In a move providing a positive signal to Liberia’s development partners and encouraging further reform efforts by the Liberian authorities, the IMF’s Executive Board decided, on October 2, to lift its 1990 declaration of noncooperation imposed on Liberia. The Executive Board also initiated the deescalation of remedial measures applied by the Fund against the West African nation because of arrears in payments. The Board said it could consider lifting the suspension of Liberia’s voting and related rights following satisfactory performance regarding economic policies and payments to the IMF during an evaluation of approximately 12 months from the Board decision. Liberia is recovering after a prolonged civil war and held elections last year.
“Liberia has established an encouraging track record of policy cooperation and payments under the staff-monitored program that began in February 2006,” said John Lipsky, First Deputy Managing Director of the IMF. “The authorities have committed to further strengthening cooperation with the IMF in terms of both policy and continued payments. This would allow the IMF to give consideration to further deescalating the remedial measures and, with adequate financing assurances, a possible rights accumulation program aimed at clearing Liberia’s arrears to the IMF. These actions could pave the way for Liberia to benefit from debt relief under the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative,” Lipsky added.
Liberia has made considerable progress in implementing its economic program. The IMF said that GDP growth is expected to continue to recover to about 8 percent, and inflation is projected to be in the single digits in 2006. Financial management has been significantly strengthened under the new government, with strict adherence to a commitment control system designed to ensure that expenditures do not exceed available revenues. The central bank’s financial position also has improved, and a cash-based balanced budget for fiscal year 2006/07 was approved in late August. Liberia also has made token monthly payments to the IMF.
The deescalation process is designed to encourage members with protracted arrears to establish a solid record of policy performance and payments to the IMF, with the ultimate objective of full clearance of arrears and regaining access to IMF financial resources. Substantial financial support from the international community for clearance of arrears and debt relief will be needed by Liberia.