IMF Warns Climate Risks Threaten Liberia’s Economic Stability

E+E Leader Team

Climate-related shocks are no longer a future concern for Liberia—they are already undermining economic stability, fiscal resilience, and living standards, according to a new Climate Policy Diagnostic from the International Monetary Fund  (IMF). The report outlines a broad reform agenda aimed at reducing macroeconomic risk while accelerating energy access, climate adaptation, and long-term growth.

The IMF finds that climate change poses “macro-critical” risks for Liberia, where roughly 70% of the population lacks access to electricity and extreme weather events already disrupt food production, inflation, and economic output.

According to the analysis, Liberia could lose 2% of real GDP per capita by 2050—and up to 5% by 2100—under a high-emissions scenario without effective adaptation. Extreme precipitation alone is estimated to reduce food production by 1.6 percentage points, cut per-capita GDP growth by more than 3 percentage points, and push inflation higher.

These impacts, the IMF notes, threaten both near-term balance-of-payments stability and long-term development prospects.

The report emphasizes that expanding electricity access is essential not only for development but also for climate resilience. It calls for a package of fiscal and regulatory reforms to scale renewable energy, reduce reliance on imported fossil fuels, and attract private investment.

Recommended measures include net-metering rules for rooftop solar, feed-in tariffs for renewable power producers, and competitive procurement programs for utility-scale projects. At the same time, the IMF urges gradual electricity tariff reform paired with social protections to ensure affordability.

Beyond energy, the IMF highlights structural weaknesses in water management, forestry governance, and disaster risk financing. Flooding and extreme rainfall are straining water and food systems, while fragmented institutions limit effective response.

The report recommends establishing a comprehensive water resources law, reforming forestry taxation to reward sustainable practices, and strengthening disaster financing mechanisms to reduce reliance on ad hoc donor support.

Liberia’s climate finance system is still at an early stage, with limited institutional capacity and coordination. The IMF calls for a national climate finance strategy to map funding gaps, engage donors and private investors, and expand green lending frameworks aligned with international standards.

Stronger climate governance—through clearer mandates, cross-ministerial coordination, and updated climate legislation—is identified as a prerequisite for translating policy into action.

While focused on Liberia, the report reflects a broader message for climate-vulnerable economies: without coordinated fiscal, energy, and governance reforms, climate impacts will increasingly translate into economic instability.