IMF approves loan for Liberia

WASHINGTON

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."

Liberia made strong macroeconomic gains under a successful ECF program initially approved in 2008 for three years and later extended to May 2012. 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.