Though the authorities in Liberia have taken the necessary steps to stabilise the economy amid multiple challenges, the COVID-19 pandemic continues to exert significant strain on its fragile economy, according to the International Monetary Fund (IMF).
Following the IMF Executive Board’s discussion on Liberia, Mr. Tao Zhang, Acting Chair and Deputy Managing Director, said that priority should be given to addressing risks from weak financial institutions besides ensuring the supply and quality of Liberian dollar banknotes.
Mr. Zhang stressed that further improvements in governance are necessary for efficient delivery of public services, while a modest fiscal loosening would be appropriate to meet humanitarian needs during the COVID19 pandemic.
“The authorities are committed to fiscal discipline and further improvements in cash management, transparency and accountability in spending, and domestic revenue mobilization to finance their development agenda. The monetary policy stance is appropriately aligned with the inflation objective, and significant progress has been made in strengthening central bank independence.
“In the context of the gradual de-dollarization of fiscal spending, it is important to further refine instruments for open market operations and enhance policy coordination between the central bank and the government.
“Further efforts are needed to contain the central bank’s operational expenses and build up reserves. Rebuilding confidence in the financial sector is critical for financial stability,” he added.
According to the IMF, steps are being taken to clear the fiscal audits backlog, further enhance procurement transparency, and upgrade the anti-corruption legal framework. Efforts to increase borrowing space would support sustainable growth.
Mr. Zhang suggested that Liberian authorities should continue to work with donors and development partners to secure grants and concessional borrowing, and carefully prioritise the use of public resources.
The IMF Board said in a statement released on Tuesday that it has completed Liberia’s first and second reviews under the Extended Credit Facility (ECF). The four-year ECF arrangement, with a total access of US$214.30 million was approved by the IMF Executive Board on 11 December, 2019.
Completion of the reviews has enabled immediate disbursement of US$48.86 million, bringing total disbursements under the arrangements to US$72.20 million.
After mixed programme performance initially, the authorities have taken corrective actions to address weaknesses in the programme and they continue to make progress in structural reforms.
Reflecting the impact from the COVID-19 pandemic, Liberia’s growth forecast for 2020 has been revised down from 1.4 percent at the programme’s inception to -3.0 percent.
Assuming global conditions gradually normalise, growth is projected to reach 3.2 percent in 2021, but downside risks to the outlook are high.
The IMF said Liberia remains fragile and vulnerable to shocks as both fiscal and external buffers remain low. The country continues to be assessed as having a sustainable debt burden, but borrowing space is limited. (PANA/NAN)
