By Festus Poquie
Liberia and the International Monetary Fund have agreed on a $209 million aid package spread over three years to help the West African country deal with prevailing economic challenges.
The arrangement, which will back up the country’s international reserves under the Special Drawing Rights tool, is intended to support the new administration’s reform agenda, the Washington based landed said in a statement late Monday.
Still at staff level, the proposed is subject to approval by the IMF’s Executive Board, which is scheduled to meet on September 25.
According to the IMF, the new country program will help Liberia restore fiscal sustainability, rebuild external reserves, ensure financial sector stability, and revitalize a reform agenda to address governance and corruption issues.
“The IMF staff welcomes the authorities’ efforts to address immediate policy challenges and restore policy credibility,” said Mr. Daehaeng Kim, the IMF’s mission chief for Liberia. “We remain committed to supporting the authorities’ implementation of key policy priorities.”
The staff-level agreement was reached following productive discussions between the IMF team and the Liberian authorities, the IMF said.
The approval of the ECF arrangement by the IMF’s Executive Board would provide much-needed financial support to Liberia as it embarks on a comprehensive reform program under the new administration.
The IMF’s Extended Credit Facility (ECF) is a lending arrangement that provides financial assistance to countries facing economic challenges.
It is designed to support countries’ medium-term economic adjustment and reform programs. Since the end of the civil war, Liberia have had ECF armament since 2008
The key features of the IMF’s ECF program are:
- Medium-term financing: The ECF provides financing over 3-4 years to support a country’s economic reform program.
- Concessional lending: Loans under the ECF have a zero-interest rate, with a grace period of 5.5 years, and a final maturity of 10 years.
- Tailored to country needs: The ECF program is designed based on the specific economic challenges and reform priorities of the member country.
- Policy reforms: The ECF provides financing conditional on the implementation of the country’s economic reform program aimed at addressing the balance of payments difficulties and achieving sustainable economic growth.
The devil in the deal
Some of the key criticisms and concerns that have been raised about IMF country programs, including in the case of Liberia, include:
- Austerity measures: IMF programs often require countries to implement austerity measures, such as spending cuts, tax increases, and reductions in public sector employment, which can be politically unpopular and have negative impacts on social services and economic growth.
- Conditionality and loss of policy autonomy: The IMF’s lending is conditional on the implementation of specific policy reforms, which can be seen as an infringement on a country’s sovereignty and its ability to determine its own economic policies.
- Structural adjustment and inequality: Critics argue that IMF-supported policies, such as trade liberalization and the privatization of state-owned enterprises, can exacerbate inequality and disproportionately harm the poor and vulnerable populations.
- Inadequate consideration of social and political factors: There are concerns that IMF programs may not sufficiently account for the social and political realities of a country, which can undermine the effectiveness and sustainability of the reforms.
- Lack of long-term development focus: Some argue that IMF programs tend to prioritize short-term macroeconomic stabilization over longer-term sustainable development and diversification of the economy.
These criticisms highlight the ongoing debates and challenges surrounding the design and implementation of IMF country programs, particularly in developing economies like Liberia.
