IMF Executive Board Completes the First and Second Review under the Extended Credit Facility for Liberia, and Approves US$48.86 Million Disbursement
December 21, 2020
- The completion of the first and second reviews enables an immediate disbursement of US$48.86 million, of which US$38 million will fill the fiscal financing gap arising from the impact of COVID-19.
- Restoring macroeconomic stability, providing a foundation for sustainable inclusive growth, and addressing weaknesses in governance remain the main objectives of this program.
- Economic activity is projected to contract by about 3.0 percent in 2020, reflecting the effects and challenges from the COVID-19 disruptions, but signs of recovery are now emerging with growth projected to reach 3.2 percent in 2021.
- While the fiscal stance has been loosened to meet humanitarian needs, tight monetary policy, much improved public financial management, domestic revenue mobilization, and no central bank financing have helped achieve price and exchange rate stability, preserving the purchasing power of the poor.
WASHINGTON, DC: Today, the Executive Board of the International Monetary Fund (IMF) completed the first and second reviews under the Extended Credit Facility (ECF). The four-year ECF arrangement, with a total access of SDR155 million (60 percent of quota or about US$214.30 million) was approved by the IMF Executive Board on December 11, 2019. Completion of the first and second reviews enables the immediate disbursement of SDR34 million (US$48.86 million), bringing total disbursements under the arrangements to SDR51 million (about US$72.20 million).
After mixed program performance initially, the authorities have taken corrective actions to address weaknesses in the program and they continue to make progress in structural reforms. Reflecting the impact from the COVID-19 pandemic, the growth forecast for 2020 has been revised down from 1.4 percent at the program’s inception to -3.0 percent. Assuming global conditions gradually normalize, growth is projected to reach 3.2 percent in 2021, but downside risks to the outlook are high. Liberia remains fragile and vulnerable to shocks as both fiscal and external buffers remain low. Liberia continues to be assessed as having a sustainable debt burden, but borrowing space is limited.
Following the Executive Board discussion, Mr. Tao Zhang, Acting Chair and Deputy Managing Director, made the following statement:
“The COVID-19 pandemic continues to exert significant strain on Liberia’s fragile economy. The authorities have taken the necessary steps to stabilize the economy amid multiple challenges. A modest fiscal loosening is appropriate to meet humanitarian needs during the COVID19 pandemic.
“The authorities are committed to fiscal discipline and further improvements in cash management, transparency and accountability in spending, and domestic revenue mobilization to finance their development agenda. The monetary policy stance is appropriately aligned with the inflation objective, and significant progress has been made in strengthening central bank independence. In the context of the gradual de-dollarization of fiscal spending, it is important to further refine instruments for open market operations and enhance policy coordination between the central bank and the government.
“Further efforts are needed to contain the central bank’s operational expenses and build up reserves. Rebuilding confidence in the financial sector is critical for financial stability. Priority should be given to addressing risks from weak financial institutions and ensuring the supply and quality of Liberian dollar banknotes. Further improvements in governance are necessary for efficient delivery of public services. Steps are being taken to clear the fiscal audits backlog, further enhance procurement transparency, and upgrade the anti-corruption legal framework. Efforts to increase borrowing space would support sustainable growth. The authorities should continue to work with donors and development partners to secure grants and concessional borrowing, and carefully prioritize the use of public resources.”
Table 1. Liberia: Selected Economic Indicators (SEI), 2018-2025
|
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
||||||
|
Act. |
Est. |
ECF Approval |
RCF |
Proj. |
ECF Approval |
RCF |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
||
|
(Annual percentage change) |
|||||||||||||
|
Real sector |
|||||||||||||
|
Real GDP |
1.2 |
-2.5 |
1.4 |
-2.5 |
-3.0 |
3.4 |
4.0 |
3.2 |
4.1 |
4.9 |
5.3 |
5.4 |
|
|
of which, Mining & panning |
24.3 |
13.2 |
9.7 |
8.6 |
1.7 |
6.8 |
6.8 |
1.9 |
4.2 |
5.2 |
5.3 |
5.3 |
|
|
of which, Non-mining |
-1.3 |
-4.7 |
0.0 |
-3.5 |
-3.8 |
2.7 |
3.5 |
3.5 |
4.1 |
4.8 |
5.3 |
5.4 |
|
|
Nominal non-mining per capita GDP (U.S. dollars) |
620 |
574 |
621 |
553 |
535 |
527 |
542 |
527 |
537 |
549 |
564 |
613 |
|
|
Nominal GDP (millions of U.S. dollars) |
3264 |
3176 |
3099 |
2928 |
3067 |
3131 |
2954 |
3107 |
3247 |
3411 |
3601 |
3828 |
|
|
Inflation |
|||||||||||||
|
Consumer prices (annual average) |
23.5 |
27.0 |
21.3 |
17.6 |
16.25 |
13.5 |
13.5 |
9.8 |
7.0 |
5.5 |
5.0 |
5.0 |
|
|
Consumer prices (end of period) |
28.5 |
20.3 |
15.0 |
15.0 |
11.65 |
12.0 |
12.0 |
8.0 |
6.0 |
5.0 |
5.0 |
5.0 |
|
|
Population (millions) |
4.5 |
4.6 |
4.7 |
4.7 |
4.7 |
4.8 |
4.8 |
4.8 |
4.9 |
5.1 |
5.2 |
5.3 |
|
|
(Percent of GDP, fiscal year) |
|||||||||||||
|
Central government operations1 |
|||||||||||||
|
Total revenue and grants |
25.9 |
28.0 |
29.9 |
27.6 |
28.1 |
29.8 |
27.7 |
29.1 |
28.9 |
28.7 |
28.2 |
27.3 |
|
|
Total revenue |
12.9 |
14.3 |
14.9 |
13.1 |
13.9 |
15.9 |
13.7 |
14.2 |
16.2 |
17.0 |
17.5 |
17.8 |
|
|
Grants |
13.0 |
13.8 |
15.1 |
14.5 |
14.1 |
13.9 |
14.0 |
14.9 |
12.7 |
11.7 |
10.7 |
9.5 |
|
|
Total expenditure |
30.8 |
34.2 |
34.6 |
33.6 |
31.7 |
33.5 |
33.2 |
32.3 |
31.7 |
30.6 |
29.9 |
29.5 |
|
|
Current expenditure |
21.3 |
23.3 |
22.7 |
22.6 |
21.7 |
22.0 |
22.0 |
21.6 |
20.4 |
19.3 |
19.1 |
18.7 |
|
|
Capital expenditure |
9.5 |
11.0 |
11.9 |
11.0 |
9.9 |
11.5 |
11.2 |
10.7 |
11.3 |
11.3 |
10.7 |
10.8 |
|
|
Overall fiscal balance, including grants |
-4.9 |
-6.2 |
-4.7 |
-6.0 |
-3.6 |
-3.7 |
-5.6 |
-3.2 |
-2.8 |
-1.9 |
-1.7 |
-2.2 |
|
|
Overall fiscal balance, excluding grants |
-17.9 |
-20.0 |
-19.7 |
-20.5 |
-17.7 |
-17.6 |
-19.5 |
-18.1 |
-15.5 |
-13.6 |
-12.3 |
-11.7 |
|
|
Public external debt2 |
25.9 |
31.5 |
38.0 |
39.2 |
37.2 |
42.7 |
45.4 |
43.1 |
46.2 |
46.9 |
46.5 |
46.1 |
|
|
Public domestic debt3 |
8.1 |
9.9 |
19.1 |
20.3 |
19.4 |
18.4 |
20.2 |
19.3 |
18.8 |
17.5 |
16.3 |
14.7 |
|
|
(Percent, unless otherwise indicated) |
|||||||||||||
|
M2/GDP |
19.6 |
20.3 |
16.7 |
22.0 |
21.6 |
16.3 |
22.3 |
22.3 |
22.6 |
22.6 |
22.6 |
22.6 |
|
|
Credit to private sector (percent of GDP) |
16.3 |
14.8 |
17.3 |
15.9 |
15.7 |
17.8 |
16.5 |
16.1 |
16.2 |
16.4 |
16.6 |
16.7 |
|
|
Credit to private sector (annual percent) change) |
4.1 |
-11.3 |
1.3 |
-1.1 |
2.1 |
3.7 |
4.6 |
4.0 |
5.1 |
6.2 |
6.7 |
6.9 |
|
|
(Percent of GDP, unless otherwise indicated) |
|||||||||||||
|
External sector |
|||||||||||||
|
Current account balance |
|||||||||||||
|
including grants |
-23.1 |
-22.5 |
-21.4 |
-22.8 |
-21.4 |
-21.9 |
-20.2 |
-22.2 |
-22.6 |
-22.9 |
-21.8 |
-20.7 |
|
|
excluding grants |
-37.8 |
-36.4 |
-35.9 |
-37.3 |
-36.1 |
-35.5 |
-33.8 |
-36.1 |
-34.8 |
-34.0 |
-31.9 |
-30.3 |
|
|
Trade balance |
-22.2 |
-19.2 |
-13.4 |
-18.5 |
-17.9 |
-12.3 |
-16.4 |
-18.9 |
-18.3 |
-17.6 |
-16.5 |
-15.6 |
|
|
Exports |
12.8 |
13.4 |
20.3 |
15.6 |
13.4 |
21.9 |
15.7 |
14.9 |
14.9 |
14.8 |
14.8 |
14.7 |
|
|
Imports |
-35.0 |
-32.5 |
-33.7 |
-34.0 |
-31.4 |
-34.2 |
-32.1 |
-33.8 |
-33.2 |
-32.3 |
-31.3 |
-30.2 |
|
|
Grants (donor transfers, net) |
14.7 |
13.9 |
14.6 |
14.4 |
14.7 |
13.5 |
13.6 |
13.9 |
12.2 |
11.2 |
10.1 |
9.6 |
|
|
Gross official reserves (millions of U.S. dollars) 4 |
297 |
292 |
308 |
336 |
331 |
333 |
401 |
403 |
429 |
448 |
438 |
443 |
|
|
Months of next years imports |
2.2 |
2.3 |
2.3 |
2.7 |
2.5 |
2.4 |
3.2 |
2.9 |
3.0 |
3.1 |
2.9 |
2.8 |
|
|
CBL's net int'l reserves (millions of U.S. dollars) 4 |
70 |
27 |
54 |
-16 |
13 |
63 |
28 |
70 |
75 |
82 |
105 |
135 |
|
|
Sources: Liberian authorities; and IMF staff estimates and projections. |
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|
1 Central government operation is based on a commitment basis and refers to the budgetary central government operations and off-budget projects. Fiscal year refers to July 1 to June 30. |
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|
2 Ratios are calculated using external debt (in USD) evaluated at the end of period exchange rate over GDP (in USD) evaluated at the period average exchange rate. |
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|
3 Including the central government debts from the Central Bank of Liberia. |
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|
4 Projections for reserves assume that the remaining financing gap will be filled by donor financing, including possibly from the RCF, and other sources. |
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|
5 2020 CPI inflation is measured excluding health and education sub-index due to measurement issues. |
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