- The IMF Executive Board completed the first review of the 40-month arrangement under the Extended Credit Facility (ECF), enabling a disbursement of SDR 34.3 million (about US$46 million).
- The ECF arrangement will support the economic reform agenda recently adopted by the authorities. To achieve this reform objective, the authorities have committed to creating fiscal space through domestic revenue mobilization and expenditure rationalization, addressing financial sector weaknesses, and tackling governance shortcomings.
- Program performance has been broadly satisfactory, meeting most of the quantitative targets and implementing all structural reforms, although some with delays.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the first review of the arrangement under the Extended Credit Facility (ECF) [1] for Liberia, allowing Liberia to draw SDR 34.3 million (equivalent to about 13.3 percent of quota or US$46 million), which will be used to strengthen Liberia's international reserve position.
Liberia's economic growth has remained strong, with the real GDP growth expected to accelerate to 5.6 percent in 2025 from 4.8 percent in 2024. Inflation and exchange rate has remained stable, and the current account deficit has continued to narrow. The authorities have successfully restored fiscal discipline, which is key for maintaining macro-financial stability. The public debt-to-GDP ratio has started to fall, reflecting a sizable consolidation of the fiscal primary balance.
Recent progress in mobilizing tax revenues, reining in recurrent spending, and anchoring financial stability is promising. The authorities' commitment to modernize the taxation regime, including the adoption of the VAT, will play a crucial role in creating fiscal space for higher investments, while preserving debt sustainability.
The authorities' renewed commitments to urgently tackle issues in weak banks and improve governance in public institutions are encouraging. Addressing the large and persistent non-performing loans (NPLs) stock remains a priority to enhance financial stability.
The Executive Board approved the authorities' request for a waiver of nonobservance of the continuous performance criterion on the non-accumulation of external arrears based on its minor nature and adopted corrective actions.
Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:
"The Liberian authorities are making good progress in implementing sound macroeconomic policies and structural reforms. The program is broadly on track, and the authorities' efforts to enhance fiscal sustainability, rebuild international reserves, and address governance weaknesses within public institutions are gradually taking effect.
"Efforts to strengthen fiscal sustainability and mitigate debt vulnerabilities should continue over the medium term. In line with these efforts, the approved budget for 2025 aims to improve revenue mobilization, while continuing to rationalize unproductive spending and safeguard priority spending. Medium-term fiscal reforms designed to enhance domestic revenue mobilization and improve public finance management will help create fiscal space to bolster public investment.
"The authorities should press ahead with addressing weaknesses in the Central Bank of Liberia's (CBL) governance. Swift implementation of the recommendations of the compliance and forensic audit reports, an update IMF safeguards assessment, and an independent legal review of its unconventional financial support to two small banks is critical. This will help restore the CBL's credibility and strengthen its governance and independence.
"Broader governance reforms are key to the success of the program and the country's long-term development prospects. Strengthening the capacity of integrity institutions, enacting necessary amendments to anti-corruption legislation, and rigorously enforcing public laws and regulations are critical. The upcoming governance diagnostic study will be crucial in guiding broader governance reforms.
"Strengthening banking sector supervision and the regulatory framework is important to address banking sector vulnerabilities. To this end, the adoption of the new Bank-Financial Institutions and Bank Financial Holding Companies Act should be expedited. Restructuring of a state-owned bank, along with measures to address weaknesses in two small, troubled banks, should be accelerated.
"The authorities are firmly committed to revitalizing the reform agenda to address the country's development challenges and support sustainable and inclusive economic development. The successful implementation of the recently adopted National Development Strategy is critical in achieving these goals."
[1] Liberia: Request for a 40-Month Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Liberia
