The Executive Board of the International Monetary Fund (IMF) today completed the seventh and eighth (final) reviews of Liberia's economic performance under the program supported by the Extended Credit Facility (ECF) arrangement. Completion of these reviews enables the immediate disbursement of SDR 14.764 million (about US$20.7 million). This brings total disbursements under the arrangement to SDR 111.664 million (about US$ 156.7 million).
The Executive Board also approved the authorities' request to waive the non-observance of performance criteria. The waivers pertain to the end-December 2016 floors on total revenue collection of the central government and ceiling on the present value of gross external borrowing by public sector, and to end-June 2017 floors on total revenue collection of the central government, net foreign exchange position of the Central Bank of Liberia, and the ceiling on the Central Bank of Liberia's gross direct credit to the central government.
The ECF arrangement for Liberia was approved by the Board on November 19, 2012 (see Press Release No. 12/449) for SDR 51.68 million (about US$69.3 million or 40 percent of quota as of that date). In September 2014, as part of the response in the fight against Ebola, the Board approved an augmentation of access of SDR 32.3 million (about US$ 43.3 million or 25 percent of quota as of that date) under the ECF arrangement for Liberia.
Following the Board's discussion on Liberia, Mr. Tao Zhang, Deputy Managing Director and Acting Chair issued the following statement:
"Liberia's economic recovery has suffered some delay due to the lingering effects of the Ebola epidemic, low global commodity prices, and the impact of the withdrawal of the United Nations peacekeeping mission. The resulting sharp decline in net foreign currency inflows has put pressure on the exchange rate and inflation, and led to a mixed program performance.
"The authorities responded to these shocks with an appropriate macroeconomic policy mix. Combined with exchange rate adjustment, a relatively tight fiscal and monetary policy stance prevented exchange rate overshooting and contained second round inflationary dynamics.
"Going forward, maintaining macroeconomic stability is critical. In fiscal policy, adherence to rules governing the release of contingent expenditure will be crucial to avoid unintended financing gaps, while protecting high-priority social spending. The monetary policy stance needs to remain tight in the face of inflationary and exchange rate pressures. Staying within the spending limits set in the central bank's three-year financial plan will be essential to regaining adequate reserve cover.
"Recourse to external borrowing should remain restrained as the risk of debt distress is already elevated. New borrowing should be on concessional terms and, to the extent possible, replaced with enhanced utilization of already signed and ratified loans.
"The publication of the executive summary of the forensic audit report of the circumstances leading up to the closure of First International Bank Liberia Limited and a significant financial loss by the central bank was an important first step in ensuring transparency. The publication of an action plan to improve central bank governance and supervisory capacity is also welcome. Sustained efforts will be needed for successful implementation.
"Good progress has been made on structural reforms, and it would be important that this momentum is maintained beyond the expiration of the Fund-supported program. Resolving the current political uncertainty in a timely manner consistent with the democratic process would be important to minimize the economic and social costs of delay."