INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND LIBERIA Joint World Bank-IMF Debt Sustainability Analysis December 2020 Prepared Jointly by the staffs of the International Development Association.1 (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA) and Celine Allard (IMF) Liberia: Joint Bank-Fund Debt Sustainability Analysis2 Risk of external debt distress Moderate Overall risk of debt distress High Granularity in the risk rating Limited space to absorb shocks Application of judgment No The Debt Sustainability Analysis (DSA) continues to assess Liberia at moderate risk of external debt distress and high risk of overall public debt distress, with very limited space to accommodate shocks and an extended breach of the Present Value (PV) of public debt-to-GDP ratio. However, public debt is assessed to be sustainable as (i) both the PV of public debt-to-GDP and PV of debt- to-revenue ratios are projected to be on a downward trend and (ii) the high PV of public debt ratios largely reflect debt to the central bank, for which the interest rate is relatively low but is not discounted in the PV calculations. The rollover risk of domestic debt is low as most of the domestic debt is the government’s consolidated debt to the CBL. To keep debt distress vulnerabilities contained, it will be important to maintain fiscal discipline and rely on concessional financing. 1Debtcoverage has remained the same as in the previous DSA. 2Liberia’sdebt-carrying capacity based on the Composite Indicator (CI), which is based on the October 2020 WEO and the 2019 CPIA, is assessed as weak. The CI score is 2.502. PUBLIC DEBT COVERAGE 1. The DSA covers central government debt, central government guaranteed debt, and central bank debt contracted on behalf of the government (Text Table 1).3 The bulk of State- Owned Enterprise (SOE) debt is guaranteed by the central government and is included in DSA, as Liberian SOEs are unable to secure external funding without such a guarantee. Government borrowing from the Central Bank of Liberia (CBL), a US$487 million restructured and consolidated debt at the inception of the ECF arrangement, is included in this current DSA analysis. Nearly, half of this amount is in legacy debt from the war time denominated in U.S. dollars, and the other half is in the form of bridge loans, suspense account, and on-lending of IMF budget support. This debt has the interest rate at 4 percent with repayments starting in 2029. In addition, the DSA includes $65 million sovereign bonds issued to banks in May 2019; about $10 million of direct liabilities with commercial banks, $45 million of contractors’ liabilities representing contractors’ defaulted payments with commercial banks for government contracts in the past, and $10 million for the rubber plant association representing debt assumption by the government with expectation of repayment of the assumed liability. The largest debt to SOEs is a World Bank loan to the Liberia Electricity Corporation (LEC) for the rehabilitation of Mt. Coffee hydropower station. 4 Local governments’ operations are small and unable to secure external funding without a central government guarantee. Other elements of the public sector debt are not included in the analysis because of data constraints.5 Text Table 1. Liberia: Coverage of Public Sector Debt Subsectors of the public sector Check box 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt Public debt coverage and the magnitude of the contingent liability tailored stress test 1 The country's coverage of public debt The central government, central bank, government-guaranteed debt Default Used for the analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0.5 percent of GDP 0.5 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2 4 PPP 35 percent of PPP stock 12.70 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5 Total (2+3+4+5) (in percent of GDP) 20.2 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. 3The definition of external and domestic debt uses a residency criterion. 4This loan is direct lending to the government, but the implementation agency is the LEC. 5The contingent liabilities shock from the SOE debt is kept at the default value of 2 percent to reflect risks associated with non- guaranteed SOE debt, currently excluded from the analysis due to data availability constraints. Currently, the SOE Reporting and Coordination Unit (SOERCU) of the MFDP monitors and reports on the performance of 15 out of 39 registered SOEs in Liberia, but the reports do not provide any specific information about non-guaranteed SOE debt. The amended PFM Act strengthens requirements for reporting and monitoring of SOE debt, including non-guaranteed debt. Going forward, the external debt coverage will be expanded as the government plans to include SOE’s non-guaranteed debt into public sector debt. 2 BACKGROUND 2. This DSA is being conducted in the context of the combined first and second reviews of a four-year arrangement under the Extended Credit Facility (ECF). The last Low-Income Country DSA (LIC-DSF) was considered by the Executive Board in June 2020 as part of the request for disbursement under the Rapid Credit Facility (RCF).6 Liberia continues to be subject to the IDA Non-Concessional Borrowing Policy (NCBP) regardless of the risk of debt distress.7 3. Under the ECF-supported Text Figure 1. Liberia: Stock of Public and Publicly program, the authorities are Guaranteed Debt, FY2015–201/ committed to keep debt Figure1. (Percent Liberia: Stock of External Public andof GDP) Publicly Guaranteed Debt, FY2015-20 1/ (In percent of GDP) sustainable. The main objectives of External debt Domestic debt 60 the ECF-supported program are to restore macroeconomic stability, 50 provide a foundation for sustainable 40 growth, and to address weaknesses in 30 governance. To ensure debt sustainability under the ECF 20 arrangement, the authorities 10 expressed commitment to closely 0 monitor the debt path; refrain from FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 additional central bank financing and Sources: Liberian authorities and IMF staff calculations. 1/ The debt to GDP ratio are calculated using external debt (in USD) evaluated at the end of period exchange rate over GDP (in buildup of arrears; remain below the USD) evaluated at the period average exchange rate, to ensure consistency with the DSA template. ceiling on non-concessional borrowing; refrain from nontransparent collateralized agreements; ensure that new debt is contracted transparently; and give due consideration to the country’s absorption capacity, which remains low. 4. The COVID-19 pandemic has resulted in an adverse impact on growth and revenue, additional spending needs, and larger BOP needs than at the time of program approval. The spread of the pandemic in Liberia has resulted in loss of output (and hence revenue) due to demand and supply shocks, specifically, a near-cessation of hotel and transportation services, resulting in a sharp decline in service exports. While the full extent of the impact of the COVID-19 pandemic is not known, the economic activity has slowed down; high frequency indicators (revenue, imports, credit growth) show that economic activity is down from the previous year by 3 percent. In particular, imports in the first half of 2020 are down by about 7 percent. 6This DSA is prepared jointly by the staff of the IMF and World Bank, in collaboration with the authorities of Liberia. The current DSA follows the revised Debt Sustainability Framework (DSF) for LICs and Guidance Note (2017) in effect as of July 1, 2018. The last joint DSA can be found in IMF Country Report No. 20/202, June 2020. 7The NCBP requires a minimum grant element of 35 percent or higher, should a higher minimum be required under a Fund- supported program. 3 5. As a result, it has Text Table 2. Liberia: Structure of External Public Debt as of end- triggered recourse to FY20201/ emergency assistance, USD millions Percent of Total Percent of GDP 2/ Multilateral 1049 90.3 33.6 reducing Liberia’s external IMF 251 21.6 8.0 World Bank 512 44.1 16.4 borrowing space compared to AfDB 161 13.9 5.2 EIB 54 4.7 1.7 the DSA at the time of Other Multilateral 70 6.1 2.3 Bilateral 113 9.7 3.6 program approval (the China Kuwait 54 20 4.7 1.7 1.7 0.6 December 2019 DSA Saudi Arabia Other Bilateral 37 1 3.2 0.1 1.2 0.0 hereafter). The total public and Total 1161 100.0 37.2 Sources: Liberian authorities and IMF staff calculations. 1 Debt stock on disbursement basis. publicly guaranteed (PPG) 2 The debt to GDP ratio are calculated using external debt (in USD) evaluated at the end of period exchange rate over GDP (in USD) evaluated at the period average exchange rate, to ensure consistency with the DSA template. external debt stock reached $1,161 million (37.2 percent of GDP) at end-FY2020 (June 2020), comprising mostly of multilateral loans (Text Table 2). The downward revision to growth outlook and the disbursement under the RCF, equivalent to 1.6 percent of GDP, have reduced Liberia’s external borrowing space and increased external debt service pressure in the medium term though some of this pressure was alleviated as the debt relief became available from the Catastrophe Containment and Relief Trust (CCRT).8,9 6. Public debt has increased by a large margin in FY2020, not only by the rise in external debt, but also by the recognition of government debt to the CBL at the program inception; public debt has increased from 41.4 percent of GDP in FY2019 to 56.6 percent of GDP in FY2020. The restructured and consolidated government debt to the central bank in U.S. dollar has the interest rate at 4 percent with repayments starting in 2029. Public debt of Liberia (both external and domestic) is only medium- and long-term borrowing and it is projected to reach 64.9 percent of GDP in FY2022 before declining to 47.8 percent of GDP in FY2031. UNDERLYING ASSUMPTIONS 7. The key macroeconomic assumptions have been revised since the December 2019 DSA, but are broadly in line with the DSA accompanying the RCF request (the June 2020 DSA hereafter).10 It is assumed that the authorities’ fiscal and monetary policy adjustments will remain on track under the ECF-supported program, while accommodating near-term measures to mitigate the negative impact of COVID-19 predominantly felt in 2020. The fiscal policy adjustment path towards the end of the program period is anchored by the debt-stabilizing primary deficit of 2.5 percent. The monetary policy adjustment is frontloaded to bring the inflation rate down to a single digit by end-2020. Changes to the underlying assumptions are as follows (Text Table 3): 8The DSA and macro-framework assume CCRT debt service relief through April 2022. The last 18 months of debt service relief is subject to the availability of CCRT resources. 9Authorities have decided not to participate in DSSI due to insignificant amounts involved. 10See IMF Country Report No. 20/202, June 2020. 4 • The real GDP growth path has been revised down but remains in line with the forecasts of the RCF. Growth for 2019 was revised down from -1.4 percent in the 2019 December DSA to -2.5 percent, reflecting the larger-than-anticipated fiscal contraction and weak demand. Growth for 2020 was revised down from 1.4 percent in the 2019 December DSA to -3.0 percent, reflecting several months of general lockdown affecting the business travel, service exports. Growth is subsequently expected to recover to 3.2 percent in 2021 and is projected to reach an average of 4.5 percent in the medium term, due to a recovery in consumption, improved business confidence, and higher spending on capital. • Pressure on inflation eased. Inflation fell from 30 percent at program inception to 14 percent in September due to tight monetary policy stance, weak economic activity, lower fuel prices, and exchange rate appreciation. • The fiscal deficit of the budgetary central government was projected to decline from 6.1 percent of GDP in FY2019 to 4.7 percent of GDP in FY2020 in the December 2019 DSA. In the current DSA, it was revised to go down from 6.2 percent of GDP in FY2019 to 3.6 percent. Overall FY2020 fiscal stance became tighter than the December 2019 DSA, mostly thanks to fiscal discipline in the first three quarters of the year despite a relaxation in the last quarter to response to the pandemic. The fiscal deficit for FY2021 was also revised down from 4.4 percent of GDP in the December 2019 DSA to 3.2 percent of GDP in the current DSA. The fiscal deficit is projected to decline to 1.7 percent of GDP by FY2024, which is consistent with the medium-term fiscal anchor. The fiscal balance projections in the medium term rely on the recent improvements in domestic revenue (excise tax on fuel and improvement in tax collection), better cash management and expenditure control, and the significant progress made on the civil service payroll reform. • The current account deficit was projected to increase from 21.4 percent of GDP in 2020 to 21.9 percent of GDP in 2021 in the December 2019 DSA; this is revised to increase from 21.4 percent of GDP in 2020 to 22.2 percent in 2021. The terms of trade shock associated with the COVID-19 is so far positive as fuel prices declined much more than those of Liberia’s main export commodities (iron ore, rubber, gold). Staff projects a deterioration in service receipts (especially in hotel and transportation 5 services). Over the medium term, the current account deficit is expected to remain high as stronger economic policies facilitate Foreign Direct Investment (FDI) and associated imports. Further, the net primary income remains large and negative mainly due to investment income repatriation abroad. The external sector assessment shows that Liberia’s external sector position is substantially weaker than implied by fundamentals and desirable policies (IMF Country Report 19/169). • Gross official reserves were projected to go up from US$308 million (2.3 months of next year’s imports) in 2020 to US$333 million (2.4 months of next year’s imports) in 2021 in the December 2019 DSA. In this DSA, it is revised up to go up from US$331 million (2.5 months of imports) in 2020 to US$403 million (2.9 months of imports) in 2021. The upward revisions are due to diligent efforts to rebuild fiscal and external buffers both by the government and the central bank. Gross official reserves are expected to increase modestly thereafter to 3.1 months of imports in 2023. 8. The assumptions for the financing mix and borrowing terms are as follows: • External borrowing. The DSA assumes new external borrowing of $774 million in the medium term (FY2021-FY2025) which is lower than the December 2019 DSA ($919 million). To reflect Liberia’s more limited borrowing space, a couple of changes are made: the average grant element of new borrowing is projected to increase to average 47.3 percent over the program period (versus 44.3 percent at the time of program approval); and the baseline assumes no non-concessional borrowing before FY2024 and non-concessional loans totaling $6.6 million in FY2024 and $20 million in FY2025, compared to a total of $215 million between FY2021 to FY2025 envisaged at the time of the program approval. SECREMP I currently has a financing gap of $60 million as a participation of private investment did not materialize but no external borrowing is assumed to fill this gap in this DSA. No external borrowing is also assumed for SECREMP II. The assumption is that this gap will be filled by reallocations of concessional resources and an increase in contributions to the National Road Fund from the budget but not an increase in external borrowing. • Domestic borrowing. The baseline assumes that the central government no longer relies on central bank financing to fill budgetary needs but still borrows to repay past ECF and RCF budget support amounting US$107.8 million. The baseline also assumes repayment of US$65 million of bonds issued of the banking sector between the period of FY2020-24. The average real interest rate is projected to remain positive in the medium term in line with current nominal rates and inflation developments. The rollover risk of domestic debt is low as most of the domestic debt is the government’s consolidated debt to the CBL. 6 REALISM OF THE BASELINE ASSUMPTIONS 9. The realism tools suggest that the baseline scenario is credible compared to Liberia’s historical experience and cross-country experiences (Figure 3). • Figure 3 shows the evolution of projections of external and public debt to GDP ratios for the current DSA, the previous DSA (the 2020 request for RCF disbursement DSA), and the DSA from 5 years ago. The current DSA reflects the latest revisions to the medium-term outlook and policy direction of the authorities in presence of COVID-19 shock and the recent economic developments. The difference between the current DSA and the previous DSA is small. The downward revisions to real GDP growth compared to the 2015 DSA, in the context of the Ebola epidemic and the commodity price shock, explain most of the increase in the ratios of public and external debt-to-GDP in the previous and current DSA. • A high contribution of unexpected current account deficits to past debt accumulation and an equally large unexpected residual to the past debt accumulation in the opposite direction are observed (Figure 3). These debt dynamics are plausible since residual financing (i.e., net private financing under other investment flows in the Balance of Payments, Table 2), which is enabling the large current account deficit, includes current transfers (remittances) that are not captured by the official statistics. • The unexpected increases in PPG external debt and public debt are about 10.8 and 21.2 percent of GDP, respectively, (due to Ebola epidemic and the commodity price shock), which are both above the median of the countries producing LIC DSF. The drivers of the unexpected public debt accumulation are unexpected decline in growth and unexpected depreciation of the real exchange rate. The change in the public debt is mainly due to recognition of restructured and consolidated government debt to the central bank (¶6). 10. The improvement in the primary balance in the next three years is in line with historical data on LIC adjustment programs. The second DSF realism tool assesses the realism of the fiscal projection. Figure 5a highlights that the anticipated adjustment in the primary balance of 1.5 percentage points of GDP in line with other LIC programs. The growth projection for 2021 and 2022 are optimistic relative to what is suggested by the fiscal multiplier realism tool. This is because of the economic rebound that is expected after the attenuation of the negative impact of COVID-19 shock. 7 COUNTRY CLASSIFICATION AND MODEL SIGNAL 11. Liberia’s debt-carrying capacity based on the Composite Indicator (CI) is assessed as weak (Text Table 4).11 The CI rating was downgraded to weak in the DSA at the time of ECF approval and the CI score is 2.502. In addition, Liberia was recently downgraded to “weak quality of debt monitoring” in line with the country’s debt-recording capacity. 12. Standard scenarios stress test and a contingent liability test are conducted and discussed below. Text Table 4. Liberia: Composite Index Components Coefficients (A) 10-year average values CI Score components Contribution of (B) (A*B) = (C) components CPIA 0.385 2.988 1.15 46% Real growth rate (in percent) 2.719 1.409 0.04 2% Import coverage of reserves (in percent) 4.052 20.864 0.85 34% Import coverage of reserves^2 (in percent) -3.990 4.353 -0.17 -7% Remittances (in percent) 2.022 12.149 0.25 10% World economic growth (in percent) 13.520 2.928 0.40 16% CI Score 2.50 100% CI rating Weak Text Table 5. Liberia: Debt Carrying Capacity and Thresholds EXTERNAL debt burden thresholds Weak Medium Strong PV of debt in % of Exports 140 180 240 GDP 30 40 55 Debt service in % of Exports 10 15 21 Revenue 14 18 23 EXTERNAL debt burden thresholds PV of debt in % of TOTAL public debt benchmark Exports 140 PV of total public debt in GDP 30 percent of GDP 35 Debt service in % of Exports 10 Revenue 14 11The CI captures the impact of the different factors through a weighted average of the World Bank’s 201 9 Country Policy and Institutional Assessment (CPIA) score, the country’s real GDP growth, remittances, international reserves, and world growth. A country’s debt-carrying capacity would be assessed as weak if its CI value is below 2.69, medium if it lies between 2.69 and 3.05, and strong if it is above 3.05. Liberia’s debt-carrying capacity based on the CI, which is based on the October 2020 WEO and the 2019 CPIA, is assessed as weak. The CI score is 2.502. 8 EXTERNAL DSA 13. Liberia remains at moderate risk of external debt distress with limited space to absorb shocks. Under the baseline scenario, the PV of debt-to-GDP and the PV of debt-to-export ratios remain below the thresholds of 30 and 140 percent in the medium- to long-term (Figure 1). The debt-service to export and debt-service to revenue ratios remain below their corresponding thresholds as well. Table 1 indicates that residuals remain large and negative in the medium term mainly due to large identified net debt creating flows. These flows, in turn, are due to large current account deficits that are financed by net FDI and net private financing which includes unrecorded remittances. 14. Standard stress tests show that a further deterioration of the macroeconomic outlook might lead to breaches of the policy dependent thresholds (Table 3). Some of the standard stress tests, namely, a shock of one-standard deviation in the real GDP growth, primary balance, exports, other non-debt creating flows, depreciation, or a combination of all shocks will all result in breaching the thresholds of the PV of debt-to-GDP ratio. A shock to the primary balance, exports, other debt creating flows, or a combination of all shocks will lead to a breaching of the threshold on the PV of debt-to-exports ratio. A shock of one-standard deviation in the primary balance, exports, other non-debt creating flows, or a combination of all shocks will all result in breaching the thresholds of the debt service-to-exports ratio. Finally, a shock to the real GDP growth, other non-debt creating flows, depreciation, or a combination of all shocks leads to a breach of the debt service-to-revenue ratio threshold. Thus, the mechanical signal suggests Liberia is at moderate risk of external debt distress. PUBLIC DSA 15. Public debt indicators show limited borrowing space, with the PV of public debt-to GDP ratio showing an extended breach. The indicator increases from an estimate of 44.8 percent in FY2021 to 46.4 percent in FY2022 and declines to 31.8 percent in FY2031 (Table 2 and Figure 2). The PV of debt-to-revenue ratio increases from 153.9 percent in FY2021 to 160.7 percent in FY2022 and to 115 percent by FY2031, while the debt-service-to-revenue ratio increases to 11.5 percent in FY2024 and gets to 12.9 percent by FY2031. 16. Under standard sensitivity analysis, the PV of debt-to-GDP breaches the relevant benchmark. Among the bound tests, a deterioration of other flows results in the largest breach of the benchmark on the PV of debt-to-GDP ratio, followed by a shock to the primary balance, the real GDP growth, combination of shocks, exports, and a one-time depreciation (Table 4). Additionally, the contingent liability stress test is estimated to lead to a one-off increase in the debt-to-GDP ratio to 58 percent in FY2022 (around 13 percentage points increase), capturing the combined shock of SOE’s external debt default, PPPs’ distress, and financial market vulnerabilities that are not included in the covered data. Given these risks and the extended breach 9 of the PV of debt-to-GDP threshold, Liberia is assessed to have a high risk of overall public debt distress. RISK RATING AND VULNERABILITIES 17. The sharp decline in GDP growth impairs Liberia’s debt sustainability and the recent borrowing to dampen the impact of COVID-19 shock has resulted in higher debt service pressure in the medium-term. Two consecutive years of negative growth will reduce Liberia’s borrowing space, while financing needs will be rising. However, implementing the appropriate set of policies (such as domestic revenue mobilization, rebuilding confidence in the banking sector, and preventing further drains on the NIR) is expected to ensure higher GDP growth and expand the borrowing space thereafter. Moreover, the availability of CCRT means that more budgetary resources can be allocated to public health needs and it will also help contain the exceptional balance of payments need resulting from the pandemic. 18. Risks to the outlook are tilted to the downside. A second wave of cases (domestic or overseas) would slow economic activity further; slippages from fiscal spending pressures could result in larger drawdowns on government deposits than programmed, putting pressure on the exchange rate and inflation; re-emergence of heightened U.S. dollar liquidity needs in the banking sector and that of Liberian dollar banknotes shortages would undermine confidence in the banking sector and the business climate more broadly. Policy slippages could also lessen access to concessional financing, which is critical for meeting development needs while keeping debt sustainable. AUTHORITIES’ VIEWS 19. The authorities agreed with the importance of maintaining debt sustainability in the medium term. The authorities expressed commitment to refrain from central bank financing and buildup of arrears. Moreover, the authorities reiterated that they will monitor the debt path closely and will seek concessional financing to meet their financing needs as they recognize that borrowing space is limited. In this regard, the authorities expressed commitment to remain below the ceiling on non-concessional borrowing 12 and refrain from nontransparent collateralized agreements, while ensuring that new debt is contracted transparently. 12The non-concessional borrowing assumptions of the medium-term debt management strategy of the authorities are in line with staff assumptions. 10 Figure 1. Liberia: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, FY2021–31 PV of debt-to GDP ratio PV of debt-to-exports ratio 60 300 PV of debt-to GDP ratio PV of debt-to-exports ratio 60 300 50 250 50 250 40 200 40 200 30 150 30 150 20 100 20 100 10 50 10 Most extreme shock: Non-debt flows 50 Most extreme shock: Exports 0 Most extreme shock: Non-debt flows 0 Most extreme shock: Exports 0 2021 2023 2025 2027 2029 2031 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 18 20 Debt service-to-exports ratio Debt service-to-revenue ratio 18 16 20 18 16 18 16 14 16 14 14 12 14 12 12 10 12 10 10 8 10 8 8 6 8 6 6 4 6 4 4 2 4 2 Most extreme shock: Exports Most extreme shock: Non-debt flows 2 0 2 0 Most extreme shock: Exports Most extreme shock: Non-debt flows 0 2021 2023 2025 2027 2029 2031 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Historical scenario Most extreme shock 1/ Threshold Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Size Interactions Default User defined Shares of marginal debt No No Shares of External marginal PPG debt MLT debt 100% Tailored Stress No No External Terms ofPPG MLT debt marginal debt 100% Tailored CombinedStress CL No Terms Avg. of marginal nominal debt interest rate on new borrowing in USD 1.0% 1.0% Combined Natural CL disaster No n.a. n.a. USD nominal interest Avg. Discount rate rate on new borrowing in USD 1.0% 5.0% 1.0% 5.0% Natural disaster Commodity price 2/ n.a. n.a. maturity rate USD Discount Avg. (incl. grace period) 5.0% 30 5.0% 30 Commodity Market price 2/ financing n.a. n.a. maturity Avg. grace (incl. grace period) period 30 6 30 6 Market financing n.a. n.a. Avg. grace period 6 6 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are Note: the "Yes" settings default indicates any for stress to change the the"n.a." tests. size or interactions indicates of that the * Note: All assumed to beadditional the covered by financing needs PPG external generated MLT debt in by thethe shocks external under DSA. the stress Default termstests are of marginal the default stress settings test does not for the stress tests. "n.a." indicates that the apply. assumed debt to be covered are based by PPG on baseline external 10-year MLT debt in the external DSA. Default terms of marginal projections. stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. Sources: 1/ Country The most authorities; extreme and stress test is staff estimates the test and the that yields projections. highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off 1/ The most breach extreme is deemed stress away test is the test for mechanical that yields signals. Whenthe highest testratio a stress a or within before one-off 2031. happens breach totest The stress with be the a one-off most breach exterme is also shock evenpresented (if any), while after disregarding the one-off the one-off breach, breach only is stress that deemed away test for (with mechanical a one-off signals. breach) wouldWhen a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, be presented. only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 11 Figure 2. Liberia: Indicators of Public Debt Under Alternative Scenarios, FY2021–31 PV of Debt-to-GDP Ratio 70 60 50 40 30 20 Most extreme shock: Non-debt flows 10 0 2021 2023 2025 2027 2029 2031 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 250 20 18 200 16 14 150 12 10 100 8 6 50 4 Most extreme shock: Non-debt flows Most extreme shock: Non-debt flows 2 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 96% 96% Domestic medium and long-term 3% 3% Domestic short-term 1% 1% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.0% 1.0% Avg. maturity (incl. grace period) 30 30 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing 5.1% 5.1% Avg. maturity (incl. grace period) 10 10 Avg. grace period 0 0 Domestic short-term debt Avg. real interest rate 10.9% 10.9% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 12 Figure 3. Liberia: Drivers of Debt Dynamics – Baseline Scenario Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Gross Nominal PPG External Debt 100 Debt-creating flows Unexpected Changes in Debt 1/ Current DSA Residual 80 80 (in percent of GDP; Previous DSA DSA vintages) proj. (percent of GDP) (past 5 years, percent of GDP) 70 DSA-2015 Interquartile Current DSA Price and100 Residual 50 60 range (25-75) 80 80 60 Previous DSA exchange proj. 70 DSA-2015 rate 40 Interquartile PriceGDP and 50 60 50 Real range (25-75) 60 exchange 0 growth Change in 20 40 rate 40 PPG debt 3/ 50 Real GDP Nominal 30 growth 0 0 Change in interest 20 40 -50 PPG debt 3/ 20 rate Nominal Current Median 30 -20 0 interest 10 account +-50 20 rate FDI Distribution across LICs 2/ Median Current -100 -40 -20 0 Change in 10 account + 5-year 5-year Contribution of unexpected 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 2031 2031 PPG debt FDI historical projected -60 Distribution across LICs 2/ 3/ -100 -40 changes 0 Change in change change PPG debt 5-year 5-year Contribution of unexpected 3/ historical projected -60 changes debt change Public change Gross Nominal Public Debt Public debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Gross Nominal Public Debt Debt-creating Residual 50 flows Unexpected Changes in Debt 1/ Current DSA (in percent of GDP; DSA vintages) (percent of GDP) 25 (past 5 years, percent of GDP) Interquartile Previous DSA proj. Residual 50 range (25- DSA-2015 Current DSA 80 Other debt 25 Interquartile 75) Previous DSA proj. creating flows 20 range (25- DSA-2015 70 80 Other debt 75) Real Exchange creating flows 20 60 70 15 Change in rate 50 60 Real Exchange depreciation 0 15 debt rate GDP Real 10 Change in 50 40 depreciation growth 0 debt Real GDP 10 40 30 growth Real interest 5 Median 30 20 rate Real interest 5 0 Median rate Primary deficit 20 10 0 10 Primary deficit -50 -5 Contribution of 0 -50 5-year 5-year Change in debt -5 unexpectedof Distribution across LICs 2/ Contribution 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 0 5-year projected historical 5-year Change in debt changes unexpected -10 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Distribution across LICs 2/ change change projected historical changes change change -10 1/ Difference between anticipated and actual contributions on debt ratios. 1/ Distribution 2/ Difference between anticipated across LICs and for which actual LIC DSAs contributions on debt ratios. were produced. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external 3/ Given debt the relatively dynamics low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external equation. debt dynamics equation. 13 Figure 4. Liberia: Qualification of the Moderate Category, FY2021–311/ PV of debt-to GDP ratio PV of debt-to-exports ratio 35 160 30 140 120 25 100 20 80 15 60 10 40 5 20 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 12 16 14 10 12 8 10 6 8 6 4 4 2 2 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Threshold Baseline Limited space Some space Substantial space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 14 Figure 5. Liberia: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) Distribution 1/ 5 1 14 4 Projected 3-yr adjustment 12 3-year PB adjustment greater 3 In percentage points of GDP 10 than 2.5 percentage points of GDP in approx. top quartile 2 In percent 8 1 6 0 -1 4 -2 2 -3 0 -4 0 -4.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 more -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 2015 2016 2017 2018 2019 2020 2021 2022 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The size 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real GDP of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on growth paths under different fiscal multipliers (left-hand side scale). the vertical axis. 15 Table 1. Liberia: External Debt Sustainability Framework, Baseline Scenario, FY2018–41 (Percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 Historical Projections External debt (nominal) 1/ 25.9 31.5 37.2 43.1 46.2 46.9 46.5 46.1 45.9 40.9 31.2 19.0 44.5 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 25.9 31.5 37.2 43.1 46.2 46.9 46.5 46.1 45.9 40.9 31.2 19.0 44.5 Is there a material difference between the two No criteria? Change in external debt 3.3 5.5 5.7 5.9 3.1 0.8 -0.5 -0.4 -0.2 -0.9 -1.4 Identified net debt-creating flows 13.5 14.3 14.2 14.1 12.9 12.5 11.1 9.6 8.2 6.5 -1.1 9.4 9.8 Non-interest current account deficit 22.7 21.9 20.5 22.1 22.8 23.1 22.1 21.1 19.5 16.7 7.6 20.5 20.3 Deficit in balance of goods and services 32.4 28.8 29.7 28.8 28.5 27.8 26.5 25.7 24.4 22.7 10.7 47.4 25.5 Exports 22.2 22.5 19.6 23.0 23.7 23.3 23.3 23.2 23.6 25.6 25.3 Debt Accumulation Imports 54.6 51.3 49.3 51.8 52.2 51.1 49.9 48.9 48.1 48.3 36.0 Net current transfers (negative = inflow) -18.5 -17.6 -20.2 -18.2 -16.7 -15.6 -14.5 -14.0 -13.5 -11.1 -7.3 20.0 60 -35.1 -13.9 of which: official -14.6 -13.7 -14.5 -14.0 -12.5 -11.4 -10.3 -9.9 -9.6 -7.7 -4.9 18.0 Other current account flows (negative = net inflow) 8.8 10.7 11.1 11.4 11.0 11.0 10.1 9.3 8.6 5.1 4.2 8.2 8.6 50 16.0 Net FDI (negative = inflow) -9.3 -8.3 -7.8 -8.1 -8.7 -9.0 -9.1 -9.4 -9.2 -8.4 -6.5 -10.8 -8.8 Endogenous debt dynamics 2/ 0.1 0.7 1.5 0.2 -1.3 -1.7 -2.0 -2.1 -2.1 -1.8 -2.2 14.0 40 Contribution from nominal interest rate 0.3 0.3 0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.4 0.4 12.0 Contribution from real GDP growth -0.4 0.2 0.9 0.0 -1.5 -2.0 -2.3 -2.4 -2.4 -2.2 -2.6 10.0 30 Contribution from price and exchange rate changes 0.2 0.3 0.1 … … … … … … … … Residual 3/ -10.2 -8.7 -8.5 -8.2 -9.8 -11.7 -11.5 -10.0 -8.4 -7.5 -0.3 -6.3 -9.4 8.0 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 6.0 4.0 Sustainability indicators 10 PV of PPG external debt-to-GDP ratio ... ... 21.7 25.5 27.7 28.1 27.8 27.6 27.6 24.9 21.9 2.0 PV of PPG external debt-to-exports ratio ... ... 110.9 111.0 116.5 120.5 119.4 119.1 116.9 97.2 86.5 0.0 0 PPG debt service-to-exports ratio 3.0 3.9 7.4 3.5 4.0 8.6 9.1 8.5 7.6 7.1 7.2 2021 2023 2025 2027 2029 2031 PPG debt service-to-revenue ratio 5.1 6.2 10.4 5.6 5.8 11.8 12.2 11.0 10.1 10.2 10.3 Gross external financing need (Million of U.S. dollars) 461.5 465.0 442.7 454.0 479.8 539.0 532.6 507.9 479.9 584.6 353.2 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 1.8 -0.6 -2.7 0.1 3.7 4.5 5.1 5.4 5.5 5.7 8.7 2.4 4.8 GDP deflator in US dollar terms (change in percent) -0.9 -1.0 -0.3 -1.2 -0.7 0.3 0.2 0.5 1.4 1.9 -0.9 3.5 0.9 Effective interest rate (percent) 4/ 1.3 1.0 1.5 0.7 0.6 0.6 0.6 0.6 0.7 0.9 1.3 1.1 0.7 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 9.8 -0.2 -15.7 16.1 6.4 3.1 5.2 5.2 9.2 5.4 8.2 1.2 8.4 of which: Private Growth of imports of G&S (US dollar terms, in percent) -8.4 -7.6 -6.9 4.0 3.8 2.5 2.7 3.8 5.2 4.7 3.1 0.5 5.6 48 Grant element of new public sector borrowing (in percent) ... ... ... 45.9 47.7 47.4 48.9 50.2 45.0 40.8 32.2 ... 46.2 47 Government revenues (excluding grants, in percent of GDP) 12.9 14.3 13.9 14.2 16.2 17.0 17.5 17.8 17.8 17.8 17.8 15.6 17.2 Aid flows (in Million of US dollars) 5/ 549.7 588.0 607.5 576.5 513.7 493.4 473.7 477.7 502.8 703.3 1323.7 46 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 17.7 15.1 13.8 12.5 11.5 11.8 11.2 10.4 ... 12.7 45 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 84.5 85.3 85.1 86.7 85.5 83.4 84.4 86.4 ... 84.9 44 Nominal GDP (Million of US dollars) 3,274 3,220 3,121 3,087 3,177 3,329 3,506 3,714 3,971 5,738 12,034 43 Nominal dollar GDP growth 0.9 -1.6 -3.1 -1.1 2.9 4.8 5.3 5.9 6.9 7.7 7.8 6.0 5.7 42 41 Memorandum items: PV of external debt 7/ ... ... 21.7 25.5 27.7 28.1 27.8 27.6 27.6 24.9 21.9 40 In percent of exports ... ... 110.9 111.0 116.5 120.5 119.4 119.1 116.9 97.2 86.5 39 Total external debt service-to-exports ratio 3.0 3.9 7.4 3.5 4.0 8.6 9.1 8.5 7.6 7.1 7.2 38 PV of PPG external debt (in Million of US dollars) 677.0 786.7 878.4 936.5 975.9 1024.0 1097.4 1429.0 2633.1 37 (PVt-PVt-1)/GDPt-1 (in percent) 3.5 3.0 1.8 1.2 1.4 2.0 1.5 0.9 2021 2023 2025 2027 2029 2031 Non-interest current account deficit that stabilizes debt ratio 19.4 16.4 14.8 16.2 19.8 22.4 22.6 21.4 19.7 17.7 9.0 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 16 Table 2. Liberia: Public Sector Debt Sustainability Framework, Baseline Scenario, FY2018–41 (Percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 Historical Projections Public sector debt 1/ 34.1 41.4 56.6 62.4 64.9 64.5 62.8 60.8 58.8 47.8 43.2 30.2 57.7 Residency- of which: external debt 25.9 31.5 37.2 43.1 46.2 46.9 46.5 46.1 45.9 40.9 31.2 19.0 44.5 Definition of external/domestic debt based of which: local-currency denominated Change in public sector debt 3.2 7.3 15.2 5.9 2.5 -0.5 -1.7 -1.9 -2.0 -1.9 0.0 Is there a material difference Identified debt-creating flows 4.4 6.1 4.7 1.6 -1.0 -2.3 -2.9 -2.4 -2.1 -1.6 -0.4 -4.3 -1.6 No between the two criteria? Primary deficit 4.3 5.1 2.8 2.3 2.0 1.2 1.0 1.5 1.8 1.6 1.8 -3.5 1.7 Revenue and grants 25.9 28.0 28.1 29.1 28.9 28.7 28.2 27.3 27.7 27.6 27.4 27.0 28.0 of which: grants 13.0 13.8 14.1 14.9 12.7 11.7 10.7 9.5 9.9 9.8 9.6 Public sector debt 1/ Primary (noninterest) expenditure 30.2 33.1 30.9 31.5 30.9 29.9 29.2 28.8 29.5 29.2 29.2 23.5 29.7 Automatic debt dynamics 0.1 0.9 2.0 -0.7 -3.0 -3.5 -3.8 -3.9 -3.9 -3.1 -2.2 of which: local-currency denominated Contribution from interest rate/growth differential -0.8 -0.1 1.1 -0.7 -3.0 -3.5 -3.8 -3.9 -3.9 -3.1 -2.2 of which: contribution from average real interest rate -0.2 -0.4 0.0 -0.6 -0.8 -0.7 -0.7 -0.7 -0.7 -0.5 1.3 of which: foreign-currency denominated of which: contribution from real GDP growth -0.6 0.2 1.2 0.0 -2.2 -2.8 -3.1 -3.2 -3.2 -2.7 -3.5 70 Contribution from real exchange rate depreciation 0.9 1.1 0.8 ... ... ... ... ... ... ... ... 60 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual -1.2 1.3 10.4 4.2 3.4 1.8 1.2 0.5 0.1 -0.3 0.4 7.7 0.8 10 0 Sustainability indicators -10 2021 2023 2025 2027 2029 2031 PV of public debt-to-GDP ratio 2/ ... ... 41.1 44.8 46.4 45.6 44.1 42.3 40.6 31.8 33.9 PV of public debt-to-revenue and grants ratio … … 146.2 153.9 160.7 159.1 156.7 154.9 146.5 115.0 123.5 Debt service-to-revenue and grants ratio 3/ 2.6 3.3 9.6 6.9 7.6 11.4 11.5 11.2 9.7 12.9 17.8 Gross financing need 4/ 4.9 6.1 5.5 4.3 4.2 4.5 4.2 4.6 4.5 5.1 6.7 of which: held by residents Key macroeconomic and fiscal assumptions of which: held by non-residents 70 Real GDP growth (in percent) 1.8 -0.6 -2.7 0.1 3.7 4.5 5.1 5.4 5.5 5.7 8.7 2.4 4.8 Average nominal interest rate on external debt (in percent) 1.3 1.0 1.5 0.7 0.6 0.6 0.6 0.6 0.7 0.9 1.3 60 1.1 0.7 Average real interest rate on domestic debt (in percent) 0.9 1.0 6.5 4.8 4.5 3.5 3.6 3.4 2.5 3.8 10.0 -2.3 3.2 50 Real exchange rate depreciation (in percent, + indicates depreciation) 3.1 3.1 1.9 … ... ... ... ... ... ... ... -1.5 ... 40 Inflation rate (GDP deflator, in percent) -0.9 -1.0 -0.3 -1.2 -0.7 0.3 0.2 0.5 1.4 1.9 -0.9 3.5 0.9 30 Growth of real primary spending (deflated by GDP deflator, in percent) -13.4 9.1 -9.5 2.0 1.9 1.0 2.6 4.1 7.9 5.5 8.4 -0.1 4.2 20 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 1.1 -2.2 -12.4 -3.6 -0.4 1.7 2.7 3.5 3.8 3.4 1.8 -4.5 2.5 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10 0 2021 2023 2025 2027 2029 2031 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 17 Table 3. Liberia: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, FY2021–31 (Percent) Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of debt-to GDP ratio Baseline 25 28 28 28 28 28 27 27 26 25 25 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 25 25 22 20 19 19 20 19 18 18 19 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 25 30 34 33 33 33 32 32 31 30 30 B2. Primary balance 25 34 40 40 40 39 39 38 37 35 35 B3. Exports 25 32 38 38 38 37 37 36 35 33 32 B4. Other flows 3/ 25 38 49 48 48 47 46 45 43 41 39 B5. Depreciation 25 35 30 30 29 30 29 28 28 27 27 B6. Combination of B1-B5 25 39 46 45 45 45 44 43 41 39 38 C. Tailored Tests C1. Combined contingent liabilities 25 38 39 38 38 38 37 36 35 34 34 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 111 116 120 119 119 117 116 102 98 97 97 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 111 103 96 87 82 81 84 72 68 70 76 0 111 114 119 120 123 125 129 117 114 113 113 B. Bound Tests B1. Real GDP growth 111 116 120 119 119 117 116 102 98 97 97 B2. Primary balance 111 142 173 172 171 167 166 146 139 135 135 B3. Exports 111 169 258 255 254 248 246 217 206 200 198 B4. Other flows 3/ 111 160 210 208 206 200 198 174 164 157 154 B5. Depreciation 111 116 101 100 100 98 98 87 83 83 84 B6. Combination of B1-B5 111 174 167 219 218 212 210 185 175 169 167 C. Tailored Tests C1. Combined contingent liabilities 111 160 165 164 164 160 158 139 133 131 131 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 3 4 9 9 8 8 8 8 8 8 7 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 3 4 8 8 8 7 8 7 7 7 6 0 3 4 8 9 8 8 9 8 9 10 9 B. Bound Tests B1. Real GDP growth 3 4 9 9 8 8 8 8 8 8 7 B2. Primary balance 3 4 9 10 9 8 9 8 10 11 10 B3. Exports 3 5 15 16 15 14 15 13 15 16 15 B4. Other flows 3/ 3 4 9 11 10 9 10 9 11 13 12 B5. Depreciation 3 4 9 9 8 7 8 7 8 7 6 B6. Combination of B1-B5 3 5 12 13 12 11 12 11 13 14 12 C. Tailored Tests C1. Combined contingent liabilities 3 4 9 10 9 8 9 8 8 8 8 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 6 6 12 12 11 10 11 11 12 12 10 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 6 6 11 11 10 9 10 11 11 10 8 0 6 6 11 12 11 10 12 12 14 14 13 B. Bound Tests B1. Real GDP growth 6 6 14 14 13 12 13 13 14 14 12 B2. Primary balance 6 6 12 13 12 11 12 12 14 16 14 B3. Exports 6 6 13 14 12 11 12 12 14 15 14 B4. Other flows 3/ 6 6 13 14 13 12 13 13 16 19 17 B5. Depreciation 6 7 15 15 13 12 13 14 15 13 11 B6. Combination of B1-B5 6 6 15 15 14 13 14 14 17 18 16 C. Tailored Tests C1. Combined contingent liabilities 6 6 13 13 12 11 12 12 13 12 11 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 14 14 14 14 14 14 14 14 14 14 14 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 18 Table 4. Liberia: Sensitivity Analysis for Key Indicators of Public Debt, FY2021–31 (Percent) Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of Debt-to-GDP Ratio Baseline 45 46 46 44 42 41 39 37 35 33 32 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 45 43 39 36 32 29 25 21 18 14 11 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 45 52 58 59 59 59 59 59 58 57 57 B2. Primary balance 45 54 60 59 57 55 53 51 49 46 45 B3. Exports 45 49 54 52 50 48 46 44 42 39 37 B4. Other flows 3/ 45 57 66 65 63 60 58 56 52 49 46 B5. Depreciation 45 52 50 47 44 41 39 36 33 30 28 B6. Combination of B1-B5 45 52 54 47 46 44 43 41 39 38 36 C. Tailored Tests C1. Combined contingent liabilities 45 58 58 57 55 53 51 50 47 45 44 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 154 161 159 157 155 146 140 134 126 120 115 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 154 150 140 130 119 104 91 78 63 51 40 0 7 14 20 18 16 15 14 14 20 21 21 B. Bound Tests B1. Real GDP growth 154 173 189 195 203 200 199 198 195 193 193 B2. Primary balance 154 185 208 208 208 199 192 185 176 168 161 B3. Exports 154 171 187 185 184 174 167 160 151 142 135 B4. Other flows 3/ 154 197 232 230 229 218 209 201 189 177 167 B5. Depreciation 154 186 180 173 167 154 144 133 121 111 104 B6. Combination of B1-B5 154 182 186 166 167 159 154 148 141 134 130 C. Tailored Tests C1. Combined contingent liabilities 154 202 202 201 201 192 186 179 171 163 158 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 7 8 11 12 11 10 9 10 14 14 13 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 7 7 11 11 10 9 9 9 12 12 11 0 7 14 20 18 16 15 14 14 20 21 21 B. Bound Tests B1. Real GDP growth 7 8 13 13 13 11 11 12 16 17 16 B2. Primary balance 7 8 12 13 12 11 11 11 16 17 16 B3. Exports 7 8 12 12 12 10 10 10 15 16 15 B4. Other flows 3/ 7 8 12 13 12 11 11 11 16 18 17 B5. Depreciation 7 8 14 14 13 12 12 12 16 16 14 B6. Combination of B1-B5 7 8 12 12 11 10 10 10 14 14 13 C. Tailored Tests C1. Combined contingent liabilities 7 8 13 12 12 11 10 10 14 14 14 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 19