IMF Executive Board Concludes 2019 Article IV Consultation with Liberia
IMF News, June 11, 2019
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- Published: June 11, 2019
Overview
- On May 31, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Liberia.
- Liberia is described as a fragile, post-conflict country with weak capacity and limited physical and human capital accumulation.
- External assistance is winding down from its peak in 2016.
- The government launched the Pro-Poor Agenda for Prosperity and Development (PAPD) focusing on physical and human capital accumulation.
- Policy uncertainty and slippages over the past two years contributed to higher fiscal deficits, accommodative monetary policy, rapid depreciation of the Liberia dollar, and increased inflation, eroding the purchasing power of the poor.
Outlook and Scenarios
- Baseline scenario:
- Growth is projected to slow further to about 0.4 percent in 2019 and remain below 2 percent into the medium-term.
- In the baseline scenario, the authorities face the possibility of a forced, abrupt adjustment when domestic and external financing options are exhausted.
- Alternative reform scenario:
- Presented as a more viable alternative.
- Growth weakens somewhat in the near term due to proactive fiscal and monetary tightening, but picks up significantly over the medium term to exceed 5 percent by 2024.
Executive Board Assessment
- Directors noted that Liberia faces major economic challenges and welcomed authorities’ efforts to bolster macroeconomic stability.
- Key emphasis by Directors:
- Steadfast and well-sequenced policies and structural reforms are essential to enhance macroeconomic stability and promote higher, sustainable, and inclusive growth.
- Garnering support from the international community for the PAPD will be important.
- Significant fiscal adjustment is needed, focusing on mobilizing domestic revenue and rationalizing spending, especially the wage bill, while securing space for social and capital spending.
- Authorities should formulate realistic budgets and implement a sound borrowing plan that ensures debt sustainability; exercise caution with non-concessional borrowing.
- Further progress in public financial management reforms is needed to improve the quality of spending.
- The Central Bank of Liberia (CBL) should tighten monetary policy with the objective of reducing inflation to single digits by 2021.
- Further issuance of CBL bills should be suspended until the cost is included in the government budget and the fiscal financing gap is closed without CBL financing.
- Although banking-sector indicators suggest adequate capitalization, the CBL should enhance supervisory efforts and prioritize strengthening supervisory, regulatory, and resolution frameworks given elevated nonperforming loans, focusing on improving loan underwriting standards.
- Improve the external position by tightening monetary and fiscal policies, allowing greater exchange rate flexibility, and raising competitiveness through improvements in the business environment.
- Aggressive efforts are needed to strengthen governance and reduce corruption; upgrade anticorruption and AML/CFT frameworks in line with international standards.
- Continued efforts to improve the quality and availability of data are essential for Fund surveillance and economic policy making.
Fiscal and Monetary Recommendations
- Fiscal:
- Mobilize domestic revenue.
- Rationalize spending, especially the wage bill.
- Secure needed space for social and capital spending.
- Formulate realistic budgets.
- Implement a sound borrowing plan to ensure debt sustainability.
- Exercise caution with non-concessional borrowing.
- Advance public financial management reforms to improve spending quality.
- Monetary:
- CBL should tighten policy to reduce inflation to single digits by 2021.
- Suspend further issuance of CBL bills until the operation’s cost is included in the government budget and the fiscal financing gap is closed without CBL financing.
- Financial sector:
- Enhance CBL supervisory efforts.
- Strengthen supervisory, regulatory, and resolution frameworks.
- Prioritize measures to improve loan underwriting standards.
Key Indicators (selected series from Table 1)
- Real GDP (annual percent change)
- 2016: -1.6
- 2017: 2.5
- 2018 (Act. 2018AIV): 3.2
- 2019 (Est. with previous GDP): 1.2
- 2019 (Est. with revised GDP): 4.7
- 2020 (Proj.): 0.4
- 2021: 1.6
- 2022: 1.3
- 2023: -1.3
- 2024: -0.5
- Mining & panning (annual percent change)
- 2016: -33.0
- 2017: 28.8
- 2018: 22.3
- 2019: 24.2
- 2020: 13.1
- 2021: 13.2
- 2022: 9.7
- 2023: 6.8
- 2024: 6.6
- Non-mining (annual percent change)
- 2016: 2.6
- 2017: 0.2
- 2018: 1.1
- 2019: 3.6
- 2020: -1.4
- 2021: 0.3
- 2022: -2.7
- 2023: -1.7
- 2024: 3.3
- Nominal non-mining per capita GDP (U.S. dollars)
- 2016: 460
- 2017: 724
- 2018: 695
- 2019 (with previous GDP): 484
- 2019 (with revised GDP): 657
- 2020: 577
- 2021: 635
- 2022: 618
- 2023: 609
- 2024: 604
- 2024 (Proj., alternate column): 594
- 2024 (last column): 613
- Nominal GDP (millions of U.S. dollars)
- 2016: 2101
- 2017: 3277
- 2018: 3284
- 2019: 3341
- 2020: 3249
- 2021: 3542
- 2022: 3221
- 2023: 3217
- 2024: 3266
- 2024 (alternate columns): 3437, 3499, 3712
- Inflation, Consumer prices (annual average)
- 2016: 8.8
- 2017: 11.7
- 2018: 20.4
- 2019: 10.5
- 2020: 24.5
- 2021: 20.5
- 2022: 17.5
- 2023: 24.0
- 2024: 13.5
- (additional columns): Consumer prices (end of period): 12.5, 13.9, 11.0, 27.0, 10.0, 22.0, 19.0, 16.0, 33.0, 15.0, 12.0
- Population (millions)
- 2016: 4.2
- 2017: 4.4
- 2018: 4.9
- 2019 (various columns): 4.5, 5.0, 4.6, 4.8, 5.1, 5.2
- Central government operations (Percent of GDP, fiscal year)
- Total revenue and grants
- 2016: 52.0
- 2017: 33.3
- 2018: 31.0
- 2019: 28.2
- 2020: 26.0
- 2021: 28.3
- 2022: 28.0
- 2023: 28.4
- 2024: 28.7
- (additional columns): 28.6
- Total revenue (percent of GDP)
- 2016: 21.8
- 2017: 14.0
- 2018: 14.3
- 2019: 12.9
- 2020: 13.0
- 2021: 13.6
- 2022: 13.7
- 2023: 14.1
- 2024: 14.5
- (additional columns): 14.7, 14.8, 14.9
- Grants
- 2016: 30.2
- 2017: 19.3
- 2018: 16.7
- 2019: 15.2
- 2020: 14.2
- 2021: 13.8
- 2022: 13.4
- Total expenditure and net lending
- 2016: 56.2
- 2017: 36.0
- 2018: 35.8
- 2019: 31.5
- 2020: 33.4
- 2021: 34.1
- 2022: 35.2
- 2023: 35.6
- 2024: 34.2
- (additional columns): 34.7, 34.3
- Current expenditure
- 2016: 35.7
- 2017: 22.9
- 2018: 22.1
- 2019: 21.3
- 2020: 22.8
- 2021: 23.2
- 2022: 22.7
- 2023: 20.9
- 2024: 20.2
- (additional columns): 20.1
- Capital expenditure
- 2016: 11.3
- 2017: 10.2
- 2018: 13.3
- 2019: 14.4
- Overall fiscal balance, including grants
- 2016: -4.2
- 2017: -4.8
- 2018: -5.2
- 2019: -5.5
- 2020: -5.1
- 2021: -6.1
- 2022: -6.8
- 2023: -6.9
- 2024: -6.0
- Overall fiscal balance, excluding grants
- 2016: -34.4
- 2017: -22.0
- 2018: -21.5
- 2019: -20.4
- 2020: -18.6
- 2021: -19.8
- 2022: -21.1
- 2023: -19.5
- 2024: -19.9
- (additional column): -19.4
- Financing gap / unidentified financing
- 2016: 0.0
- 2017: -0.4
- 2018: -1.5
- 2019: -0.9
- 2020: -1.1
- 2021: -0.6
- 2022: -0.7
- Public external debt (percent of GDP)
- 2016: 18.0
- 2017: 26.3
- 2018: 29.9
- 2019: 38.6
- 2020: 42.2
- 2021: 47.5
- 2022: 52.5
- 2023: 55.4
- Public domestic debt (percent of GDP)
- 2018: 12.7
- 2019: 8.0
- 2020: 15.8
- 2021: 16.5
- 2022: 12.2
- Of which, Central Bank of Liberia: 10.6, 11.9, 12.3
- Monetary and credit indicators
- M2/GDP
- 2016: 32.0
- 2017: 19.9
- 2018: 23.6
- 2019: 24.8
- 2020: 23.9
- 2021: 20.3
- Credit to private sector (percent of GDP)
- 2016: 12.8
- 2017: 14.6
- 2018: 15.4
- 2019: 16.4
- 2020: 16.8
- 2021: 16.9
- 2022: 15.6
- Credit to private sector (annual percent change)
- 2016: 2.3
- 2017: 5.3
- 2018: 2.4
- 2019: -2.9
- 2020: -3.7
- Velocity (GDP-to-M2): 4.1, 4.0
- Money multiplier (M2/M0): 3.9
- External sector
- Current account balance including grants
- 2016: -28.9
- 2017: -23.4
- 2018: -22.4
- 2019: -22.3
- 2020: -23.3
- 2021: -23.1
- 2022: -24.4
- 2023: -16.4
- 2024: -17.2
- (additional columns): -16.7
- Current account balance excluding grants
- 2016: -73.6
- 2017: -47.2
- 2018: -43.6
- 2019: -39.0
- 2020: -38.5
- 2021: -36.4
- 2022: -37.6
- 2023: -37.4
- 2024: -38.4
- (additional columns): -29.9, -30.9, -29.8
- Trade balance
- 2016: -43.9
- 2017: -28.2
- 2018: -20.2
- 2019: -18.2
- 2020: -18.5
- 2021: -17.5
- 2022: -14.7
- 2023: -13.5
- 2024: -13.7
- (additional columns): -9.0, -9.3
- Exports
- 2016: 18.1
- 2017: 11.6
- 2018: 12.4
- 2019: 19.6
- 2020: 21.0
- 2021: 20.6
- 2022: 21.1
- Imports
- 2016: -62.0
- 2017: -39.8
- 2018: -33.2
- 2019: -31.1
- 2020: -35.2
- 2021: -32.7
- 2022: -33.1
- 2023: -34.7
- 2024: -29.5
- (additional columns): -30.4, -30.6
- Grants (donor transfers, net)
- 2016: 44.6
- 2017: 16.6
- Financing gap ( - deficit / + surplus)
- 2018: -1.0
- 2019: -0.8
- Gross official reserves (millions of U.S. dollars)
- 2016: 453
- 2017: 407
- 2018: 405
- 2019: 358
- 2020: 429
- 2021: 261
- 2022: 173
- 2023: 87
- 2024: 84
- (additional columns): 85
- Months of imports of goods and services4
- 2016: 3.0
- 2017: 3.1
- 2018: 2.1
- 2019: 0.8
- 2020: 0.7
- 2021: 0.6
- CBL's net foreign exchange position (millions of U.S. dollars)
- 2016: 165
- 2017: 128
- 2018: 124
- 2019: 106
- 2020: 164
- 2021: -3
- 2022: -61
- 2023: -113
- 2024: -77
- (additional columns): -36, 2
Source: IMF Communications Department press release, June 11, 2019.
