US: IMF notes impact of Ebola crisis on Liberia's economy

New York, US (PANA) - Liberia’s economy in 2014 was greatly affected by the Ebola crisis, and real GDP growth for 2014 is estimated at about 0.7 per cent, compared to 8.9 per cent in 2013, the International Monetary Fund (IMF) said on Tuesday.

The IMF also noted that the economic impact of the Ebola outbreak was compounded by the steep decline in iron ore prices, which had affected planned investment in the mining sector.

It said consumer price inflation declined to 7.3 per cent in March 2015 after peaking at 13.5 per cent in September 2014 as lower international oil prices more than offset higher domestic food prices.  Gross international reserves stood at about 2.7 months of imports as of end-April 2015.

The observations were contained in a statement issued at the end of an IMF mission, led by Ms. Corinne Delechat, which visited Monrovia from 25 April to 8 May, to conduct the fourth review of the government’s economic programme supported by the IMF under an Extended Credit Facility (ECF) arrangement, which was approved by the IMF Executive Board in November 2012.

The ECF is the IMF’s main tool for medium-term financial support to low-income countries, and it provides for a higher level of access to financing, more concessional terms, enhanced flexibility in programme design, and more focused, streamlined conditionality.

Financing under ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.

Ms. Delechat said: "The medium-term economic outlook remains challenging, and real GDP growth is projected to remain weak in 2015, with a gradual recovery taking hold in 2016 buoyed by a rebound in agriculture and services."

She said that, risks to the outlook stemmed mainly from a prolonged period of low commodity prices, which would significantly curtail tax and export revenues, and could dampen medium term growth prospects.

Programme performance as of end-June 2014 was mixed. Most quantitative performance targets were met, while only 3 out of 7 structural benchmarks were implemented.

Ms Delechat said although implementation of the structural reform agenda was hampered by the Ebola outbreak, some notable achievements included the merger of the Ministries of Finance and Economic Planning and the establishment of the Liberia Revenue Authority.

"For 2015-16, fiscal policy will remain accommodative as the draft budget includes key post-Ebola initiatives under the government’s Economic Stabilization and Recovery Plan, including the rebuilding of the health system and additional spending on education."

Ms. Delechat, however, noted that, the authorities were committed to ensuring that expenditure increases allowed room for implementation of their Public Sector Investment Programme.

"The audit of the road contracts that were being implemented without corresponding budgetary allocations initiated last year is expected to be completed in the coming weeks, and the government is implementing measures to strengthen investment planning and monitoring.

"Monetary policy will aim at containing inflation while maintaining an adequate reserves buffer, and the authorities are stepping up coordination between the Ministry of Finance and Development Planning and the Central Bank of Liberia to enhance Liberian dollar liquidity management. Such coordination, including the joint preparation of monthly liquidity forecasts, would help contain exchange rate and inflation pressures," she stated.

She said the next phase of the programme included actions to restore growth to pre-crisis levels while protecting vulnerable groups, strengthen the budget process and improve public financial management, rebuild international reserves, modernize tax administration, and strengthen financial regulation and supervision.

The statement noted that the IMF staff would continue discussions on these issues in the coming days with the objective of reaching an agreement, on a package of policies that would allow the government to achieve its programme objectives.

It said that the Liberian authorities expressed their appreciation to the IMF for the extraordinary financial and technical support during the Ebola crisis on account of the ECF augmentation and the Rapid Credit Facility (RCF) disbursements.

They also look forward to continuous engagement and cooperation with the IMF on the implementation of Liberia’s Post-Ebola Economic Stabilization and Recovery Plan.
-0- PANA AA/MA 12May2015

12 may 2015 20:25:16

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