By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-Liberia’s inflation will drop to 6.0 percent (6%) in 2014 the International Monetary Fund (IMF) said on Thursday.

This is coming on the heels of the second review of the government’s economic program supported by the IMF under an Extended Credit Facility (ECF) arrangement.

Corinne Deléchat, who led the IMF Mission, said inflation (in Liberian dollar terms) is projected to pick up to 8% in 2013 owing to higher domestic and international food prices and recent exchange rate depreciation pressures, and to gradually decline to 6% in 2014. “While uncertainty in the global economic environment poses downside risks to the growth outlook, “this risk is offset by the coming on stream of new mining and agricultural concessions in the next few years, which could lead to higher growth over the medium term,” Deléchat said.

She affirmed that Liberia’s economic outlook remains favourable, with output expected to expand by 8.1% in 2013 and around 7% in 2014. “This strong performance reflects higher-than-anticipated iron ore production and an acceleration in non-mining real Gross Domestic Product (GDP) growth boosted by robust private and public investment in line with the government’s development strategy,” she said.

The IMF mission leader said the fiscal outturn for 2013 of Liberia was broadly in line with the economic program and total revenue including grants exceeded the projections, though core revenues fell short of the program targets.

According to her, total spending was above the program, owing in part to higher current spending. “Externally financed capital spending was below the government targets reflecting implementation bottlenecks and delays in approving and distributing last year’s budget. As a result, the overall fiscal deficit for 2013 amounted to 1.6% of GDP, some of which was financed by the use of deposits,” Deléchat said.

She further affirmed that program implementation has been challenging in some areas and reserves declined below the agreed targets in June, in part due to higher sales of foreign exchange by the Central Bank of Liberia (CBL) in the context of the depreciation pressures.

Deléchat noted that solid progress was made in the implementation of the structural agenda, though a number of benchmarks were met with delay.

She said in this context, the Liberian authorities and IMF staff reached agreement, ad referendum, on a package of policies that would allow the government to strengthen its buffers to address external shocks and to improve public financial management.

“In particular, the authorities indicated that they were committed to (i) rebuilding reserves and strengthening U.S. dollar and Liberian dollar liquidity management, including through improving the functioning of the foreign exchange auction and continuing to issue CBL bills, and (ii) identifying budgetary space to compensate for the expenditure overruns while enhancing budget execution monitoring,” the IMF mission said.