The Country spotlight for the fourth issue of our Debt Newsletter for Public Debt Managers in Africa on "Managing higher borrowing cost", is Liberia.
The Government of Liberia (GoL) is fully committed to structural reforms, following a prolonged period of economic stagnation. One such reform involves the establishment of a strong and capable public debt management office that will manage the public debt of Liberia in a cost-effective and sustainable manner. Although Liberia continues to be considered as having a sustainable debt burden, the borrowing space is insufficient to support sustainable growth and the pressure on high borrowing costs, in the short- to medium-term, is ever increasing.
The Debt Management Unit (DMU) currently mostly performs back-office functions (debt recording and initiating debt service payments) while other critical functions are fragmented across several units within the Ministry of Finance and Development Planning and the Central of Bank of Liberia and based on largely informal/undocumented procedures. The GoL is therefore seeking to strengthen its institutional framework around public debt management, by adopting prudent public debt management policies and implementing sound practices and processes.
The main achievements to date include:
1. Developing of a comprehensive Public Debt Management Procedure Manual that is published online and will be updated on a regular basis;
2. Developing of a Medium-Term Debt Management Strategy (MTDS), 2021-2023, which will be updated in 2022;
3. Developing of a debt management reform strategy and action plans.
The five priority areas in this reform base strategy, are as follows:
1. Strengthening the legal framework for public debt management. Although the PFM Act was amended in 2019, to include the objectives for borrowing, there are still some important gaps that need to be addressed by means of amendments to the PFM Act and regulations.
2. Functional restructuring of the DMU to ensure clear separation and segregation of duties. The proposed reorganization will focus on functionalities and will be split between front, middle and back office responsibilities, for better work flow, separation of duties and co-ordinating and sharing of information amongst stakeholders.
3. Strengthening management practices within the unit to enhance staff efficiency and effectiveness.
4. Transitioning from the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS) to the Commonwealth Meridian debt recording system to improve the recording, analysing and reporting of public sector debt.
5. Better coordinating public debt management with fiscal and monetary policy.
To date Liberia has received support from various development partners to strengthen public debt management capabilities. The DMU is committed in ensuring that the support received are well embedded in policies and strategies in accessing the most favourable borrowing options as well as terms and conditions. Going forward, Liberia will proactively seek assistance from the appropriate external partners and will also prioritise learning and adopting good practices from other debt management offices in the region. Several countries in the region have made significant progress in establishing strong and capable debt management offices, from which valuable lessons could be learned.