IMF approves $50 million for Liberia as the country runs out of hard currency

Sierra Leone Telegraph: 06 June 2020:

Yesterday, the Executive Board of the International Monetary Fund (IMF), announced that it has approved the disbursement of SDR36.17 million (US$50 million – equivalent to 1.7 percent of the country’s GDP) to be drawn under the Rapid Credit Facility (RCF) in support of the Liberian government’s response to the COVID-19 pandemic.

“This, together with debt relief approved in April 13, will help meet Liberia’s urgent balance of payment needs, mostly stemming from fiscal needs necessary to respond to the pandemic,” the statement says.

According to the IMF, “the pandemic is hitting Liberia at a time, when economic activity was already declining. Real GDP growth for 2019 is estimated at -2.5 percent as private sector confidence remained weak, while inflation remains high. In addition, vulnerability to exogenous shocks remained high as both fiscal and external buffers were low.

“The full extent of the impact of COVID-19 is not known, but growth is now projected at 2.5 percent for 2020, largely due to lockdown at home and abroad which are negatively impacting domestic demand, net remittances, capital inflows, and the banking sector.

“In the absence of support, the poorest will feel the impact the most as there is little social safety net, and the food security of those relying on uncertain daily income is a pressing concern. The pandemic opens a balance of payment need of US$150 million (5.1 percent of GDP) in 2020, which largely arises from a domestic revenue shortfall projected at US$119 million.”

But the IMF expressed reservations about the government’s performance in managing the economy.

“Preliminary data suggest that performance under the Extended Credit Facility (ECF)-supported program has been weak, though the authorities are fully committed to address the weaknesses. Most of the end-December fiscal targets and structural benchmarks were met but the monetary program went off track by a large margin mainly for two reasons: an acute shortage of Liberian dollar banknotes at a period of high cash demand resulting in higher foreign exchange intervention than programmed; and acute shortages of U.S. dollar liquidity in the banking sector. The authorities are addressing these weaknesses, aiming to bring the program back on track in time to complete the first review, but are faced with the challenging task of managing the COVID-19 crisis at the same time.”

Following the decision to approve the disbursement, Mr. Tao Zhang, Deputy Managing Director and Acting Chair of the IMF, said:

“The COVID-19 pandemic came at a time when a consensus on the need for broad-based reform in Liberia had finally emerged, but when macroeconomic conditions remained challenging. The pandemic is expected to hit Liberia hard, and will likely disproportionately affect the most vulnerable as social safety nets are rudimentary, food insecurity is rising, and the healthcare system is underdeveloped.

“The authorities remain committed to protecting the most vulnerable amidst a significant revenue shortfall. The initial response to the pandemic, including the emergency food aid program, is welcome, but more remains to be done.

“Specifically. the passage of the agreed FY2021 budget with high-quality revenue measures is key to addressing the COVID-19 crisis. It is also important to expeditiously finalize the comprehensive off-budget COVID-19 response plan with development partners.

“The authorities have taken measures to raise domestic revenue, including legislative approval of an excise tax on fuel and adoption of a resolution to channel all revenues acquired by two large state-owned entities to the government’s consolidated account. They have also made significant improvements in the monitoring, control, and transparency of expenditure, including by tabulating and publishing detailed weekly reconciled spending reports, by requiring all budgetary entities to utilize the centralized financial management system, and by committing to the timely publication of an audit of crisis spending.

“To address the shortage of Liberian dollars and the growing need for more U.S. dollar liquidity, the authorities have contracted the printing of additional Liberian dollar bank notes and are formulating measures for inclusion in the FY2021 budget to augment US dollar liquidity.

“The authorities have also made steady progress in reaching benchmarks set under the Extended Credit Facility arrangement and remain committed to reforms under the arrangement to stabilize macroeconomic conditions and lay the foundation for inclusive and durable growth once the crisis subsides.’’

Two days ago, the IMF approved disbursement of $143 million to help the government of neighbouring Sierra Leone manage the economic impact of the COVID-19 pandemic, which the Bio-led government says will cost over $300 million to address.

3 Comments

  1. President George Weah of Liberia, has to exhibit strong leadership in governance and in uprooting corruptions FROM all sectors of his Government. The disappearance of a 40 feet container of over 100 million of US Dollars has made the international community not have 100 percent confidence in the Liberia Government.

  2. I have always had a keen interest in what goes on in liberia both economically, and politically . This two countries for historical reason are joined by the hip. Liberia will never succeed economically with out Sierra Leone. And the same applies to our country. Both for security and economic reasons, our countries should work together. Just like Sierra Leone, this IMF loan for Liberia , should be seen as putting a plaster on a wounded economy. We need politicians that has the two countries at heart to come in as doctors and put a stop at the economic bleeding, and treat this wound once and for all, by injecting an anti corruption vaccine in the economic system to cure it.

    The vaccine exists, we just need serious minded politicians that put country first before their own interest. I was happy to see president George Weah got elected as president of the country. We all know this footballer turned politician, has unfortunately, not lived up to the expectations of the Liberian people. More to the point he has not been able to transfer his gift in the football field to being leader of this tiny West African state. Like Sierra Leone, Liberia is the oldest republic in Africa and was founded by former American slaves in the deep south and has always struggled economically. Like Sierra Leone, corruption and patronage, are the biggest cancers that is holding back the country.

    When Master Sargent Samuel K. Doe took power in a bloody military coup on the 12th April 1980, there were widespread jubilations by the general population. He removed a hundred and fifty year old tradition, where real political power has always been in the hands of the Americo-Liberians, decendants of the freed slaves in the America’s deep south. The first act of Doe’s despotic PRC Junta, was the execution of President Tolbert and thirteen of his ministers in the beach front near the Barkley training centre in Monrovia. The blood of those ministers sowed the seed of what followed years later. As his tyrannical regime became more desperate, you wouldn’t think Liberia was suffering from food shortage, as Samuel K Doe, a skinny master sergeant piled on the pounds.

  3. George Oppong Weah – an exceptionally talented,and gifted individual indeed;the only African footballer to ever win the prestigious FIFA Ballon d’Or footballer of the year,(world’s Best)in 1995.He was truly one of a kind;an incomparable magician,that commanded,and the ball fluidly obeyed,a true master-craftsman,he was,that effortlessly promoted,and elevated the beautiful game with his unparalleled skills,determination,and unwavering discipline.But that was football,where a coach is heavily paid,to create,and devise flawless strategies,tactics,and game-plans,that could easily subdue even the toughest opponents,leaving them dejected,defeated,and in tears.Governance is a different game completely;As President you are the ultimate coach of the team,winning and losing all depends on you.Again,i am not quite sure King George knew exactly what he was getting into;its frightening when one assumes power,and finds out firsthand,that his country,and all its mineral,and natural resources are all owned by lenders like the IMF,and World Bank.And lets be real; sincerely,what does a gullible,inexperienced,glamorous,celebrated footballer know about the dirty game of politics,where hands are washed profusely daily with the blood of the innocent?Where truth is a rare commodity,like Manna from heaven – can only be inspired,and can only come from the discerning hands of Almighty God.And how do you create jobs,for a people lacking in solid work ethics,discipline,and an unflinching drive to succeed? My advice to President Weah is for him to quit relying on high interests loans,in order to sustain his people,and move his economy forward.Sir,you need to find creative ways to energize,and propel your economy forward.I once heard that local,companies,and Liberian citizens in the diaspora,were about to start producing,and exporting medicinal marijuana in 2019.What a great idea that was!I sincerely hope you will help them using the immense powers of the office you are holding to bring such a lofty ideal to fruition.Hang in there Buddy;surely,its going to get worse,before it begins to get better.

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