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The government of Liberia and the International Monetary Fund (IMF) have agreed on a plan to support the country with a financial assistance of about $209 million to be repaid over 40 months.
This plan, sealed under the Extended Credit Facility (ECF) initiative of the IMF, is designed to help Liberia implement economic reforms, says Anthony G. Myers, Acting Finance and Development Planning Minister, Ministry of Finance, when he appeared at the Ministry of Information press briefing.
Minister Myers further outlined some key benefits of the ECF to Liberia. These benefits, among others, include setting a financial policy framework that facilitates the actualization of the ARREST Agenda and the return to fiscal sustainability. Other benefits are an increase in Liberia's allocations to other financing sources such as the International Development Association, African Development Fund, International Finance Corporation, etc.
He added that the arrangement, pending approval by the IMF's Executive Board, is a statement of confidence in the current Joseph Nyuma Boakai administration's determination to undertake reforms in the public financial management sector.
This, according to Minister Myers, includes restoring fiscal sustainability, rebuilding external reserves, ensuring financial sector stability, and revitalizing a reform agenda to tackle governance and corruption issues.
He said the MFDP, in particular, noted that this agreement is a testament to Liberia's ongoing efforts to strengthen its economy and improve governance for the benefit of all Liberians.
Minister Myers added that the Liberian authorities remain optimistic that the ECF arrangement will contribute significantly to restoring fiscal discipline, improving the country's financial stability, and advancing reforms that will promote transparency, enhance governance, and reduce corruption.
He said the successful negotiation of this agreement reflects Liberia's continued partnership with the IMF and underscores the government's commitment to implementing policies that foster economic growth, stability, and resilience in the face of global challenges.
If approved, this arrangement will provide the necessary financial support to reinforce Liberia's economic reforms and help the country address critical fiscal and governance issues.
However, this agreement still needs to be approved by the IMF's higher authorities-a discussion that is poised to take place on September 25. The ECF allows the IMF to provide medium-term financial assistance to low-income countries with a zero percent interest rate to be repaid between 3-5 years.
Countries that have prolonged balances of payments are eligible for this credit. Under the Poverty Reduction and Growth Trust (PRGT), the ECF is one of the IMF programs that empowers developing countries, including Liberia, to implement economic reforms and ensure stable and sustainable macroeconomics.
Kim says the IMF is committed to restoring policy credibility, and policy challenges. "We remain committed to supporting the authorities' implementation of key policy priorities, which include restoring fiscal sustainability, rebuilding external reserves, ensuring financial sector stability, and revitalizing a reform agenda to tackle governance and corruption issues. The authorities have developed a sound plan and have initiated essential policy actions to manage the difficult fiscal situation and address concerns related to central bank governance."
In a significant development for Liberia's economic future, the International Monetary Fund (IMF) and the government of Liberia have reached a staff-level agreement on a comprehensive set of policies that will support a 40-month Extended Credit Facility (ECF) arrangement.
This agreement, valued at SDR 155 million (approximately US$209 million), represents 60 percent of Liberia's IMF quota and is seen as a critical step in backing the new administration's ambitious reform agenda.
The IMF's mission chief for Liberia, Mr. Daehaeng Kim, announced the breakthrough in discussions with Liberian authorities, stating, "I am pleased to announce that the IMF staff and the Liberian government have reached an agreement that will facilitate the IMF's support for the new administration's policy reform agenda."
Mr. Kim emphasized the importance of this agreement in addressing Liberia's immediate economic challenges, highlighting that the IMF staff "welcomes the authorities' efforts to address immediate policy challenges and restore policy credibility." He added, "We remain committed to supporting the authorities' implementation of key policy priorities, which include restoring fiscal sustainability, rebuilding external reserves, ensuring financial sector stability, and revitalizing a reform agenda to tackle governance and corruption issues."
The agreement is expected to pave the way for the IMF's support of the government's policy objectives aimed at stabilizing the economy and ensuring long-term growth.
The Liberian government, in turn, has developed a comprehensive plan to manage the difficult fiscal situation while addressing concerns related to central bank governance and overall economic stability.
According to Mr. Kim, the policy actions initiated by Liberia's new administration are crucial in managing the country's economic challenges.
"The authorities have developed a sound plan and have initiated essential policy actions to manage the difficult fiscal situation and address concerns related to central bank governance," he remarked. "The agreement now awaits approval from the IMF's Management and Executive Board, with the Board discussion on Liberia's ECF arrangement scheduled for September 25."
Why the ECF?
The government of President Joseph Boakai has faced economic hurdles to support its ARREST agenda, which presents Agriculture, Roads, Rule of Law, Education, Sanitation, and Tourism.
In February, the House of Representatives and the Senate approved $41.3 million to prevent his government shutdown. The move was criticized by members of the opposition block, including Representative Musa Bility.
Liberia's economy is mainly driven by the mining sector, which declined from 4.8 percent in 2022 to 4.5 percent in 2023, causing inflation to rise from 7.6 percent to 10.5 percent, according to the African Development Bank.
"So in December 2023, then President-elect Joseph Boakai asked that he wanted Liberia to re-engage with the fund and to resume the ECF program," Minister Meyers said, explaining why they requested the ECF.
According to him, in 2022, the government of former president George Weah failed to meet ECF's requirements, leading to the program's suspension. He says, "In fact, it collapsed," causing the exchange rate, inflation rate to go, and import prices to rise."
Minister Myers said, upon the request of the president, IMF staff conducted an assessment in Liberia by engaging with the CBL and the Ministry of Finance. "It was agreed in that assessment meeting that yes, the country will be ready to resume the ECF. And so all the documentation was prepared."
The World Bank says the country's economy is expected to expand by 5.3 percent in 2024 and by an average of 5.9 percent from 2024 to 2026. However, maintaining this growth requires stabilizing the country's macroeconomic stability.
"Tightening monetary policy will ease inflationary pressures and bring inflation down to single digits in the medium term. The fiscal deficit is projected to moderate to an average of 3.3% of GDP in the medium term as the government strengthens domestic resource mobilization and expenditure controls. The current account deficit is expected to remain elevated in the medium term due to a surge in aggregate demand driven by foreign direct investment (FDI)-related imports."
Countering reports of default in payment
This huge breakthrough comes amid a report that the Government of Liberia has defaulted on the settlement of its outstanding obligations to the International Development Association (IDA), a global counterpart of the IMF.
Like the IMF, the IDA is one of the leading financing institutions of the World Bank Group for low-income countries and provides low-interest loans and grants to promote sustainable economic growth and reduce poverty.
According to a statement issued by the MFDP, about US$44.3 million has been paid by the administration under President Joseph Nyuma Boakai since January 2024.
This amount includes US$23 million outstanding from 2023 that was not paid by the previous administration and US$21 million out of the scheduled external debt repayments due in 2024.
The clarity from the Finance Ministry was provoked by a recent report by The Liberian Investigator, an online news outlet, that the World Bank had frozen Liberia's access to funds due to unpaid debts, leading to a suspension of crucial financing necessary for development projects.
The outlet reported On Friday, August 23, 2024, that the country's default on payment obligations for 60 days prompted the World Bank to halt funds withdrawal under active credits, grants, and loans managed by the institution.
The government has since refuted the report, indicating that it is on course with its payments to the bank.