‘IMF US$100 to Liberia Is Both Loan and Grant’ – Amara Konneh Clarifies
MONROVIA – The Ministry of Finance and Development Planning (MFDP) might have been going in circus with the team of experts and tacticians from the International Monetary Fund (IMF) in coming to terms whether the US$100 million which came to the country from the IMF between 2014 and 2016 – when former President Ellen Johnson-Sirleaf’s government was in charge was a loan or a grant.
However, former Finance Minister, Amara Konneh, during whose reign at the Ministry the money has provided clarity, stating the money was intended to be both loan and grant – an information which he said those in charge at the Ministry could have easily verified.
At the onset of the debate, Finance Ministry sources tell FrontPageAfrica that its Debt Management Unit does not recognize the US$100 million in question as a loan. “The government has always seen this as a grant that will not be repaid and that it does not have documentation to show this is a loan,” said a source speaking on condition of anonymity Monday.
The MFDP argued that the national legislature did not ratify the amount and to classify it as a loan would be a huge violation of the Public Finance Management Regulations (PFM) and a major breach of governance under the Sirleaf administration.
The IMF, according to sources privy to the ongoing discussions, reportedly agreed that the activity could be a major or breach of governance but says its record shows the amount as a loan.
the IMF does not give grants to countries except in extreme emergencies as it did during the deadly Ebola virus outbreak when it granted Liberia, Guinea and Sierra Leone – the three countries stricken by the deadly virus a debt relief of about $100m (£65m) as it prevailed on other international lenders to the countries to take similar action as it established a catastrophe containment relief trust to provide grants to countries suffering epidemics and other natural disasters.
Konneh Steps In
Providing clarity to FrontPageAfrica, Mr. Konneh said the question as to whether resources received from the International Monetary Fund (IMF) were loan or grant is one that no one working in the Ministry of Finance and Development Planning would dare to ask publicly, given the direct access they have to the answer.
Konneh: “That this question has surfaced from within MFDP shows that the leaker of this story is new to the Ministry, has not attempted to read available information about those facilities, and is therefore an embarrassment to the MFDP’s predominantly critical-thinking staff that served me and my predecessors so well.
I say this because the facilities upon which those resources are drawn have in their names, the word “credit.” The long and short answer to the question is: it was a Grant and a Loan – IMF Support to Liberia’s Ebola Response and Recovery amounted to $82.2 Million”
He explained that there are three windows through which Liberia withdrew funds from the IMF since the country completed the Heavily Indebted Poor Countries (HIPC) completion point in 2010. These windows, he said, include The Extended Credit Facility (ECF); the Rapid Credit Facility (RCF) and Catastrophe Containment and Relief (CCR) Trust.
Konneh: “Let me just put on the record that the very same reserve from which the Government took the US$25 million to carry out its very unconventional mop-up exercise in 2018 is part of the Extended Credit Facility (ECF) for which they might be asking this question. Under the IMF’s ECF program, whenever we achieved our agreed benchmarks, the IMF Board of Governors would approve the disbursement of certain amounts to be put in our Reserves Account at the Federal Reserve of New York to be managed exclusively by the Central Bank for balance of payment support. Liberia’s Balance of Payments refers to all the economic transactions that occur between our country and the rest of the world in a particular period of time. Liberia’s BOP is negative because we are a net importer of key commodities.”
He explained that Liberia’s economy was paralyzed by the Ebola outbreak in 2014, creating a significant decline in economic activity which rendered fiscal and external needs more pronounced.
In this cause, the IMF Board approved US$49 million of emergency financial assistance to Liberia under the initial three-year $79.9 million ECF loan facility approved in November 2012. These funds are disbursed on an ad hoc basis (when necessary or as needed) and based on prevailing Special Drawing Rights (SDR) calculations, taking total funds available under the ECF to about $130 million. The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies – the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling;
Mr. Konneh disclosed that the Government of Liberia in 2015 requested a disbursement under the IMF’s Rapid Credit Facility (RCF), as well as debt relief under the Catastrophe Containment and Relief (CCR) Trust to free up space to address the aforementioned Ebola-related challenges.
Based on the request, the IMF Board responded, approving a total of $82.2 million (not $100 million) comprising:
A US$45.6 million loan (equivalent to SDR 32.3 million) under RCF, to support the fight against Ebola by covering urgent budgetary and balance of payments needs and strengthening international reserves. https://www.imf.org/en/News/Articles/2015/09/14/01/49/pr1569; and
A $36.5 million grant in debt relief from the Catastrophe Containment and Relief (CCR) Trust, a newly established trust set up to help low-income countries recover from natural disasters. This money does not come into the bank but rather removes some of the Government’s debt obligations to the Fund. https://www.imf.org/en/News/Articles/2015/09/28/04/53/socar022415a
According to former Finance Minister, there is no precedent for seeking Legislative ratification from IMF’s member states because under the ECF’s Articles of Agreement, the IMF may allocate SDRs to members countries only when certain conditions to build up reserves are met or during a major crisis as was the case of the Ebola epidemic.