Press Release No. 07/74

Press Release: Statement by IMF Mission to Liberia on Progress Under the Staff Monitored Program

April 16, 2007

The following statement was issued on April 11 in Monrovia by Mr. Robert Powell, the International Monetary Fund (IMF) mission chief for Liberia:

"The IMF mission team visited Monrovia during March 28-April 11 to assess progress to date under the staff monitored program (SMP) for 2007, and to discuss the planned budget for 2007/08. Meetings were held with Minister of Finance Antoinette Sayeh, the Executive Governor of the Central Bank of Liberia (CBL) J. Mills Jones, Acting Minister of Planning Simeon Moribah, members of the Ways and Means Committee of the Legislature, other senior government officials, and members of the donor community and private sector. The mission also met with President Ellen Johnson-Sirleaf. The mission worked closely with staff from the World Bank and the African Development Bank."

"Liberia's economic recovery continues to strengthen, and medium term prospects have improved. In 2006, real GDP growth is estimated to have increased by 7.8 percent, driven mainly by construction, the recovery in the agricultural sector, and the donor-funded expenditures in the country. A similar growth rate is projected for 2007. Over the period 2008-2012, growth is now projected to average over 11 percent, buoyed by the expected revival of mining, forestry and agricultural sectors. Inflation is expected to remain in the single digits anchored on a balanced cash-based budget and broad exchange rate stability.

"The government has achieved most of the quantitative and structural benchmarks under the SMP through end-March 2007. In particular, revenues continue to exceed the program targets by a significant margin. This positive outcome reflects the government's continued efforts, with the support of the international community, to strengthen the tax system, including improvements in revenue administration and enforcement. Further support and training is being provided to government ministries to expedite the implementation of their approved spending plans. Implementation of the government's domestic debt resolution strategy has commenced, and the government has also broadened and updated the consumer price index to give a more accurate measure of inflation.

"The financial operations of the CBL have continued to improve in line with program targets. The 2006 external audit of the CBL is being carried out by a major international audit firm, and steps are being taken to ensure that CBL audits continue to be carried out in line with international best practice.

"The mission discussed the government's projections for the budget in 2007/08. The government intends to propose a cash-balanced budget to the legislature involving a further significant increase in both revenues and expenditures. We have encouraged the authorities to ensure that the draft budget is presented to the legislature in good time to allow its debate and approval in advance of the start of the new fiscal year in July.

"Discussions were also held with the government on its plans for further economic reform over the next three years. Key objectives will include maintaining macroeconomic stability, further strengthening public financial management and the banking sector, and implementing tax reform, the anti-corruption, and domestic debt resolution strategies that were developed in 2006.

"Looking ahead, the mission notes that the continued success of the government's economic program will require prompt action on key legislation, as well as strong support from Liberia's international partners. Timely approval of the 2007/08 budget will be critical in providing clarity to line ministries on their resource envelopes and support for the continued strengthening of Liberia's fiscal policy framework. Similarly, approval of legislation to merge the Bureau of the Budget into the Ministry of Finance would help further strengthen public financial management, and make budget implementation more effective. Support of the legislature will also be necessary to commence implementation of the government's anti-corruption strategy and to implement plans to eliminate the granting of tax exemptions.

"Finally, Liberia's external debt is clearly unsustainable, and comprehensive debt relief is required. Continued progress under the SMP, together with sufficient indications of support from donors, would be important steps towards clearance of arrears to the IMF and would help pave the way for Liberia's timely participation in the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief Initiatives."