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.
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review under an Extended Credit Facility (ECF)1 arrangement for Liberia. The completion of the review enables the disbursement of SDR 7.38 million (about US$10.2 million), bringing total disbursement under the arrangement to SDR 69.21 million (about US$95.8 million).
In completing the review, the Board approved waivers for the nonobservance of the performance criteria on government revenues and central bank net foreign exchange position. The Board also approved the re-phasing and extension of the arrangement to end-2016 in light of the delays caused by the Ebola outbreak.
The ECF arrangement for Liberia was approved by the IMF’s Executive Board on November 19, 2012 (see
Following the Executive Board’s discussion of Liberia, Mr. David Lipton, First Deputy Managing Director and Acting Chair issued the following statement:
“Liberia has largely overcome the Ebola epidemic, thanks to decisive policy actions, unprecedented international support, and strong community engagement. However, the sharp decline in global commodity prices is holding back the economic recovery.
“Performance under the authorities’ Fund-supported program has been uneven as a result of the epidemic and, to a lesser extent, policy slippages. A still challenging economic situation underscores the importance of strong program implementation in the period ahead to sustain macroeconomic stability, improve policy credibility, and secure additional donors financing.
“Fiscal policy next year will remain accommodative to support the recovery. Reallocation of resources toward the health and education sectors is appropriate. In light of limited fiscal space, caution is needed in considering tax relief for companies in the commodity sector. The authorities should also press ahead with addressing public financial management weaknesses and further strengthen revenue administration.
“Borrowing polices should remain prudent in the context of lower growth prospects. Financing needs, particularly for large investment projects, should be covered mostly with grants and concessional loans. This approach would facilitate needed capital projects while preserving debt sustainability.
“Rebuilding external buffers in Liberia’s dual currency regime requires containing the central bank’s operational expenses and limiting foreign exchange intervention only to smoothing volatility. More effective liquidity management and further development of monetary policy instruments will help safeguard price stability. Strengthening the prudential oversight of the banking system and the framework for crisis management remains critical to tackle threats to financial stability.”
The ECF has replaced the Poverty Reduction and Growth Facility as the Fund’s main tool for medium-term financial support to low-income countries. Financing under the ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.
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