Finance and Development, June 2017
Recovery from the twin shocks of Ebola and the collapse of the iron ore sector continues. Non-iron ore sector growth is projected to be 3.7 percent in 2016, led by manufacturing and trade. Iron ore growth is also recovering, with the main company now operating with moderate profitability. Overall growth is projected to be 4.9 percent. Inflation was 10.9 percent at end-September, while the exchange rate has depreciated 19 percent over the last year. The budget is under severe pressure, in part because the rapid depreciation has stripped the government of all excise revenue from retail fuel, and led to explicit subsidies from the budget to keep retail fuel prices fixed. All end-June performance criteria were met while some structural benchmarks were missed. However, the ceiling on net domestic financing was met in part through the accumulation of arrears. There was also a minor non-observance of the continuous ceiling on external debt and a temporary multiple currency practice was introduced in recent months. This is the last review under this ECF arrangement, which expires on December 21, 2016. The authorities have expressed interest in negotiating a successor program in early 2017.
This 2016 Article IV Consultation highlights that the Ebola epidemic and the fall in commodity prices have revealed the vulnerabilities of Liberia's economy. After barely positive growth in 2014, GDP was flat in 2015 mainly owing to the decline in activity in the iron ore and rubber sectors. Although international gross reserves increased in 2015, the Central Bank of Liberia's net foreign exchange position declined owing to operational deficits and exceptional support to the banking sector. In 2016, growth is expected to rise to 2.5 percent, thanks to a rebound in services and the start of gold production, while inflation should stay in the single digits.
Finance and Development, June 2016
Guinea was declared free of the Ebola epidemic at end-2015 and after two years of stagnant activity, growth is expected to rebound this year. Pent-up demand coupled with robust agricultural growth, and improved electricity provision will be the main drivers of activity, lifting growth to around 4 percent. However, given the severity of the shocks that have hit Guinea during 2014-15 and continued depressed commodities prices, the recovery is expected to be gradual and will need to be supported by policies to restore macroeconomic stability and rebuild domestic and external buffers. Structural reforms are also needed to improve the business environment, including in the mining sector, and strengthen the delivery of public service.
This paper discusses Liberia's Fourth Review Under the Extended Credit Facility (ECF) Arrangement and Requests for Waivers of Nonobservance of Performance Criteria (PC), Modification of PC, and Rephasing and Extension of the Arrangement. The end-June 2014 quantitative PC on government revenues and central bank net foreign exchange position, and one indicative target on net domestic assets were not met. Only three out of seven structural benchmarks for the fourth review were met. Based on the authorities' corrective actions, the IMF staff supports completion of the delayed fourth ECF review, and the authorities' request for an extension and re-phasing of the program to end-December 2016.