Liberia - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

The Debt Sustainability Analysis assesses Liberia at moderate risk of external debt distress and at high risk of total public debt distress, with limited space to absorb shocks. Despite these risks, staff consider public debt to be sustainable. Around 90 percent of Liberia’s external debt is on highly concessional terms and held by multilateral lenders. Most domestic debt is owed to the Central Bank of Liberia (CBL) under favorable terms. Still, domestic debt is mostly denominated in U.S. dollars posing further vulnerabilities. Debt projections are predicated on continued prudent fiscal policy, including avoidance of non-concessional external borrowing in the nearer term and continued fiscal consolidation. The primary fiscal deficit declined from 6.1 percent of GDP in 2023 to 1 percent of GDP in 2024, and is expected to remain broadly stable throughout the projection period. Such a fiscal path plays a vital role in stabilizing the PV of total public debt, considering the gradual projected increase in non-concessional borrowing to partly compensate for the sharp decline in donor support over the medium- and long-term. Key downside risks include negative shocks to growth, terms of trade, foreign direct investment, and a potential reversal of fiscal discipline. This DSA is being conducted in the context of the Article IV consultation for 2025 and the second review under the ECF-supported program approved in September 2024.