The International Monetary Fund (IMF) has revised Liberia’s gross domestic product (GDP) downward to 5.9 percent in 2014. Real GDP grew at 8.7 percent in 2013 and is now projected to decline to 5.9 percent in 2014 as mining production decelerates. The revision runs contrary to Finance Minister Amara Konneh’s state of the economy address at the Ministry of Information, Cultural Affairs and Tourism (MICAT) few months ago which he projected an 8 percent GDP growth in 2014.
According to Minister Konneh, the IMF’s revise report didn’t capture some sectors of the economy that are expected to produce output in 2014.
He made specific reference to government of Liberia’s projected output from China Union and few companies that would begin export in 2014.
Giving some reasons for revising the GDP downward, the IMF explained that inflation picked up reflecting the depreciation of the Liberian dollar in the context of a widening current account deficit.
The IMF, however, noted that it expects current account deficit to moderate in 2014 as international food and fuel prices decline.
The Fund observed that risks to the outlook stem from delays in priority public investment and declines in rubber and iron ore prices.
According to the IMF country report on Liberia for July, 2014, 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 Liberian authorities’ ability to deliver on the country’s development agenda are key challenges and risks.
The IMF noted that measures aimed at strengthening the budget process, in line with the public financial management and procurement laws, should help reduce fiscal risks.
It expressed the hope that the new independent Liberia Revenue Authority (LRA) will prioritize implementation of tax controls to improve compliance and the revenue performance.
The IMF also called for stronger coordination between the fiscal and monetary arms of government to contain inflation in the dual currency regime.
“Containing inflation in the dual currency regime will require enhanced liquidity management and stronger coordination between fiscal and monetary policy,” said the IMF.
Meanwhile, the IMF has reported that the current pace of external borrowing by the Liberian government is consistent with the temporary scaling-up of public investment to address infrastructure gaps, but called on the government to begin to moderate external borrowing. Liberia’s total debt overhang is in the tune of about US$560 million.
The IMF used the report to described government’s program performance as 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,” the IMF stated.
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), the IMF observed staff supports the completion of the third extended credit facility (ECF) review.
The IMF staff also supports the Liberian 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.
The IMF praised the government for implementing additional structural measures to strengthen public financial management, supported by IMF technical assistance.
“The Liberian authorities are strengthening oversight of investment projects. A database of all investment projects will be prepared by end-December 2014 and, starting with the FY2016 budget, a list of all ongoing projects for which multi-year allocations are required will be included in the draft budget to ensure adequate funding.”