IMF Executive Board Completes Fourth Review under the Extended Credit Facility Arrangement and Concludes the 2022 Article IV Consultation for Liberia
August 24, 2022
- Global developments will dampen economic growth to 3.7 percent this year, but Liberia easily has the potential to grow by at least 5 percent annually.
- Quantitative program performance was quite strong while the implementation of the structural reform agenda incurred delays. Adoption of new anti-corruption legislation was good progress.
- Entrenching macroeconomic stability, achieving strong and fiscally sustainable economic growth, and addressing weaknesses in governance and public-sector institutions remain the main program objectives.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the 2022 Article IV Consultation and the fourth review under the Extended Credit Facility (ECF) with Liberia. The four-year arrangement, with total access of SDR 155 million (60 percent of quota or about US$214.30 million) was approved by the IMF Executive Board on December 11, 2019. Today’s decision allows for an immediate disbursement of SDR 17 million (about US$ 22.1 million), bringing total disbursements under the arrangement to SDR 85 million (about US$ 110.7 million). In completing the fourth review, the Executive Board granted a waiver of nonobservance of the end-June 2021 quantitative performance criterion on net international reserves, based on corrective action taken by the authorities.
Liberia experienced a strong economic recovery in 2021. Growth is expected to soften to 3.7 percent in 2022, largely due to heightened global uncertainties and commodity price shocks, which are pushing inflation into the double-digits. Liberia ’s COVID-19 vaccination program has accelerated in recent months, but pandemic-related risks, including a potential outbreak of new variants, remain. The upcoming political cycle with presidential and parliamentary elections, scheduled for September 2023, is another source of uncertainty.
The Liberian authorities continue to implement sound macroeconomic policies, despite delays with the broad-based reform agenda. The authorities managed to keep the program broadly on track by preserving macroeconomic stability, ensuring a comfortable international reserve position, and maintaining debt sustainability.
The supplementary budget for 2022 aims primarily to mitigate pressures on food prices and stabilize the state-owned electricity company. To limit the temporary widening of the fiscal deficit, the authorities have streamlined non-priority spending, while largely preserving the significant increase of public investment relative to previous years, made possible by partial use of the IMF’s 2021 SDR allocation to Liberia.
The authorities should press ahead with fiscal structural reforms to make public services and public enterprises more efficient and to secure more permanent space for adequate public investment while preserving debt sustainability. Progress with mobilizing domestic revenues should be built upon, including by streamlining tax exemptions. Efforts to address capacity constraints that hamper selection, preparation, and execution of public investment projects need renewed impetus.
Macroeconomic stability is set to strengthen further with the planned modernization of Liberia’s monetary policy framework and the ongoing currency changeover, provided operational risks are appropriately mitigated.
Stepping up the fight against corruption remains a top priority. The recent adoption of the amended Liberia Anti-Corruption Commission (LACC) Act, the new Whistleblower and Witness Protection Act, and the revised Code of Conduct, is good progress. Swift implementation is now key.
The authorities are strengthening the growth leg of their reform program. In addition to pro-growth fiscal reforms and the fight against corruption, it will be important to fully see-through plans to improve the business climate and enable greater access to credit, including by facilitating the resolution of non-performing loans. Improving educational attainment, adapting to climate change, and addressing gender disparities are also critical.
|
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
||||
|
Est. |
Est. |
3rd Review |
Est. |
3rd Review |
Proj. |
3rd Review |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
|
|
(Annual percentage change, unless otherwise indicated) |
||||||||||||
|
Real sector |
||||||||||||
|
Real GDP |
-2.5 |
-3.0 |
3.6 |
5.0 |
4.7 |
3.7 |
4.9 |
4.7 |
5.7 |
5.7 |
5.5 |
5.6 |
|
of which: Mining & panning |
13.2 |
2.0 |
7.0 |
17.6 |
4.7 |
7.1 |
5.7 |
4.3 |
5.8 |
7.5 |
4.6 |
5.2 |
|
of which: Non-mining |
-4.7 |
-3.8 |
2.9 |
2.8 |
4.7 |
3.0 |
4.7 |
4.8 |
5.6 |
5.4 |
5.7 |
5.6 |
|
Nominal non-mining per capita GDP (U.S. dollars) |
531 |
507 |
584 |
567 |
618 |
625 |
625 |
659 |
653 |
677 |
710 |
750 |
|
Nominal GDP (millions of U.S. dollars) |
3,080 |
3,037 |
3,426 |
3,509 |
3,698 |
3,938 |
3,847 |
4,236 |
4,339 |
4,636 |
4,968 |
5,354 |
|
Inflation |
||||||||||||
|
Consumer prices (end of period) |
20.3 |
13.1 |
9.7 |
5.5 |
12.3 |
11.7 |
6.4 |
6.9 |
5.2 |
5.0 |
5.0 |
5.0 |
|
Population (millions) |
4.9 |
5.1 |
5.2 |
5.2 |
5.3 |
5.3 |
5.4 |
5.4 |
5.6 |
5.7 |
5.8 |
6.0 |
|
(Percent of GDP) |
||||||||||||
|
Central government operations1 |
||||||||||||
|
Total revenue and grants |
27.4 |
31.3 |
30.7 |
27.3 |
28.9 |
24.2 |
28.0 |
24.1 |
24.0 |
24.2 |
24.7 |
24.9 |
|
Total revenue |
13.9 |
15.9 |
17.8 |
16.4 |
17.2 |
16.4 |
17.4 |
16.1 |
16.3 |
16.7 |
17.1 |
17.2 |
|
Grants2 |
13.5 |
15.3 |
12.9 |
10.9 |
11.7 |
7.8 |
10.5 |
8.0 |
7.7 |
7.5 |
7.6 |
7.7 |
|
Total expenditure2 |
32.2 |
35.1 |
33.1 |
29.7 |
32.9 |
29.1 |
30.0 |
27.6 |
27.7 |
28.0 |
28.5 |
28.7 |
|
Current expenditure3 |
21.4 |
24.5 |
22.6 |
21.9 |
21.2 |
20.9 |
19.5 |
19.2 |
19.3 |
19.5 |
19.8 |
19.9 |
|
Capital expenditure |
10.8 |
10.6 |
10.5 |
7.8 |
11.7 |
8.3 |
10.5 |
8.4 |
8.4 |
8.5 |
8.6 |
8.8 |
|
Overall balance, including grants2 |
-4.8 |
-3.8 |
-2.4 |
-2.4 |
-4.0 |
-5.0 |
-2.1 |
-3.5 |
-3.7 |
-3.8 |
-3.8 |
-3.8 |
|
Overall balance, excluding grants2 |
-18.3 |
-19.2 |
-15.3 |
-13.3 |
-15.8 |
-12.7 |
-12.6 |
-11.5 |
-11.4 |
-11.3 |
-11.3 |
-11.5 |
|
Total public debt (nominal) |
48.5 |
58.7 |
56.1 |
53.2 |
59.0 |
54.6 |
59.4 |
55.3 |
56.9 |
56.4 |
55.6 |
54.8 |
|
Public external debt4 |
34.9 |
41.1 |
38.3 |
37.2 |
38.1 |
38.8 |
38.7 |
40.3 |
42.9 |
43.9 |
44.9 |
46.0 |
|
Public domestic debt5 |
13.6 |
17.6 |
17.9 |
16.0 |
20.9 |
15.8 |
20.6 |
15.0 |
14.0 |
12.5 |
10.7 |
8.8 |
|
(Percent, unless otherwise indicated) |
||||||||||||
|
Monetary sector |
||||||||||||
|
M2/GDP |
20.9 |
25.5 |
24.6 |
24.6 |
23.6 |
24.8 |
24.2 |
24.9 |
25.1 |
25.1 |
25.1 |
25.1 |
|
Credit to private sector (percent of GDP) |
15.3 |
16.4 |
16.4 |
14.8 |
16.6 |
14.9 |
17.2 |
15.2 |
16.0 |
16.4 |
16.7 |
17.0 |
|
Credit to private sector (annual percent change) |
-11.3 |
5.5 |
12.7 |
4.4 |
9.4 |
12.8 |
7.9 |
9.7 |
8.0 |
9.3 |
9.5 |
9.7 |
|
(Percent of GDP, unless otherwise indicated) |
||||||||||||
|
External sector |
||||||||||||
|
Current account balance, including grants |
-19.6 |
-16.4 |
-17.9 |
-17.7 |
-18.9 |
-16.0 |
-19.9 |
-15.3 |
-15.1 |
-14.9 |
-14.8 |
-14.6 |
|
Current account balance, excluding grants |
-25.0 |
-23.7 |
-23.7 |
-22.6 |
-24.1 |
-19.1 |
-24.2 |
-18.2 |
-18.2 |
-17.9 |
-17.6 |
-17.3 |
|
Trade balance |
-12.8 |
-12.9 |
-12.6 |
-13.1 |
-10.8 |
-10.6 |
-10.2 |
-10.8 |
-9.6 |
-8.6 |
-8.5 |
-7.9 |
|
Exports |
17.5 |
20.0 |
23.1 |
25.0 |
23.3 |
24.3 |
23.7 |
23.1 |
24.3 |
24.4 |
24.1 |
23.3 |
|
Imports |
-30.3 |
-32.9 |
-35.7 |
-38.1 |
-34.1 |
-34.9 |
-33.8 |
-33.9 |
-33.9 |
-33.0 |
-32.5 |
-31.2 |
|
Grants (donor transfers, net) |
5.4 |
7.3 |
5.7 |
5.0 |
5.2 |
3.1 |
4.4 |
2.9 |
3.1 |
3.0 |
2.8 |
2.7 |
|
Gross official reserves (millions of U.S. dollars) |
292 |
358 |
716 |
700 |
719 |
691 |
769 |
750 |
784 |
828 |
881 |
927 |
|
In months of next year's imports |
2.2 |
2.2 |
4.4 |
4.2 |
4.2 |
4.0 |
4.3 |
4.2 |
4.2 |
4.2 |
4.3 |
4.2 |
|
Net international reserves (millions of U.S. dollars) |
27 |
0 |
392 |
387 |
362 |
352 |
401 |
384 |
451 |
523 |
611 |
690 |
|
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. |
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|
2 The total amount of external project grants and loans, along with the associated spending, has been revised down from 2021 onwards to reflect the revised authorities’ database prepared together with donors. |
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|
3 Estimates for 2021 include bank restructuring costs of 0.3 percent of GDP as expenditure. |
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|
4 Ratios are calculated using external debt (in U.S. dollars) evaluated at the end of period exchange rate over GDP (in U.S. dollars) evaluated at the period average exchange rate. |
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|
5 Including central government debt owed to the Central Bank of Liberia. |
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