Doloquee
The Central Bank of Liberia (CBL) has recently announced significant policy changes aimed at bolstering the country’s economic stability and tackling challenges arising from global financial uncertainties. In a decision made during its sitting on July 20, the CBL’s Board of Governors, representing the Monetary Policy Committee (MPC), took decisive actions to counter the depreciation of the Liberian dollar and address other pressing economic concerns.
One of the key measures taken by the CBL is an increase in the monetary policy rate (MPR) by 250 basis points, bringing it to 20%. The move is aimed at reversing the recent trend of the Liberian dollar’s depreciation, which has been affected by tightened global financial conditions, as well as the ongoing Russian-Ukraine War. Additionally, the CBL Board mandated the Bank management to remove the ceiling on CBL bills, giving Management the flexibility to determine bill issuance based on evolving excess liquidity in the banking sector.
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The decision to raise the MPR and loosen the CBL bill issuance comes in response to several economic factors, including a decline in global economic growth from 3.4% in 2022 to 2.8% in 2023. Fluctuations in international prices of Liberia’s main exports and an increase in the price of rice have also impacted the domestic economy. Despite the challenges posed by the global economy, Liberia’s economic growth rate has been revised upwards to 4.6% in 2023, mainly due to unexpected growth in the mining and services subsectors. The expansion of the electricity supply has stimulated increased manufacturing activities, contributing to the overall growth of the domestic economy.
The banking sector in Liberia has shown signs of improvement, as it managed to address liquidity problems and registered growth in total loans, gross assets, total deposits, and total capital. Non-performing loans, though still relatively high, have shown signs of improvement, declining from 16.2% to 15.8%.
While Liberia’s trade deficit has reduced from 3.9% in the previous quarter to 3.4% in the quarter under review, the country experienced a reduction in remittance inflows to banks, amounting to US$95.5 million compared to US$107.0 million in the first quarter. On the other hand, inbound remittances to mobile wallets have increased by an estimated 8.5% within the same period, reaching US$111.6 million.
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However, despite the resilience of the Liberian economy, inflation has risen to 11.3% in the second quarter of 2023, up from 7.5% in the first quarter. This has been attributed to the impact of global economic uncertainties on the domestic economy and rising expenditures in the local currency, particularly amid election uncertainties.
The CBL’s recent monetary policy decisions reflect the determination to stabilize the economy and address economic challenges amid global uncertainties. With a proactive approach to monetary management, Liberia seeks to navigate these uncertain times and maintain its economic growth trajectory. As the country progresses, the effectiveness of these policy measures will be closely monitored by experts and market observers.
