The International Monetary Fund (IMF) has officially approved a 40-month arrangement for Liberia under the Extended Credit Facility (ECF), totaling approximately SDR155 million, equivalent to around $210 million. This decision, announced mid-week, includes an initial disbursement of about SDR4.3 million (roughly $5.8 million) aimed at addressing Liberia’s immediate balance of payments needs, which have been exacerbated by substantial development gaps.
The IMF stated that this financial assistance is designed to support the Liberian government’s efforts to implement critical reforms that tackle macroeconomic imbalances and promote growth driven by the private sector beyond the natural resources sector. The ECF arrangement encompasses a detailed policy framework focusing on fiscal sustainability and creating necessary investment space.
Key strategies outlined in the program include cutting unnecessary expenditures, enhancing domestic revenue generation, and mitigating debt risks to ensure sustainable economic growth. The initiative also prioritizes the protection of social spending in essential sectors like education and health while redirecting resources toward public investment.
Bo Li, the Deputy Managing Director of the IMF, acknowledged the increasing economic vulnerabilities facing Liberia, noting that fiscal mismanagement has undermined public debt sustainability and contributed to a decline in international reserves. He pointed out that the newly elected authorities, who assumed office in early 2024, have sought this arrangement to back a comprehensive reform agenda.
To restore fiscal credibility, the government plans to focus on minimizing wasteful spending and shifting resources to public investments. It will also work on improving fiscal discipline and mobilizing domestic revenue through new tax policies, including the introduction of a Value Added Tax (VAT) and the reduction of excessive tax incentives.
Furthermore, the IMF emphasized the importance of strengthening debt management practices and actively pursuing concessional loans and grants to finance critical infrastructure projects. In light of challenges within the financial sector, there is an urgent need for the swift implementation of a new Banking and Financial Institutions Act to enhance regulatory oversight.
The Central Bank of Liberia is encouraged to bolster its governance structure to improve its independence and credibility while refining its monetary policy framework. The authorities are firmly committed to advancing their reform agenda, aiming for macroeconomic stability, broad-based economic growth, and a reduction in poverty levels. To achieve these goals, substantial structural reforms and enhancements in governance and transparency will be vital, supported by robust program ownership and capacity development to ensure the successful implementation of the reform initiatives.
