The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of an amount equivalent to SDR 32.3 million (about US$45.6 million or 25 percent of quota) to be drawn from the Rapid Credit Facility (RCF)1 as well as SDR 25.84 million (about US36.5 million or 20 percent of the country’s quota) in immediate debt relief under the Catastrophe Containment and Relief (CCR) Trust2.
The RCF funds will support the authorities fight against the Ebola outbreak by covering urgent budgetary and balance of payments needs and strengthening international reserves. This additional IMF financing also ought to help catalyse further assistance from the international community, preferably grants. The CCR funds will be applied to immediately repay outstanding debt up to the equivalent of 20 percent of Liberia’s quota (SDR 25.84 million).
At the conclusion of the Executive Board’s discussion, Mr. Shinohara, Chair and Deputy Managing Director issued the following statement:
“The Ebola outbreak continues to cripple the Liberian economy, although the recent decline in new cases is welcome. Economic activity has decelerated significantly, and fiscal and external financing needs are more pronounced than envisaged at the time of the Extended Credit Facility (ECF) augmentation. The economy is projected to stagnate in 2014 and contract in 2015, due to the ongoing impact of the epidemic and lower investment in mining and infrastructure. A gradual recovery in economic activity is projected to take hold in 2016, led by a rebound in services.
“The authorities remain committed to the broad objectives of the ECF-supported program. However, program implementation capacity has been hampered since the beginning of the crisis as the authorities focused on the emergency. Implementation of structural reforms has also been delayed by the limited functioning of the public sector due to the Ebola outbreak. Large financing gaps are estimated for 2015–16, and reserves coverage could decline significantly in 2015 in the absence of additional financing. Fund financial assistance, together with debt relief from the CCR Trust, will help boost central bank reserves to meet market demand for foreign exchange, while acting as a catalyst for additional grant financing from other official and private creditors.
“Fiscal policy should continue to remain accommodative to meet spending priorities relating to the epidemic, subject to the availability of financing. Continued improvements in public financial management and transparency in the use of external resources will be key to unlocking further donor budget support. Emergency social safety nets need to be deployed to address rising poverty and food insecurity. Over the medium term, rebuilding a resilient health system should remain a priority.
“Greater exchange rate flexibility is desirable to maintain adequate reserves in the context of a prolonged crisis. Continued close monitoring of monetary and financial sector conditions, as well as enhanced liquidity management, are essential to contain any lingering vulnerabilities in the financial system. Going forward, the central bank plans to develop a framework for the provision of emergency liquidity support to banks, supported by Fund technical assistance, will help enhance the resilience of the banking system.”
The RCF provides rapid financial support in a single, up-front payout for low-income countries facing urgent financing needs. Financial assistance under the RCF is provided as an outright disbursement to Poverty Reduction and Growth Trust (PRGT)-eligible members that face an urgent balance of payments need, and where a full-fledged economic program is either not necessary or not feasible.
The Catastrophe Containment and Relief (CCR) Trust provides grant assistance to be used as debt relief for eligible countries confronting major natural disasters, including public health disasters.