IMF Board Approves US$50 Million Budget Support for Liberia

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The IMF Executive Board

The Executive Board of the International Monetary Fund (IMF) on Friday, June 5, approved the disbursement of SDR36.17 million (US$50 million; 1.7 percent of GDP) to be drawn under the Rapid Credit Facility (RCF). This, together with debt relief approved in April 13, will help meet Liberia’s urgent balance of payment needs, mostly stemming from fiscal needs necessary to respond to the Coronavirus pandemic.

A release from the IMF says the pandemic is hitting Liberia at a time when economic activity was already declining.

“Real GDP growth for 2019 is estimated at -2.5 percent as private sector confidence remained weak, while inflation remains high,” the IMF says. “In addition, vulnerability to exogenous shocks remained high as both fiscal and external buffers were low. The full extent of the impact of COVID-19 is not known, but growth is now projected at -2.5 percent for 2020, largely due to lockdown at home and abroad which are negatively impacting domestic demand, net remittances, capital inflows, and the banking sector. In the absence of support, the poorest will feel the impact the most as there is little social safety net, and the food security of those relying on uncertain daily income is a pressing concern. The pandemic opens a balance of payment need of US$150 million (5.1 percent of GDP) in 2020, which largely arises from a domestic revenue shortfall projected at US$119 million.”

According to the IMF, preliminary data suggest that performance under the Extended Credit Facility (ECF)-supported program has been weak, though the authorities are fully committed to address the weaknesses. Most of the end-December fiscal targets and structural benchmarks were met but the monetary program went off track by a large margin mainly for two reasons: an acute shortage of Liberian dollar banknotes at a period of high cash demand resulting in higher foreign exchange intervention than programmed; and acute shortages of U.S. dollar liquidity in the banking sector. The authorities are addressing these weaknesses—aiming to bring the program back on track in time to complete the first review—but are faced with the challenging task of managing the COVID-19 crisis at the same time.

Following the Executive Board’s discussion of Liberia, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:

“The COVID-19 pandemic came at a time when a consensus on the need for broad-based reform in Liberia had finally emerged, but when macroeconomic conditions remained challenging. The pandemic is expected to hit Liberia hard, and will likely disproportionately affect the most vulnerable as social safety nets are rudimentary, food insecurity is rising, and the healthcare system is underdeveloped.

“The authorities remain committed to protecting the most vulnerable amidst a significant revenue shortfall. The initial response to the pandemic, including the emergency food aid program, is welcome, but more remains to be done. Specifically. the passage of the agreed FY2021 budget with high-quality revenue measures is key to addressing the COVID-19 crisis. It is also important to expeditiously finalize the comprehensive off-budget COVID-19 response plan with development partners. The authorities have taken measures to raise domestic revenue, including legislative approval of an excise tax on fuel and adoption of a resolution to channel all revenues acquired by two large state-owned entities to the government’s consolidated account. They have also made significant improvements in the monitoring, control, and transparency of expenditure, including by tabulating and publishing detailed weekly reconciled spending reports, by requiring all budgetary entities to utilize the centralized financial management system, and by committing to the timely publication of an audit of crisis spending.

“To address the shortage of Liberian dollars and the growing need for more U.S. dollar liquidity, the authorities have contracted the printing of additional Liberian dollar bank notes and are formulating measures for inclusion in the FY2021 budget to augment US dollar liquidity.

“The authorities have also made steady progress in reaching benchmarks set under the Extended Credit Facility arrangement and remain committed to reforms under the arrangement to stabilize macroeconomic conditions and lay the foundation for inclusive and durable growth once the crisis subsides.’’

2 COMMENTS

  1. Now, the question becomes whether Weah is able to set the goals and translate these IMF loans into some transforming objectives to bring about meaningful changes in the lives of the people. And from what Liberians have already experienced under his administration, this remains to be seen.

    Is the transformation of Liberia from IMF loans realizable? Yes, but the transformation will depend on the honesty and integrity of the government in power as IMF loans are double-edged swords. When used wisely and prudently, they do achieve enviable results. But when used unwisely, they set the country on a cataclysmic course.

    Examples worth emanating regarding the borrowing of IMF loans combined with the wise use and the positive in-flow of revenues from the sales of the natural resources of some African nations are. Ghana, Mauritius, Rwanda and so forth; these are just a few.

    With Liberia, I say hats off to Weah as nothing will change. In fact, in the coming months, Liberians will witness the upsurge of even more private mansions all over Monrovia belonging to his private projects. And when he is questioned about such developments, he will tersely reply, “Wedor! I play football…” “I made plenty money.” “My son play football in America!”

    Liberians! Brace yourselves as more adverse impacts are still to come.

  2. Money is not Liberia’s problem. Perhaps, not its major problems. The World Bank can emptied its vault, and poured in all that cool cash in Liberia, well, it will only create new sets of millionaires. As there are already millionaires in Liberia by that country’s standard , and still no impact on national issues and developments. So what is actually the problem ? Patriotism, nationalism, all the alisms ? Perhaps, no . So let take a look at what the US government is being accused of for not doing too much, or not doing enough for Liberia’s developments, in comparison to the just arrived Chinese on the political and economical scenes of that County’s developments. The Chinese developmental structures are visible for Liberians to see and feel the impact. Because they only do not bring in the money, they bring in their own people to do the heavy lifting for them to have a successful story on the mindset of Liberians. On the other hand the American are bringing in the cash, but there projects as determined by both the Liberian government and the US are invisible because the US government is not doing the heavy where it counts, leaving that to the Liberian government to do the heavy lifting. Where the government itself is found lacking. But millions and millions of US dollars have been poured into that country, and its success story as viewed by many Liberians is not enough, or enough being done. The US USAID has taken upon all kinds of projects . From supporting farmers to road constructions. But the people at that agency are not FARMERS ! The people at that agency are not ENGINEERS for road constructions. They are just political appointees or papers pushers to see that the money is spent as it is supposed to be spent. How the heavy lifting is carried out by the government is their national affairs. So the US funded projects with millions of US dollars are invisible and have little or no impact, as compared to the Chinese who are funding and doing the heavy lifting at the same time. Now lets visit the nation’s Central Bank where the financial technical skills are missing to do the heavy lifting. The US agency of USAID has sent in technical support assistants to do the heavy lifting, which both the bank and government do not have. The results so far are steady improvement operations from the bank than before. The US government has stopped direct or hands-on nation building ! They provide the funds and expects the receiving nation to do the heavy lifting with its trained citizens in the field of technical know how. The US is billing the management of the Central Bank of its citizens for doing the heavy lifting. And so Liberia’s problem is not MONEY but its lack of trained citizens to do the heavy lifting. The money is there, supports from partners are there, but not trained citizens to do the heavy lifting with technical knowledge and skills. The World Bank poured out all its money in Liberia, but they will have to provide the necessary brains to do the heavy lifting. The same way the IMF . The same with Sweden which has poured in financial support against rapes and child abuse , they too will have to send in technical support assistants to do the heavy lifting. That is if the politics of the country will allow them to do so. And with all that being said, the nation is ready not thinking along those lines. The managment of RIA is about to carry out some expansions, but they have Ghanaians on mind to do the heavy lifting. Right there, Money is not the Problem. And money by itself can not do the heavy lifting. Only people with the technical knowledge and skills can do.

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