An IMF assessment of Liberia‘s economy indicates that the country appears poised for recovery, but significant fragilities remain, as reflected in the pressure on the exchange rate and on fiscal resources resulting from declining aid inflows.
The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Liberia on June 8, 2018.
The Executive Directors noted that ’assuming sound policies, the medium‑term outlook is favorable, albeit with risks’
The directors welcomed the authorities’ pro‑poor agenda and noted that macroeconomic stability is essential for advancing this agenda. They stressed the critical need to mobilize resources, ensure debt sustainability, and pursue structural and institutional reforms to achieve higher growth and reduce poverty.
A new government is in place, with a mandate to achieve ambitious development objectives. Liberia’s economy appears poised for recovery, as growth bottomed out in 2016 and edged to 2.5 percent in 2017. However, Liberia remains fragile with poor living conditions for the majority of the population. Moreover, a decline in aid inflows, which were elevated during 2014–16, has put pressure on the exchange rate and fiscal resources. The government is thus facing the daunting task of pursuing a demanding development agenda in the face of high expectations, while also managing near-term adjustments and safeguarding macroeconomic stability.
The directors underscored the need to anchor fiscal policy with the goal of ensuring debt sustainability over the medium term, and urged the authorities to increase efforts to mobilize additional domestic resources, including by enhancing the IT system of the revenue authority to improve tax compliance and efficiency.
They also emphasized that improved governance, and greater fiscal transparency and accountability are key to improving spending efficiency, and also welcomed the authorities’ efforts to contain the public wage bill and encouraged redirection of budgetary expenditures to capital spending, especially for rebuilding infrastructure.
The directors emphasized that future debt obligations should be undertaken transparently, limiting new debt to concessional terms, with effective implementation of infrastructure projects, underscoring that maintaining macroeconomic stability will also hinge on effective implementation of monetary policy.
“To equip the Central Bank of Liberia (CBL) with effective operational tools, its recapitalization would be necessary,” the directors noted, and stressed the need to safeguard international reserves, and preserve governance principles and central bank independence.