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Liberia: IMF Executive Board Concludes the Second Review under the Extended Credit Facility Arrangement

Press Release No. 13/499 December 11, 2013

The Executive Board of the International Monetary Fund (IMF) today completed the second review under the three-year arrangement under the Extended Credit Facility (ECF) for Liberia. The completion of the review enables the disbursement of an amount equivalent to SDR 7.382 million (about US$11.4 million), bringing the total disbursements under the arrangement to SDR 22.146 million (about US$34.2 million). In completing the review, the Board approved the waiver for the nonobservance of the performance criteria on the floor on revenue collection of the central government, the ceiling on Central Bank of Liberia’s gross direct credit to the government, and the floor on foreign reserves of the CBL. The Board also approved the authorities’ requests for modification of end-December 2013 and end-June 2014 performance criterion on the ceiling on new domestic borrowing of the central government.

The ECF arrangement for Liberia for the equivalent of SDR 51.68 million (about US$79.7 million) was approved by the IMF’s Executive Board on November 19, 2012 (see Press Release No. 12/449).

Following the Executive Board’s discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:

“Liberia’s economic growth remains strong and the medium-term outlook is positive, provided new projects in the mining and plantation sectors come on stream. Non-resource real GDP growth is expected to continue to pick up in 2014–15, as the authorities continue to press ahead with the implementation of large energy and road infrastructure projects, in line with their Agenda for Transformation.

“While the authorities remain fully committed to reforms underpinned by the ECF arrangement, institutional and capacity constraints have affected recent program performance. Deviations on government revenue and domestic financing were minor, but foreign reserves fell below the program floor reflecting in part higher intervention in the foreign exchange market to mitigate depreciation pressures. The authorities are taking appropriate action to rebuild an adequate reserves buffer, including by strengthening the foreign exchange auction and enhancing liquidity management.

“Action is being taken to strengthen budget execution while scaling up public investment. The authorities have identified savings in the FY2014 budget to be able to meet their deficit target while protecting capital spending. They are also enhancing cash management, including through establishing a Treasury Single Account. Timely approval of annual budgets, together with careful prioritization and preparation of investment projects, would help remove implementation bottlenecks.

“Financial sector reforms will continue to focus on addressing high credit risks and strengthening the legal and institutional environment to promote intermediation. Enhancing the credit reference system and establishing the collateral registry would directly help reduce credit risk. Other credit initiatives should be market-based, efficient, and recognized as fiscal initiatives financed by the government or donors.

“In light of the recent rapid debt accumulation and large remaining external financing needs, maintaining debt sustainability will require adhering to sound debt management principles, enshrined in the new medium-term debt strategy.”