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IMF Executive Board Approves Three-Year, US$78.9Million ECF Arrangement for Liberia

By International Monetary Fund (IMF)
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MONROVIA, Liberia, November 20, 2012/African Press Organization (APO)/ -- The Executive Board of the International Monetary Fund (IMF) today approved a three-year Extended Credit Facility (ECF)1 Arrangement for Liberia in an amount equivalent to SDR 51.68 million (about US$78.9 million). The overall amount of the program represents 40 percent of Liberia's quota in the IMF and approval enables the immediate disbursement of SDR 7.382 million (about US$11.3 million). The Executive Board also concluded the 2012 Article IV consultations with Liberia, which will be detailed in a Public Information Notice in due course.

Following the Executive Board's discussion of Liberia, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement.

“Liberia made strong macroeconomic gains under the recent Extended Credit Facility (ECF) arrangement supported by the Fund. Economic growth has been robust; inflation has been largely contained; international reserves have been built up; and external debt has been reduced through substantial debt relief. However, further reforms are needed to promote broad-based growth, reduce poverty, and create jobs, particularly for the youth.

“The new ECF arrangement aims to support the authorities' second poverty reduction strategy. The policy priorities focus on safeguarding macroeconomic stability and laying the basis for faster and diversified growth through a substantial scaling up of infrastructure and social investments.

“Growth will be underpinned by sound macroeconomic policies, higher investment, and vigorous implementation of structural reforms. Fiscal reforms focus on containing current spending, particularly the wage bill, and strengthening budget execution and controls, through improvements in public financial management. An increase in external debt limits will allow a scaling up of critical growth-enhancing investments while maintaining debt sustainability. Measures are also planned to further improve governance and transparency, including financial oversight of state-owned enterprises, streamlining procurement procedures, improving project execution, and establishing a natural resource revenue unit at the Ministry of Finance. Financial sector reforms focus on reducing vulnerabilities and improving access to credit.”


Recent Economic Developments

Liberia made strong macroeconomic gains under a successful ECF program initially approved in 2008 for three years and later extended to May 2012 (see Press Release No. 12/165). The short- to medium-term outlook remains favorable, although subject to considerable risks. Following an initial post-conflict boost, economic growth has averaged 7 percent a year since 2009 (mostly from non-mining activities before the resumption of iron ore exports in late 2011), while inflation has been largely contained at or near single digits. With the resumption of iron ore exports in 2011, real gross domestic product (GDP) growth is estimated at close to 9 percent in 2012, supported by strong growth in the mining sector and expansionary fiscal policy to accommodate a scaling up of infrastructure investment.

Foreign direct investment is increasing. Following spikes in food and fuel prices in 2011 and early 2012, U.S. dollar-denominated inflation declined to under 4 percent by end-June and is expected to remain in single digits through end-2012. The trade deficit has widened since 2010 reflecting concession-financed capital imports and rising food and fuel import prices which more than offset the increase in iron ore exports. Reserve coverage has remained relatively stable at about 2½ months of imports.

Nevertheless, Liberia's macroeconomic stability has been hard won and its development challenges are daunting. It remains a poor country, with massive infrastructure gaps and large development needs. Poverty remains pervasive (at 84 percent of the population), and Liberia ranks near the bottom of the UN's Human Development Index (HDI) and is unlikely to meet many of its Millennium Development Goals.

Program Summary

The ECF arrangement will support the authorities' program to accelerate broad-based growth and poverty reduction, aligned with their Poverty Reduction Strategy, while maintaining macroeconomic stability. Consistent with these objectives, the program has three central objectives:

• Creating fiscal space for higher capital spending by containing personnel costs and other current transfers;

• Strengthening the financial sector through reducing vulnerabilities and improving access to credit; and

• Underpinning growth with structural reforms to further improve public financial management, governance, and the business environment.

Liberia: Selected Economic and Financial Indicators, 2009–13

2009 2010 2011 2012

Proj. 2013


(Annual percentage change, unless otherwise indicated)

National account and prices

Real GDP

5.3 6.1 8.2 8.9 8.3

GDP deflator (US dollars)

-1.7 5.4 10.6 5.0 1.1

Nominal GDP (millions of US dollars)

1,155.1 1,291.9 1,545.4 1,767.5 1,934.4

Consumer prices (annual average)

7.4 7.3 8.5 6.6 5.6

External sector

Exports, f.o.b.

-39.7 40.4 77.0 23.8 14.3

Imports, f.o.b.

-19.0 17.4 49.9 33.3 16.1

Terms of trade (deterioration -)

-9.2 76.8 16.1 -24.1 -2.5

Average exchange rate (local currency per U.S. dollar)

68.3 71.4 72.2 … …

Gross official reserves (millions of US dollars)

312.2 391.4 425.1 452.0 462.0

Import coverage of reserves (months) 1

3.2 3.5 2.9 2.2 2.1

Central government operations 2

Total revenue and grants

13.5 22.6 30.2 23.0 9.7

Of which: total revenue

5.2 30.2 21.7 29.3 6.5

Total expenditure and net lending

26.3 13.4 35.7 34.3 19.9

Of which: current expenditure

24.2 16.4 23.5 44.3 5.9

capital expenditure

41.5 -6.2 131.7 -7.8 111.8

Money and credit

Reserve money

12.4 33.9 49.7 13.8 12.1

Broad money (M2) 3

36.7 35.4 34.6 17.4 12.6

Credit to private sector

31.5 40.1


14.4 9.4

(Percent of GDP)

External sector

Current account balance

(including official grants)

-28.8 -32.8 -34.1 -52.4 -62.4

(excluding official grants)

-148.2 -152.0 -149.3 -131.5 -97.4

Trade balance

-36.4 -35.5 -40.7 -49.5 -53.0

Exports, f.o.b.

13.3 16.7 24.6 26.7 27.9

Imports, f.o.b.

-49.7 -52.2 -65.4 -76.2 -80.9

Central government operations 2

Total revenue and grants

20.7 23.5 26.4 27.8 27.3

Of which: total revenue

18.6 22.5 23.6 26.1 24.9

Total expenditure and net lending

21.9 23.1 27.0 31.0 33.3

Of which: current expenditure

18.9 20.5 21.8 27.0 25.6

capital expenditure

3.0 2.6 5.2 4.1 7.8

Overall fiscal balance (including grants)

-1.2 0.5 -0.6 -3.2 -6.0

Public external debt

145.4 8.8 10.7 12.1 14.8

Sources: Liberian authorities and IMF staff estimates and projections.

1 Excluding imputed UN military services imports.

2 Fiscal year ending in June on a cash basis (debt service payments shown after all debt relief).

3 Defined as Liberian currency outside banks plus demand, time, and savings deposits in Liberian and US dollars.

1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as 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.