The International Monetary Fund(IMF), at the end of its 2018 Article IV Consultation Mission to Liberia, has expressed optimism that the Liberian economy, following the devastating Ebola epidemic, a dramatic fall in export commodity prices, the withdrawal of the UN peacekeeping force, disruptions associated with the December 2017 elections and negative growth rates, all of which conspired to keep economic activity at low levels, will experience an upturn, according to the head of the IMF team, Mika Saito.
Those same factors, according to Mr. Saito led to the depreciation of the foreign exchange rate by 28 percent since January 2017 and the driving of inflation to 14 percent which, in the Fund’s assessment is relatively high. And this had the effect of putting pressure on the foreign exchange reserves of the Central Bank of Liberia which could cover only 2.8 months of import activity.
The Fund’s prognosis of a favorable upturn in the nation’s economy, however, rests firmly on the assumption that the government of Liberia will implement good policies that include support for private sector development and concrete measures to improve the business climate.
The Fund noted that the recent peaceful transition of political power from President Sirleaf to George Weah will have the effect of providing support to the recovery of the domestic economy mainly the Agriculture and service sectors because of improved investor and consumer confidence.
The IMF also predicts that the export commodity sectors will be more active as global commodity prices recover from the lows experienced over the past months, although it did not say whether the predicted commodity price recovery will be or can be sustained over the long term. This is a key concern to local watchers of the economy especially since there is very little or no value additions to the country’s traditional exports be they gold, diamonds, timber or rubber.
But while the Fund supports commends the government’s adoption of a strongly pro-poor agenda, it is warning that increased expenditure must go hand in hand with measures to ensure macroeconomic and debt stability
This is against fears that the adverse impact of macroeconomic and debt instability will not only fall disproportionately on the poorest of the poor but will serve to undercut the goal of poverty reduction and thus ultimately undermine President Weah’s ability to deliver on his pro-poor agenda.
In the opinion of the Fund, the contracting of future debt should be undertaken with caution, particularly as regards, the securing of favorable terms and conditions as well as the creation of fiscal space through improvement in the efficiency of existing spending.
In this regard, according to the Fund, the creation of additional fiscal space would require the inculcation of greater fiscal transparency and accountability as well as order and priority in government’s fiscal relations.
It will also require controlling the growth of the public wage bill if development spending is to be replaced by current spending and if order and priority in government’s fiscal relations is to be assured.
The Fund also observed that in comparison to regional standards, domestic revenue generation is low and expanding investment spending over the medium terms will hinge primarily on the ability of government to exploit the scope for improvement.
Also required, according to the Fund, is the need for government to adopt a comprehensive program to clear domestic arrears and “prevent the emergence of new ones utilizing realistic revenue estimates for budget formulation and improving the monitoring of all expenditure including grant and loan-financed projects’.
Finally, the Fund noted that as macroeconomic stability hinges on effective implementation of monetary policy, an effective precondition is the strengthening of the Central Bank of Liberia’s balance sheet as a way of ensuring that the Central Bank has adequate financial potency to carry out its mandate effectively.
For his part, Finance and Development Planning (MFDP) Minister, Samuel Tweah, said the Government under the leadership of President George Weah is seeking a robust partnership with the International Monetary Fund (IMF) that will enable the President achieve his Pro-Poor development agenda.
He said partnership with the IMF will focus on greater flexibility “because this is a government that is going to be transparent and transformative in its development.
The Minister made these statements on Tuesday, March 20, at a joint press conference held in Monrovia with the IMF staff teams that convey preliminary findings after a visit to the country.
He further said that government is keen on improving key areas in generating revenue to maintain its operations.
According to him, the major concerns for government are to provide electricity for all Liberians, create empowerment through job creation, and invest in agriculture by focusing mainly on the production of rice and cassava.
He said that education is another key area they will invest in to maintain the growth and development of the country. He said job creation and investing in the private sector will not only help create more jobs but will serve as a generation of revenue for the country.
The Finance minister said there are risks associated with these plans; however, he believes the government can manage these risks. He also disclosed that by June, Liberia will have a new development strategy that will focus on infrastructure, agriculture and education.
He said the idea is to prioritize and develop those sectors that can support growth, create jobs such as oil palm production, rice and cassava production and education.