of the authorities’ stated policies as articulated at the time of the March 2018 mission.
- Country situation:
- A new government is in place with a mandate to achieve ambitious development objectives.
- Liberia’s economy appears poised for recovery: growth bottomed out in 2016 and edged to 2.5 percent in 2017.
- Decline in aid inflows (which were elevated during 2014–16) has put pressure on the exchange rate and fiscal resources.
- The government faces a demanding development agenda while managing near-term adjustments and safeguarding macroeconomic stability.
- Risks:
- Main upside risk: an increase in commodity prices and output.
- Main downside risks: difficulties in mobilizing resources to fill the financing gap and in pursuing structural and institutional reforms.
Executive Board assessment and policy priorities
- Overall judgment:
- Directors noted the economy appears poised for recovery but significant fragilities remain.
- Assuming sound policies, Directors agreed the medium‑term outlook is favorable, albeit with risks.
- Directors welcomed the authorities’ pro‑poor agenda and stressed that macroeconomic stability is essential for advancing this agenda.
- Fiscal policy and debt sustainability:
- Need to anchor fiscal policy with the goal of ensuring debt sustainability over the medium term.
- Urged increased efforts to mobilize additional domestic resources.
- Specific revenue-side action: enhance the IT system of the revenue authority to improve tax compliance and efficiency.
- Emphasized improved governance, greater fiscal transparency and accountability to improve spending efficiency.
- Welcomed efforts to contain the public wage bill and encouraged redirection of budgetary expenditures to capital spending, especially for rebuilding infrastructure.
- Future debt obligations should be undertaken transparently, limited to concessional terms, with effective implementation of infrastructure projects.
- Monetary policy and central bank:
- Maintaining macroeconomic stability hinges on effective implementation of monetary policy.
- Recapitalization of the Central Bank of Liberia (CBL) would be necessary to equip it with effective operational tools.
- Need to safeguard international reserves, and preserve governance principles and central bank independence.
- External sector and exchange rate:
- Strengthen the external position by allowing greater exchange rate flexibility while maintaining price stability.
- Institute structural reforms to improve productivity and competitiveness and reduce the public saving‑investment gap.
- Financial sector and banking risks:
- Need to reduce risk in the banking sector by reducing nonperforming loans, including by clearing government obligations to the banks.
- Complete implementation of the CBL’s Action Plan of reform.
- The remittance surrender requirement, while currently appropriate, should be lifted when foreign exchange market conditions allow.
- Data and capacity development:
- Acknowledged recent improvement in trade and aid data but serious data shortcomings remain.
- Urged continued enhancement of data quality, especially in national accounts and external data.
- Underscored the key role of capacity development and technical assistance for Liberia.
Selected economic indicators (2016–19)
- Output
- Real GDP growth (%): 2016: -1.6; 2017: 2.5; 2018: 3.2; 2019: 4.7
- Prices
- Inflation – average (%): 2016: 8.8; 2017: 12.4; 2018: 11.7; 2019: 10.5
- Central Government (percent of GDP; fiscal year July 1 to June 30; commitment basis)
- Revenue and grants (% of GDP): 2016: 51.9; 2017: 33.3; 2018: 31.0; 2019: 28.2; with revised GDP column shows 2019: 28.3
- Expenditure (% of GDP): 2016: 56.1; 2017: 36.0; 2018: 35.8; 2019: 33.4
- Fiscal balance (% of GDP): 2016: -4.2; 2017: -2.7; 2018: -4.8; 2019: -5.2; with revised GDP column shows 2019: -5.1
- Public Debt (% of GDP) (excluding central government debts from the Central Bank of Liberia): 2016: 28.6; 2017: 18.3; 2018: 24.6; 2019: 30.8
- Money and Credit
- Broad money (% change): 2016: -2.5; 2017: 1.7; 2018: 6.0
- Credit to private sector (% change): 2016: 2.3; 2017: 14.7; 2018: 10.0
- Balance of Payments
- Current account (% of GDP): 2016: -28.9; 2017: -18.5; 2018: -22.7; 2019: -22.4; with revised GDP column shows 2019: -22.3
- Reserve (in months of imports)4: 2016: 3.0; 2017: 3.1
- External public debt (% of GDP)2: 2016: 28.0; 2017: 17.9; 2018: 22.7; 2019: 26.3; with revised GDP column shows 2019: 29.9
- Exchange rate
- NEER (% change): 2016: -7.3; 2017: -16.7
- REER (% change): 2016: 0.1; 2017: -9.6
- Notes on indicators:
- The numbers expressed in percent of GDP are not comparable to those referenced in IMF Country Report 17/348 due to the revisions to GDP estimates.
- Reserve measure in months of next year's imports excludes imports related to UNMIL operations and FDI projects such as iron-ore concessions.
- Sources: Liberian authorities; IMF staff estimates.
IMF Communications Department — Press Release No. 18/235 (June 13, 2018).
