By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE) – The International Monetary Fund (IMF) Wednesday said it has approved $11.4 million Extended Credit Facility (ECF) for Liberia.
This is coming on the heels of the conclusion of the second review under the ECF by the Fund’s Executive Board.
With the approval of the $11.4 million, total disbursements under the arrangement now stands at about $34.2 million.
According to IMF Executive Board, in completing the review, it approved the waiver for the non-observance of the performance criteria on the floor on revenue collection of the central government, the ceiling on Central Bank of Liberia’s (CBL) gross direct credit to the government, and the floor on foreign reserves of the CBL.
The IMF Board also approved Liberia’s requests for modification of end-December 2013 and end-June 2014 performance criterion on the ceiling on new domestic borrowing of the central government.
Naoyuki Shinohara, Deputy Managing Director (DMD) and Acting Chair, said Liberia’s economic growth remains strongand the medium-term outlook is positive, provided new projects in the mining and plantation sectors come on stream.
He said non-resource real Gross Domestic Product (GDP) growth is expected to continue to pick up in 2014–15, as the authorities continue to press ahead with the implementation of large energy and road infrastructure projects, in line with their Agenda for Transformation.
“While the authorities remain fully committed to reforms underpinned by the ECF arrangement, institutional and capacity constraints have affected recent program performance. Deviations on government revenue and domestic financing were minor, but foreign reserves fell below the program floor reflecting in part higher intervention in the foreign exchange market to mitigate depreciation pressures. The authorities are taking appropriate action to rebuild an adequate reserves buffer, including by strengthening the foreign exchange auction and enhancing liquidity management,’’ Shinohara said.
The IMF DMD said action is being taken to strengthen budget execution while scaling up public investment.
According to him, Liberian authorities have identified savings in the FY2014 budget to be able to meet their deficit target while protecting capital spending. “They are also enhancing cash management, including through establishing a Treasury Single Account. Timely approval of annual budgets, together with careful prioritization and preparation of investment projects, would help remove implementation bottlenecks. ” he said.
Shinohara further affirmed that financial sector reforms will continue to focus on addressing high credit risks and strengthening the legal and institutional environment to promote intermediation.
He called on the enhancement of the credit reference system and establishing the collateral registry which would directly help reduce credit risk. “Other credit initiatives should be market-based, efficient, and recognized as fiscal initiatives financed by the government or donors,” he affirmed.
Shinohara said in light of the recent rapid debt accumulation and large remaining external financing needs, maintaining debt sustainability will require adhering to sound debt management principles, enshrined in the new medium-term debt strategy.
