Liberia: A Success Story Of IMF’s Structural Benchmark

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The Weah government may have all its shortcomings, but is definitely a success story as it regards reaching the International Monetary Fund’s structural financial benchmark. The administration began on a terrible track, withdrawing monies belonging to foreign partners and lagging in the payment of monthly salaries to civil servants.

   The Ministry of Finance and Development Planning (MFDP), headed by Samuel Tweah, Jr., had argued that their actions were due to the financial improprieties they inherited from the Ellen Johnson-Sirleaf administration, which is gradually becoming glaring by the day.

   The value of the Liberian dollar depreciated drastically amidst critics predicting that by the end of 2019 inflation would have entered three digits. But in a twist of fate, the Ministry of Finance and the Central Bank of Liberia (CBL), now headed by J. Aloysius Tarlue, began to work with the guidelines of the IMF and World Bank, working out modalities to put Liberia back into financial programs to strengthen the currency.

   The IMF presented the MFDP and CBL with its structural benchmarks for the nation to achieve in order to obtain financial assistance.

   In a 2022/Liberia-IMF Structural Benchmark chart, the CBL has a deliverable of finalizing preparation for second phase of the currency changeover by the end of August 2022 in an effort to improve financial sector stability.

   Also, there was a stipulated deliverable to close all accounts of MACs at commercial banks and transfer the balances to the CBL by end-August 2022, if necessary per order of the Minister of Finance and Development Planning, except donor-project accounts and 45 other accounts pertaining to institutions that operate in regions of the country where the CBL has limited presence and to support regional fiscal decentralization.

   As of now, the IMF is reporting that Liberia has met all the requirements on the stipulated dates, except for a few exceptions.

   In the fifth review of a four-year arrangement for Liberia under the Extended Credit Facility, published November 11, 2022, the IMF reported that 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 government. The authorities also missed two out of four structural benchmarks for 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 the large tax expenditures. The authorities are committed to following through on the missed structural benchmarks in November 2022, before Liberia goes to the Board,” the IMF report says.

   According to the report, despite the prevailing global economic challenges characterized by the lingering effects of COVID-19 and the on-going 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. The Central Bank of Liberia’s (CBL’s) Research, Policy and Planning Department has downwardly revised its economic growth projection for 2022 from its previous projection of 4.5 percent to an estimated 3.7 percent (in real terms) on the back of a slowdown in key primary and secondary economic sectors, mainly the mining sector. Conversely, real GDP in 2023 is expected to increase by 4.7 percent, as economic activity in agriculture & fisheries, forestry, mining & panning subsectors as well as manufacturing and services related activities are expected to experience stronger growth.    The report underscored that the financial authorities of Liberia remain committed to fighting inflation and achieving single-digit rate of inflation (at most 5 percent – which is in line with the ECOWAS threshold) in the medium term. In this regard, and as will be testament in the upcoming 3rd Quarter Monetary Policy Meeting, the intention is to maintain the current contractionary monetary policy stance, while being mindful to strike a balance between price stability and the promotion of economic growth. Average inflation outlook for 2022 is projected at 7.2 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).

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