Front Matter Page
© 2009 International Monetary Fund
June 2009
IMF Country Report No. 09/177
Liberia: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver and Modification of Performance Criteria, and Financing Assurances Review—Staff Report; Staff Supplement; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Liberia
In the context of the second review under the three-year arrangement under the Poverty Reduction and Growth Facility, request for a waiver and modification of performance criteria, and the financing assurances review for Liberia, the following documents have been released and are included in this package:
The staff report for the Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver and Modification of Performance Criteria, and Financing Assurances Review, prepared by a staff team of the IMF, following discussions that ended on February 25, 2009, with the officials of Liberia on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 22, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement on the joint IMF/World Bank debt sustainability analysis.
A staff statement of May 6, 2009, updating information on recent developments.
A Press Release summarizing the views of the Executive Board as expressed during its May 6, 2009, discussion of the staff report that completed the review.
A statement by the Executive Director for Liberia.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of Liberia*
Memorandum of Economic and Financial Policies by the authorities of Liberia*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
700 19th Street, N.W. • Washington, D.C. 20431
Telephone: (202) 623-7430 • Telefax: (202) 623-7201
E-mail: publications@imf.org • Internet: http://www.imf.org
International Monetary Fund
Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
LIBERIA
Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver and Modification of Performance Criteria, and Financing Assurances Review
Prepared by African Department (In consultation with other departments)
Approved by Thomas Krueger and Dhaneshwar Ghura
April 22, 2009
Mr. Lane (head), Mr. Gottschalk and Ms. Dlamini-Kunene (all AFR), Mr. Kitili (SPR), Mr. Kloeden (FAD), and Mr. Tharkur (Resident Representative) visited Monrovia February 12–25, 2009 to conduct discussions for the second review under the PRGF. Ms. Mannathoko (OED) attended discussions.
The mission met with President Johnson-Sirleaf, Minister of Finance Ngafuan, other senior government officials, Central Bank Governor Mills Jones, representatives of the legislature, private sector, civic society and development partners.
Liberia cleared its arrears of SDR 543 million to the Fund on March 14, 2008. The Executive Board approved three-year arrangements under the PRGF and the Extended Fund Facility totaling SDR 582 million (450 percent of quota). Liberia remains current on its Fund obligations. The last Article IV consultation and first program review were concluded on December 22, 2008. SDR 7 million (5.4 percent of quota) becomes available upon completion of the second Review.
The authorities’ letter of intent and supplementary memorandum of economic and financial policies are in Attachment I.
Contents
Executive Summary
I. Macroeconomic Developments and Performance Under the Program
A. Impact of the Global Financial Crisis
B. Performance Under the Program Remains Good with Minor Deviations
C. Political Context
II. Program Discussions
A. Macroeconomic Framework
B. Fiscal Program
C. Monetary and Financial Policies
D. Structural Reform Agenda
E. Financing Assurances and Debt Strategy
III. Program Monitoring
IV. Staff Appraisal
Figures
1. Recent Economic Developments, 2007–09
2. Projected GDP Growth, 2008–12
3. Official Grants, Aid Dependent Fragile States
4. Medium Term Outlook 2007–13
5. Government Deposits, 2006–09
6. Financial Soundness Indicators, 2005–09
Tables
1. Selected Economic and Financial Indicators, 2007–11
2. Medium-Term Outlook, 2007–14
3. Monetary Survey, 2007–09
4. Balance of Payments, 2007–09
5a. Summary of Central Government Operations (Commitment Basis), 2007/08–2012/13
5b. Summary of Central Government Operations (Cash Basis), 2007/08–2012/13
6. Millennium Development Goals
-
7. Fund Credit Position and Projected Payments to the Fund, 2008–2021
8. External Financing Requirements and Sources, 2006–13
9. Schedule of PRGF/EFF Disbursements, 2008–11
Attachments
I. Letter of Intent and Memorandum of Economic and Financial Policies, 2009
II. Technical Memorandum of Understanding
Annex
1. Guidelines on Performance Criteria with Respect to Foreign Debt
Executive Summary
The global recession is slowing Liberia’s postwar economic recovery. The drop in demand and commodity prices is adversely affecting investment and exports in some key sectors. However, there is little evidence yet that the financial sector is adversely affected although there are emerging risks.
There is limited room for counter-cyclical fiscal action due to high debt levels while monetary policy is constrained by high dollarization. However, the authorities remain strongly committed to cash-based budgeting.
The longer-term outlook remains bright. In the mining sector, investment continues and iron ore exports are expected to resume with global economic recovery. Interest in forestry and export agriculture remains high.
The program remains on track. Most quantitative and structural performance criteria (PCs) in the period through end-December 2008 were met. Staff support the authorities’ request for waivers of non-observance of the PCs on domestic arrears and Central Bank of Liberia (CBL) spending at end-December 2008 on the basis that the deviations were temporary, and for delays in achieving the end-September 2008 structural PC on the Liberia Anti-Corruption Commission that were also temporary.
Structural reforms continue to advance. The authorities have stepped up their efforts to strengthen the Liberia Anti-Corruption Commission and are close to finalizing important legislation on public financial management and tax reform. The authorities wish to convert structural PCs remaining for 2009 into benchmarks consistent with the new policy on structural conditionality.
Staff supports the authorities’ request for a limited amount of highly concessional borrowing under the program for a critical infrastructure project provided appropriate safeguards are in place.
The global recession clearly poses downside risks for program objectives particularly for investment, employment and growth. However, the authorities remain strongly committed to full program implementation.
Front Matter Page
INTERNATIONAL MONETARY FUND
LIBERIA
Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver and Modification of Performance Criteria, and Financing Assurances Review—Informational Annex
Prepared by the African Department (In consultation with other departments)
April 22, 2009
Relations with the Fund. Describes financial and technical assistance from the Fund and provides information on the safeguards assessment and exchange rate system. Outstanding purchases and loans amounted to SDR 553.47 million (103.8 percent of quota) at end-June 2007.
Joint World Bank-IMF Work Program, 2008–09.
Statistical Issues. Assess the quality of the statistical data. Weaknesses in a broad range of economic statistics are hampering the analyses of economic developments in the country.
Contents
I. Relations with the Fund
II. Joint World Bank-IMF Work Program, 2008–09
III. Statistical Issues
Front Matter Page
INTERNATIONAL DEVELOPMENT ASSOCIATION AND
INTERNATIONAL MONETARY FUND
LIBERIA
Joint World Bank/IMF Debt Sustainability Analysis
Prepared by the staffs of the International Development Association and the International Monetary Fund
Approved by Dominique Desruelle and Thomas Krueger (IMF) and Sudhir Shetty and Carlos Braga (World Bank)
April 22, 2009
This update of the external low-income country debt sustainability analysis (LIC DSA) indicates that Liberia remains in debt distress in the baseline scenario.1 / 2/ Under the alternative scenario, which assumes full delivery of HIPC, MDRI and IMF beyond-HIPC3 debt relief at completion point, debt dynamics are below the relevant policy-dependent indicative thresholds, assuming moderate new borrowing on concessional terms, and robust GDP growth. The inclusion of public domestic debt in the analysis does not significantly change the overall assessment of Liberia’s debt sustainability.
Front Matter Page
May 6, 2009
Front Matter Page
Press Release No. 09/154
FOR IMMEDIATE RELEASE
May 7, 2009
International Monetary Fund
Washington, D.C. 20431 USA
Washington, D.C. 20431 • Telephone 202-623-7100 • Fax 202-623-6772 • www.imf.org
Front Matter Page
May 6, 2009
