IMF Executive Board Completes Fifth and Sixth ECF Reviews for Liberia, Increases Access, Extends the Arrangement, and Approves US$37.1 million Disbursement
The Executive Board of the International Monetary Fund (IMF) today completed the fifth and sixth reviews of Liberia’s economic performance under the program supported by the Extended Credit Facility (ECF) arrangement. Completion of these reviews enables the immediate disbursement of SDR 27.69 million (about US$37.1 million). This brings total disbursements under the arrangement to SDR 96.9 million (about US$129.9 million).
The Executive Board also approved the authorities’ request to waive the non-observance of performance criteria. The waivers pertains to the end-December 2015 floors on total revenue collection of the central government and the net foreign exchange position of the Central Bank of Liberia and to the end-June 2016 performance criteria on floors on total revenue collection of the central government, net foreign exchange position of the Central Bank of Liberia, and the ceiling on the Central Bank of Liberia’s gross direct credit to the central government. It also approved the authorities’ requests to augment access under the program by SDR 27.69 million (about US$37.1 million), of which SDR 12.9 million (about US$17.3 million) would be directed to the budget, and to extend the program until November 18, 2017.
The ECF arrangement for Liberia was approved by the Board on November 19, 2012 (see Press Release No. 12/449 ) for SDR 51.68 million (about US$69.3 million or 40 percent of quota as of that date). In September 2014, as part of the response in the fight against Ebola, the Board approved an augmentation of access of SDR 32.3 million (about US$ 43.3 million or 25 percent of quota as of that date) under the ECF arrangement for Liberia.
Following the Board’s discussion on Liberia, Mr. Tao Zhang, Deputy Managing Director and Acting Chair issued the following statement:
“After the end of the Ebola epidemic, a weak global commodity price environment has delayed Liberia’s economic recovery. Low prices for iron ore and rubber have led to significant cutbacks in output and investment. In addition, the withdrawal of UNMIL peacekeepers has reduced demand for local services.
“The authorities have managed to maintain macroeconomic stability in a difficult economic situation, and remain committed to strong program implementation. However, program performance has been mixed on account of the challenging economic situation as well as policy choices, including open bank assistance by the central bank. The pace of structural reform has been slow reflecting limited capacity and weak prioritization, due in part to the transition of the economic management teams at the ministry of finance and central bank.
“Fiscal policy has appropriately responded to the commodity price shock, thanks to new revenue measures accompanied by increased spending discipline. In the coming years, fiscal prudence is needed, including through the introduction of the VAT and the rationalization of the wage bill. Progress on public financial management reforms, especially the Treasury Single Account, investment management, and financial control of state-owned enterprises, will be important to support fiscal consolidation efforts.
“Borrowing policies should remain prudent. The authorities’ success so far in respecting the debt limits under the new debt limit policy is commendable. In addition, preserving debt sustainability will require prioritizing concessional loans and carefully contracting new borrowing through sound project appraisal.
“Rebuilding external buffers will require a rigorous implementation of the central bank’s three-year financial plan and limiting foreign exchange intervention to smoothing volatility. Good liquidity management should be relied upon to anchor inflation. The closure of the First International Bank of Liberia Limited (FIBLL) is welcome, and the forensic audit launched by the central bank enhances its credibility and transparency. Lessons from this experience point to the importance of strengthening frameworks for emergency liquidity assistance, bank resolution, and deposit insurance.”
 The Extended Credit Facility (ECF) is the IMF’s main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years. (see http://www.imf.org/external/np/exr/facts/ecf.htm).