Liberia's financial gatekeeping concept has received magnificent applause and a profound pat on the back for ably weathering the storm amidst the economic pressure and the incursion of the dreadful pandemic that hit the entire world greatly.
Beginning from October 31 to November 11, 2022, participated in the IMF mission on the Fifth Review of a Four-Year Arrangement under the Extended Credit Facility (ECF) for Liberia, held in the capital, Monrovia.
The mission team, led by the mission chief, Mr. Christoph Klingen, held discussions on the macroeconomic and financial situation of the country and evaluated the program performance thus far, as against the end-September 2022 performance criteria and indicative targets as well as structural benchmarks.
The mission also set priorities for the future (in terms of policies and the economic growth outlook) after evaluating how government policies may affect growth, economic stability, and desirable stabilization adjustments in the short to medium term.
Consultations were held with the Hon. Samuel. D. Tweah, Minister of Finance and Development Planning, and the Hon. J. Aloysius Tarlue, Executive Governor of the Central Bank of Liberia, as well as with development partners, private sector representatives and senior government officials.
Concerning the Macroeconomic overview and recent economic developments and despite the prevailing global economic challenges, characterized by the lingering effects of COVID-19 and the ongoing conflict between Russia and Ukraine, the country continues to enjoy macroeconomic stability, largely due to the continuous policy advice and technical support from the IMF.
Unlike Ghana and other countries in Africa, Ghana in spite of similar major economic and financial crises, and its attendant social challenges, In 2020 and 2021, the COVID-19 pandemic negatively impacted its fiscal and economic situation. It makes it constraining to apply some stringent fiscal policy to keep afloat in the face of global risk aversion triggered by large capital outflows, a loss of external market access, and rising domestic borrowing costs.
Also, the combination of adverse external shocks has exposed Ghana to a surge in inflation, a large exchange rate depreciation and stress on the financing of the budget. These factors taken together have put the sustainability of the debt at risk.
To address these mounting challenges, Liberia's neighbor launched on Monday, December 5 an invitation to exchange its domestic debt. The details of this domestic debt exchange are set forth in an Exchange Memorandum, available on https://mofep.gov.gh/news-and-events/debt-operations.
This domestic debt operation is part of a more comprehensive agenda to restore public debt sustainability. Given the magnitude of the economic and social crisis that Ghana is confronted with, this domestic debt operation will not be enough to close the large financing gaps that Ghana faces over the coming years. The Government's Debt Sustainability Analysis (DSA) has demonstrated that public debt, both external and domestic, is unsustainable.
As for Liberia, the authorities have met all quantitative performance criteria (PC) except three. These include (i) the floor on the primary fiscal balance, (ii) the floor on international reserves of the CBL, and (iii) the ceiling on CBL gross direct credit to the government.
The authorities also missed two out of four structural benchmarks for the end of September. These include (i) submitting amendments of the Financial Institutions Act (FIA) of 1999 to the Legislature, and (ii) submitting the audit report for the FY2020/21 budget to the Legislature. Some progress has been made to implement the TSA and prepare the needed legislation to reduce large tax expenditures.
The authorities are committed to following through on the missed structural benchmarks in November 2022, before Liberia goes to the Board.
Moreover, the authorities remain committed to fighting inflation and achieving a single-digit rate of inflation (at most 5 percent which is in line with the ECOWAS threshold) in the medium term
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In this regard, and as will be a testament in the upcoming 3rd Quarter Monetary Policy Meeting, the intention is to maintain the current contractionary monetary policy stance, while being two percent, whereas the end-of-year inflation is projected at 8.5 percent.
It is the view of the authorities that the path of inflation will depend largely on the stability of the domestic currency, economic diversification, increased domestic production of rice, public tax policies on key commodities (i.e., petroleum products and other consumables), increasing energy supply and accelerating infrastructural developments (i.e., farm to market roads).
With such a posture and sound economic policy propelled by unhindered fiscal disciplinary measures applied, Liberia is indeed bound to enjoy leverage over Ghana in weathering the storm financially and economically.
