Monrovia – Liberia’s Finance Minister Samuel Tweah recently claimed that the country’s reserves in months of import have increased from three months of imports in 2017 to 4.2 months of imports.
Appearing on Spoon Talk on November 8, the Minister said that “when the President [George Weah] took over, Madam Sirleaf [former President Ellen Johnson Sirleaf] left three months of imports; we are now at 4.2 months of import”.
What is ‘Months of imports’?
According to Trading Economics, a country reserves in months of import is the number of months of imports of goods and services that a country reserves could pay for. It measures the number of months of money available in the national bank to cover the cost of imports.
Simply put, a country’s month of imports is measured by the amount of foreign currency reserve that the Central Bank holds. This also means that the more the total Months of imports, the larger the reserves.
According to an IMF, the “traditional ‘rules of thumb’ that have been used to guide reserve adequacy suggest that countries should hold reserves covering 100 percent of short-term debt or the equivalent of three months’ worth of imports”.
What did we Find?
Central Bank of Liberia Financial and Economic Bulletin for the second quarter of 2021 shows that months of import dropped from 2.4 in the first quarter to 2.3 in the second quarter of 2021.The report attributes the decline in months of import to the “rise in import payment”.
However, the CBL Financial and Economic Bulletin covering January–March 2018 shows that months of imports dropped to 4.9 in the first quarter of 2018 from 5.0 in the last quarter of 2017.
Also, the IMF first and second review of Liberia under the Extended Credit Facility agreement, shows that months of import in 2021 under the Extended Credit Facility was 2.4. In the report months of import under the Rapid Credit Facility is at 3.2 months.
It is important to note that the Finance Minister Tweah’s claim that the government took Liberia reserves in months of import from 3 months to 4.2 months of import in 2021 is not corroborated by any data made available by either the IMF or the Central Bank of Liberia as stated above in this report.
Based on research of data from both the Central Bank and the IMF, we found the claim made by Liberia’s Minister of Finance and Development Planning to be incorrect.
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