allAfrica.com: Liberia: Country's IMF Status - Blessing Or Benefit of the Doubt? (Page 1 of 8)

Fresh from winning the leadership contest of war-ravaged Liberia, the Johnson-Sirleaf administration stepped right into the challenge of balancing the debt repayment expectation of financial institutions and lender nations with the recovery expectation of millions of war-devastated Liberians.

It's been more than a year of discussions and compromises now, and the Executive Board of the International Monetary Fund (IMF) says it is providing a growth-enabling environment for Liberia.

There is a resounding "Hooray!" across the nation, but the questions that remain are, "Is Liberia ready to handle the requirements of that environment in order to remain the IMF's trusted partner?" "Is the country's new status a blessing or the benefit of the doubt for Liberia?"

Or better still, "How long will the conditions in Liberia make the IMF compassionate enough to keep engaged - outside the hard core lending and business rules?"

The Analyst Staff Writer has been considering just these questions plus more.

Announcements by the Executive Board of the International Monetary Fund (IMF), last week, leaves as much for delight as it leaves hard questions for reflection and consideration lest the delight is short-lived, observers and analysts have suggested.

The announcement, though, lifted for the 185-nation IMF and the Johnson-Sirleaf administration a chorus of "Hooray!" amongst unsuspecting Liberians across the nation last week. These expect that the administration will now begin to restore basic social services, revamp the private and public sectors, and begin creating new jobs to service the nation's daunting unemployment problem.

"But how realistic are the expectations in the face of crawling realities that comprise troubling contradictions and professional and structural insufficiencies?" is yet another question observers and analysts want answered.

IMF Announcement

IMF Board, in a policy statement, said it has fully restored Liberia's IMF status after 20 years delinquency in loan servicing, approved financial support amounting to US$952 Million, and agreed in principle to designate Liberia as a "Decision Point country" under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

A country reaches decision point, amongst other things, after it had establish a track record of reform and sound policies through IMF- and World Bank's International Development Association (IDA)-supported programs.

This include, foremost, after the country had developed what is called a Poverty Reduction Strategy Paper (PRSP) through a process that involved the IMF and World Bank and all of the country's stakeholders in the private and public sectors.

The IMF eligibility criteria say a country at decision point may immediately begin receiving interim relief on its debt service falling due. In order for the relief to become full and irrevocable, the criteria say, the country must establish a further track record of good performance under IMF- and IDA-supported programs; implement satisfactorily key reforms agreed at the decision point, and adopt and implement the PRSP for at least one year.

Achievement at this level will qualify the nation for what IMF calls its completion point, at which time lenders are expected to provide the full debt relief committed at decision point. The IMF announcement says the Board approved the range of measures to complete the steps necessary for Liberia to fully normalize financial relations after more than two decades of protracted arrears to the IMF.

The decisions, according to the policy statement, also enabled it to commit IMF financial support amounting to a combined SDR 582 million, about US$952 million. SDR is initials for "special drawing right" the current value of which is determined daily by the IMF by summing the values in U.S. dollars, based on market exchange rates, of a basket of four major currencies - the euro, Japanese yen, pound sterling, and the U.S. dollar.

The SDR valuation basket is normally reviewed every five years. Interest on SDR holdings is paid, and charges on net cumulative allocations are collected, on a quarterly basis, and are settled on the first day of the subsequent quarter.

The full restoration of Liberia's IMF status, according to the Board, includes the Executive Board's agreement to restore Liberia's voting and related rights, and its decision to restore Liberia's eligibility to use the general resources of the Fund.

Liberia's suspension rights to use SDRs was also lifted after overdue obligations to the IMF were cleared through a bridge loan amounting to an equivalent to SDR 543 million (about US$888 million) was paid by the U.S. government.

"Financial support approved by the Executive Board includes a three-year, SDR 239.02 million (about US$391 million) arrangement under the Poverty Reduction and Growth Facility (PRGF) and a SDR 342.77 million (about US$561 million) arrangement under the Extended Fund Facility (EFF) in support of the Liberia government's economic program covering 2008-10," the announcement said.

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