Front Matter Page
IMF Country Report No. 14/197
LIBERIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—STAFF REPORT; AND PRESS RELEASE
July 2014
In the context of the third review under the Extended Credit Facility Arrangement and request for waiver of nonobservance of performance criterion and modification of performance criteria, the following documents have been released and are included in this package:
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 3, 2014, following discussions that ended on April 1, 2014, with the officials of Liberia on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on June 17, 2014,
An Informational Annex prepared by the IMF
A Debt Sustainability Analysis prepared by the staffs of the IMF and the World Bank.
A Press Release including a statement by the Chair of the Executive Board.
The following documents 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 publication policy for staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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PO Box 92780 • Washington, D.C. 20090
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International Monetary Fund
Washington, D.C.
©2014 International Monetary Fund
Front Matter Page
LIBERIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA
June 17, 2014
Key Issues
Context. Real GDP grew at 8.7 percent in 2013 and is projected to decline to 5.9 percent in 2014 as mining production decelerates. Inflation picked up reflecting the depreciation of the Liberian dollar in the context of a widening current account deficit, but should moderate in 2014 as international food and fuel prices decline. Risks to the outlook stem from delays in priority public investment and declines in rubber and iron ore prices.
Key challenges and risks. Significant revenue shortfalls and recently-uncovered spending commitments outside the budget process underscore remaining capacity constraints and institutional weaknesses that ought to be resolutely addressed to preserve the credibility of the budget and the authorities’ ability to deliver on their development agenda.
Policy discussions
Measures aimed at strengthening the budget process, in line with the public financial management and procurement laws, should help reduce fiscal risks. The new independent Liberia Revenue Authority will prioritize implementation of tax controls to improve compliance and the revenue performance.
Containing inflation in the dual currency regime will require enhanced liquidity management and stronger coordination between fiscal and monetary policy.
The current pace of external borrowing is consistent with the temporary scaling-up of public investment to address infrastructure gaps, but should begin to moderate.
Program performance remains mixed. Most end-December 2013 performance criteria (PCs) and indicative targets (ITs) were met, except for the PC on government revenue and the IT on external borrowing. Four out of five structural benchmarks (SBs) were met on time. Based on the authorities’ strong corrective actions to address the revenue shortfall and to strengthen expenditure controls, including the initiation of both an external audit of the extra-budgetary commitments and a review of procurement procedures in key ministries (prior actions), staff supports the completion of the third ECF review. Staff also supports the authorities’ request for a waiver for the nonobservance of the floor on government revenue (PC) and to modify the end-June net foreign reserves PC and the IT on public sector gross external borrowing.
Approved By
Abebe Aemro Selassie and Chris Lane
Discussions were held in Monrovia (March 19–April 1, 2014). The mission comprised Ms. Deléchat (head), Messrs. Narita and Rosales (AFR), and Mr. Guo (SPR). Mr. Amo-Yartey, resident representative, and Mr. Deline, local economist, assisted the mission. The mission met with Minister of Finance Konneh; Central Bank Governor Mills Jones; other senior officials, representatives of the private sector, civil society, and development partners. Ms. Dlamini (OED) joined the discussions.
Contents
RECENT DEVELOPMENTS
POLICY DISCUSSIONS
A. Outlook and Risks
B. Addressing Fiscal Challenges
C. Strengthening the Monetary and Exchange Rate Policy Framework
D. Addressing Development Needs While Maintaining Debt Sustainability
PROGRAM MONITORING AND RISKS
STAFF APPRAISAL
BOX
1. Liberia’s FY2015 Budget
FIGURES
1. Recent Economic Developments
2. External Sector Developments
3. Foreign Exchange Developments
4. Monetary and Financial Developments
5. Medium-Term Outlook, 2012–19
6. Medium-Term Fiscal Outlook, FY2012–19
TABLES
1. Selected Economic and Financial Indicators, 2012–17
2. Balance of Payments, 2012–17
3. Monetary Survey, 2012–15
4. Financial Soundness Indicators, 2011–March 2014
5. Medium-Term Outlook, 2012–19
6a. Fiscal Operations of the Central Government, FY2012–17 (Millions of U.S. dollars)
6b. Fiscal Operations of the Central Government, FY2012–17 (Percent of GDP)
7. Schedule of Disbursements Under the ECF Arrangements, 2012–15
APPENDICES
I. Letter of Intent
Attachment 1. Memorandum of Economic and Financial Policies of the Government of Liberia for FY2014 and FY2015
Attachment 2. Technical Memorandum of Understanding
II. Exchange Rate Developments and Policy Responses
Front Matter Page
LIBERIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—INFORMATIONAL ANNEX
June 17, 2014
Prepared By
African Department (In consultation with other departments)
Contents
RELATIONS WITH THE FUND
JOINT WORLD BANK-IMF WORK PROGRAM, 2012–14
RELATIONS WITH THE WORLD BANK GROUP
RELATIONS WITH THE AFRICAN DEVELOPMENT BANK
STATISTICAL ISSUES
Front Matter Page
LIBERIA
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—DEBT SUSTAINABILITY ANALYSIS UPDATE1
June 17, 2014
Approved By
Abebe Aemro Selassie and Chris Lane (IMF); Jeffrey Lewis and Marcelo Giugale (IDA)
The updated Debt Sustainability Analysis indicates that Liberia’s risk of external debt distress remains low. The present value of the external debt stock is projected to remain sustainable with all external debt indicators below the policy-related thresholds. Nonetheless, the pace of new borrowing has accelerated over the past year. This rapid accumulation of new loan commitments remains broadly consistent with the temporary scaling up of public investment envisaged under the program, but the authorities should continue to prioritize new financing for strategic projects on highly concessional terms to ensure that public debt remains sustainable.
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Press Release No. Press Release No. 14/328
FOR IMMEDIATE RELEASE
July 3, 2014
International Monetary Fund
Washington, D.C. 20431 USA
Telephone: 202-623-7100
Fax: 202-623-6772
