The International Monetary Fund or IMF welcomes the Weah-led administration’s adoption of a strongly pro-poor agenda here, stressing that the needs of the poorest segments of the population are clearly large, and it is commendable that the authorities have made this a policy priority.
“Within this ambition, it would be particularly important to ensure that the increase in expenditure goes hand-in-hand with measures to ensure macroeconomic and debt stability, as the impact of instability would fall disproportionately on the most vulnerable groups and undercut the goal of poverty reduction”, says Mika Saito, who headed an IMF visiting team to Monrovia from March 7-20, to conduct discussions for the 2018 Article Consultation with Liberia.
The team met with President George Manneh Weah and several government officials, including Speaker Bhofal Chambers, Senate President Pro-Tempore Albert Chie, Finance and Development Planning Minister Samuel Tweah, Executive Governor of the Central Bank of Liberia, Milton A. Weeks. It also met with the Minister of Commerce and Industry, Wilson K. Tarpeh, Public Works Minister Mobutu Mobutu Nyenpan, Sr. and Mines and Energy Minister, Gesler E. Murray as well as private sector representatives and development partners.
At the end of discussions, the team issued a press statement in Monrovia, highlighting preliminary findings from its mission.Mr. Saito says that the need to increase investment spending is coming at a time when resource mobilization –from external borrowing, domestic revenue generation and aid is facing challenges.
He notes that debt levels have been rising steadily in recent years, but quickly adds that while the risk of debt distress remains moderate, borrowing space has clearly been reduced over time, saying that looking forward, future obligations will need to be undertaken with caution, specifically with respect to securing favorable terms and conditions.
This appears to be the first major visit to Liberia by an IMF team since President Weah assumed office in January, coming at a time when the administration’s pro-poor agenda is taking off with a coastal highway project as key priority among others.
Domestic revenue generation, according to him, is relatively low by regional standards, and that exploiting the scope for improvement will be essential to expanding investment spending in the medium term.
The IMF head of delegation also says that aid remains substantial, but is on a declining trend from past levels, which were inflated by exceptional support given for the post-conflict period and the Ebola emergency.
“Given these potential constraints on resource mobilization”, Mr. Saito advises “it will be important to not only mobilize significant quantities of additional domestic revenue and secure attractive terms for future contracted debt, but also to improve the efficiency of existing spending to create additional fiscal space.”
He continues that governance improvements, particularly with respect to inculcating greater fiscal transparency and accountability would be key in this, as would instilling greater order and priority in government’s fiscal relations.
He further explains that replacing development spending with current expenditure to the extent possible would need to be part of this, including by controlling growth of the wage bill.
“In addition”, he says, “Government could also usefully consider adopting a comprehensive program to clear domestic arrears and prevent the emergence of new ones; utilizing realistic revenue estimates for budget formulation; and improving the monitoring of all expenditures including grant- and loan-financed projects.”
Mr.. Saito stresses that maintaining macroeconomic stability will also hinge on effective implementation of monetary policy, a precondition for which would be strengthening the CBL’s balance sheet, adding, “To this end, Government should explore ways and means of ensuring the CBL has the financial wherewithal to effectively carry out its policy mandate.”
The IMF observes that Liberia’s economy appears poised for recovery after sa very difficult period, specifically pointing out that over the last five years, the Ebola crisis with all its devastating humanitarian impact, combined with a large decrease in export prices, the ongoing withdrawal of UN peacekeeping force, and some disruption associated with the December 2017 run-off presidential election, to keep economic activity at low levels, adding that growth bottomed out in 2016 at 1.6 percent, before increasing somewhat to 2.5 percent in the same period.
“With the economic shocks and the Ebola crisis now in the past, assuming the implementation of good policies, including measures to improve the business climate and support private sector development – the medium term outlook appears favorable. The peaceful political transition will offer support to the recovery of the domestic economy”, Mr. Saito expresses.
-Writes Jonathan Browne