IMF approves US$210million 40-month ECF for Liberia

The Executive Board of the International Monetary Fund (IMF) has approved a 40-month arrangement under the Extended Credit Facility (ECF) for Liberia, amounting to SDR155 million (60 per cent of the quota, or approximately US$210 million).

In a statement, the IMF said this support aims to assist the authorities in their reform efforts to address macroeconomic imbalances and establish a foundation for increased private-sector-led growth beyond the natural resource sector.

With the Executive Board’s approval of the arrangement, an immediate disbursement of SDR4.3 million (about US$5.8 million) will be made, helping Liberia meet its ongoing balance of payments needs, primarily due to significant and widening development gaps, the statement indicated.

It added that the authorities’ economic programme, supported by the 40-month ECF arrangement, envisages a comprehensive policy package to strengthen fiscal sustainability and create fiscal space for investment.

“This will begin with rationalising unproductive spending, followed by efforts to mobilise domestic revenue,” it added.

The Fund noted that this policy package is intended to help mitigate debt vulnerability and foster more robust and sustainable growth.

Key policies outlined in the programme include: (i) reducing unproductive spending, (ii) implementing new tax measures, including a Value-Added Tax (VAT), and streamlining extensive tax expenditures, (iii) increasing priority public spending, particularly on basic infrastructure, and (iv) enhancing financial stability by addressing the issue of non-performing loans.

A critical goal of the authorities’ reform programme, the Fund pointed out, is to preserve and enhance social spending, especially in the education and health sectors.

Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, said in a statement: “Liberia’s economic vulnerability has worsened in recent years. Fiscal slippages have compromised public debt sustainability, contributing to a sharp decline in international reserves. Governance weaknesses have also persisted. To address these challenges, the new authorities that took office in early 2024 have requested a 40-month arrangement under the Extended Credit Facility to support a broad-based reform agenda.”

“The Liberian authorities are appropriately prioritising restoring fiscal credibility. They are focusing on reducing unproductive spending and shifting resources toward public investment while protecting social spending. Over the program period, the authorities should continue to strengthen fiscal discipline and improve domestic revenue mobilization, including through the introduction of the VAT and the reduction of generous tax incentives.”

“It will also be important to significantly improve the authorities’ debt management capacity. It is crucial to continue to seek concessional loans and grants to create fiscal space for critical infrastructure development.”

“Given the significant challenges in the financial sector, it is imperative that the new Banking and Financial Institutions Act be adopted expeditiously to provide for modern bank supervisory and resolution frameworks. Other vital reforms also need to be put in place to strengthen the banking sector.”

“Building on recent progress, the Central Bank of Liberia (CBL) needs to continue to improve its governance to bolster its independence and credibility. It is also important to strengthen the monetary policy framework.”

“The authorities are firmly committed to revitalising the reform agenda to support macroeconomic stability, promote broad-based economic development, and reduce widespread poverty. Comprehensive structural reforms, including improvements in governance and transparency, are critical for achieving these objectives. Maintaining strong program ownership, supported by capacity development, will be crucial to ensure program success and continued donor support.”