The Executive Board of the International Monetary Fund (IMF) has 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 Special Drawing Rights (SDR) 14.764 million (about US$20.7 million). This brings total disbursements under the arrangement to SDR 111.664 million, which is about US$156.7 million, the IMF said.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
It may be recalled that the ECF arrangement for Liberia was approved by the Board on November 19, 2012 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,” he said.
Mr. Zhang said maintaining the 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.
According to him, 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.
Mr. Zhang said “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.”