Liberia’s debt burden continues to mount, sparking concerns over long-term sustainability even as the International Monetary Fund (IMF) disbursed an additional US$26.5 million under the country’s Extended Credit Facility (ECF) program.
The latest disbursement, approved on October 1, 2025, follows the successful completion of the IMF’s second review of Liberia’s performance and brings total support under the 40-month arrangement to US$79.4 million.
While the IMF praised Liberia’s progress in fiscal discipline and reforms, critics point to a deepening reliance on borrowing, with the country’s total debt stock now standing at US$2.7 billion, equivalent to 52.2% of GDP, according to the Central Bank of Liberia’s (CBL) latest report.
Rising Domestic Debt, Declining Aid
The report highlights a 0.6% increase in domestic debt, now totaling US$1.07 billion, even as external debt saw a slight decline to US$1.6 billion. This shift toward domestic borrowing, analysts warn, could squeeze local credit markets, potentially stifling private sector growth.
Despite the modest nature of the increase, the continued accumulation of debt, particularly in a low-income, aid-dependent economy, has raised alarms over a possible “debt trap,” where new loans are used to repay existing obligations, leaving little room for real investment in development.
The IMF itself urged caution, calling for “robust debt management” and stressing the need for reforms in public spending, revenue mobilization, and better investment oversight.
Government Optimistic, But Eyes on 2026
Finance Minister Augustine Kpehe Ngafuan welcomed the IMF’s decision as a “vote of confidence” in the government’s fiscal policy, adding that Liberia remains on course to qualify for the IMF’s Resilience and Sustainability Facility (RSF) in 2026-targeted at climate resilience financing.
Ngafuan credited coordination between the Ministry and the CBL under Governor Henry F. Saamoi, while reaffirming President Joseph Boakai’s commitment to the ARREST Agenda for Inclusive Development (AAID).
Inflation, Lending, and Market Pressures
Inflation remained relatively stable in May 2025, with a slight increase of 0.1 percentage point. The Central Bank continued a tight monetary policy, using tools like CBL bills to control liquidity and maintain price stability.
Meanwhile, lending to the private sector grew: Liberian-dollar loans rose by 2.9% and U.S. dollar-denominated loans by 3.1%, signaling moderate confidence among banks and businesses.
However, the expansion of the money supply, reaching L$281.36 billion, was driven by domestic factors, not foreign inflows, pointing to continued internal pressures to fund public operations amid dwindling aid.
Liberia’s long-term fiscal path remains uncertain. While IMF support provides short-term stability, the deepening reliance on borrowing and shifting debt profile raises critical questions.
Will increased borrowing choke private sector growth? Can the government strike a balance between development needs and debt sustainability?
For now, the money flows. But the debt trap looms.
