IMF Executive Board Approves a US$50 Million Disbursement to Liberia to Address the COVID-19 Pandemic

Via IMF (Den Internationale Valutafond)

IMF Executive Board Approves a US$50 Million Disbursement to Liberia to Address the COVID-19 Pandemic







June 5, 2020











  • The IMF approved the disbursement of US$50 million (1.7 percent of GDP) under the Rapid Credit Facility to support the authorities’ response to the COVID-19 pandemic.
  • The economic impact of the pandemic is hitting the poorest with little social safety net, and food security of those relying on uncertain daily income is a pressing concern.
  • The authorities have responded by taking revenue and expenditure measures to support emergency food aid for the poor; improving monitoring and control of spending; and safeguarding scarce foreign exchange reserves.

WASHINGTON, DC
– The Executive Board of the International
Monetary Fund (IMF), today, approved the disbursement of SDR36.17 million
(US$50 million; 1.7 percent of GDP) to be drawn under the Rapid Credit
Facility (RCF). 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 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.

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 Executive Board’s discussion of Liberia, Mr. Tao Zhang,
Deputy Managing Director and Acting Chair, issued the following statement:

“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.’’

More information

IMF Lending Tracker (emergency financing request approved by the IMF
Executive Board)


https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker

IMF Executive Board calendar

https://www.imf.org/external/NP/SEC/bc/eng/index.aspx


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Meera Louis

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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