The Informer (Monrovia)

Liberia Benefits U.S.$11 Million From IMF - Re-Selected for MCC Project

Photo: The New Dawn
Finance Minister Amara Konneh.

The Executive Board of the International Monetary Fund (IMF) Thursday completed the second review under the three-year arrangement under the Extended Credit Facility (ECF) for Liberia, committing up to US$11 million to the country.

"The completion of the review enables the disbursement of an amount equivalent to SDR 7.382 million (about US$11.4 million), bringing the total disbursements under the arrangement to SDR 22.146 million (about US$34.2 million)," a Finance Ministry's release issued last night said.

In completing the review, the Board approved the waiver for the nonobservance of the performance criteria on the floor on revenue collection of the central government, the ceiling on Central Bank of Liberia's gross direct credit to the government, and the floor on foreign reserves of the CBL.

The Board also approved the authorities' requests for modification of end-December 2013 and end-June 2014 performance criterion on the ceiling on new domestic borrowing of the central government.

The ECF arrangement for Liberia for the equivalent of SDR 51.68 million (about US$79.7 million) was approved by the IMF's Executive Board on November 19, 2012

Following the Executive Board's discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:

"Liberia's economic growth remains strong and the medium-term outlook is positive, provided new projects in the mining and plantation sectors come on stream. Non-resource real GDP growth is expected to continue to pick up in 2014-15, as the authorities continue to press ahead with the implementation of large energy and road infrastructure projects, in line with their Agenda for Transformation.

"While the authorities remain fully committed to reforms underpinned by the ECF arrangement, institutional and capacity constraints have affected recent program performance.

Deviations on government revenue and domestic financing were minor, but foreign reserves fell below the program floor reflecting in part higher intervention in the foreign exchange market to mitigate depreciation pressures. The authorities are taking appropriate action to rebuild an adequate reserves buffer, including by strengthening the foreign exchange auction and enhancing liquidity management.

"Action is being taken to strengthen budget execution while scaling up public investment. The authorities have identified savings in the FY2014 budget to be able to meet their deficit target while protecting capital spending. They are also enhancing cash management, including through establishing a Treasury Single Account. Timely approval of annual budgets, together with careful prioritization and preparation of investment projects, would help remove implementation bottlenecks.

"Financial sector reforms will continue to focus on addressing high credit risks and strengthening the legal and institutional environment to promote intermediation. Enhancing the credit reference system and establishing the collateral registry would directly help reduce credit risk. Other credit initiatives should be market-based, efficient, and recognized as fiscal initiatives financed by the government or donors.

"In light of the recent rapid debt accumulation and large remaining external financing needs, maintaining debt sustainability will require adhering to sound debt management principles, enshrined in the new medium-term debt strategy."

Meanwhile, the Government of Liberia welcomes the decision of the Board of Directors of the Millennium Challenge Corporation (MCC) to re-select Liberia as a compact eligible country.

MCC's governance benchmarks are in alignment with the Government governance reform policies and national aspirations. The Government of Liberia will exert all efforts to improve its governance performance and it will also continue to scale up its commitment of the requisite resources.

The Government's performance on major governance indicators has been monitored and supervised by a Steering Committee comprised of several ministries and agencies, as well as some of our development partners. The committee is chaired by Amara Konneh, Minister of Finance. The establishment of the committee by the President Ellen Johnson Sirleaf prioritized continued governance reforms and focused on improvement in actual performance indicators.

As a result of the committee oversight, the Government has shown improvement over most key performance indicators over the past years and remains committed to continuing such performance improvement over the next year with the goal of exceeding the median threshold performance of other low Income Countries.

In its continued commitment to strengthening democracy and good governance in Liberia, the Government of Liberia reaffirms its commitment to achieving the following four governance policy objectives including the protection of up to 13% of Liberia's biomes within the next two years, the Improvement of the control in the trafficking of persons, and the reform of civil libel laws through the decriminalization of civil libel. The Government is also committed to the continued improvement of its performance on such governance indicators as economic freedom, investing in people, and ruling justly.

In fulfillment of its commitment to successfully complete the MCC compact development process, the Government has established since May 2013, a country Core Team with the responsibility to implement the compact development process in collaboration with the MCC.

The team has already successfully completed Phase 1 of the process by producing an Economic Constraints Analysis (CA), which is available to the public on the Ministry of Finance website (www.mof.gov.lr). Furthermore, the team has under taken national consultations on the findings of the Constraints Analysis in Monrovia, Tubmanburg, Kakata, Gbarnga, Ganta, Zwedru, and Voinjama.

Based on the CA findings and the national consultations, initial project proposals have been submitted to the MCC covering roads and electricity. These concepts have been discussed by the Core Team and the MCC in Washington DC in November 2013. The Government is pleased to announce that it has now embarked on developing a more comprehensive and in- depth proposal for submission to the MCC by early 2014.

In a separate development, the Executive Board of the International Monetary Fund (IMF) has completed its review the Extended Credit Facility (ECF) for Liberia, enabling the disbursement of US$11.4 million as part of support to Liberia's financial sector. The latest approval brings to roughly US$34.2 million in IMF financing under the ECF arrangement since its adoption on November 19, 2012 by the IMF's Executive Board.

In completing the review, the Board approved the waiver for the nonobservance of the performance criteria on the floor on revenue collection of the central government, the ceiling on Central Bank of Liberia's gross direct credit to the government, and the floor on foreign reserves of the CBL.

Speaking after the decision, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said "Liberia's economic growth remains strong and the medium-term outlook is positive, provided new projects in the mining and plantation sectors come on stream. Non-resource real GDP growth is expected to continue to pick up in 2014-15, as the authorities continue to press ahead with the implementation of large energy and road infrastructure projects, in line with their Agenda for Transformation".

"While the authorities remain fully committed to reforms underpinned by the ECF arrangement, institutional and capacity constraints have affected recent program performance. Deviations on government revenue and domestic financing were minor, but foreign reserves fell below the program floor reflecting in part higher intervention in the foreign exchange market to mitigate depreciation pressures. The authorities are taking appropriate action to rebuild an adequate reserves buffer, including by strengthening the foreign exchange auction and enhancing liquidity management."

"Action is being taken to strengthen budget execution while scaling up public investment. The authorities have identified savings in the FY2014 budget to be able to meet their deficit target while protecting capital spending. They are also enhancing cash management, including through establishing a Treasury Single Account. Timely approval of annual budgets, together with careful prioritization and preparation of investment projects, would help remove implementation bottlenecks.

In response to these developments, Finance Minister Amara Konneh, praised the team working on both efforts and cited the government continued commitment to engaging with the MCC and following on the recommendations from the IMF. "The progress we have seen from these two programs is indicative of this government's desire to strengthen our fiscal and growth programs, while remaining compliant with the various rules and requirements enshrined in these programs. There are challenges but we are working very hard to deal with them, in spite of the many constraints we face."

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