CBL: Bedrock for Economic Growth

0
653
J. Mills Jones_Web.jpg

President Ellen Johnson Sirleaf has said that the Central Bank of Liberia (CBL) remains a strong institution with potential to support the growth of the Liberian economy.

Delivering her Annual Message to the 53rd National Legislature on Monday, January 27, the Liberian leader reported that significant progress has been made by the CBL in regulating activities of insurance companies, especially in modernizing the payments system and establishing a collateral registry in the country.

According to the Liberian leader, the issuance of a 90-day Treasury Bill denominated in Liberian dollar commenced in the fourth quarter of the fiscal year 2012/2013, primarily to facilitate revenue smoothing as well as initial step towards the creation of a domestic money market.

She further pointed out that a four-year roadmap has already been formulated to address the dual currency issue through a rational and gradual transition process of de-dollarization by the removal of barriers to increase demand for transaction in Liberian dollars.

The President noted that the financial system will continue to expand under the guidance of the CBL in branch networks, foreign exchange bureaus and credit unions.

The exercise, she said, has resulted in significant expansion in credit, which was buoyed (maintained) by policy measures relating to more stringent action by the CBL and the commercial court, resulting in a decrease and non-performing loans.

According to the President, there is a need for more effective cooperative role by the monetary and fiscal authorities, which will ensure that the economy performs as planned and roadmap is implemented as it is intended.

President Sirleaf also said that credit expansion will also have greater potential and maximum impact when citizens demonstrate their responsibility by repaying loans, a factor which continues to weaken access to credit for local companies.

Relatively stable since 2010, the Liberian dollar came under enormous pressure under the year, resulting in a depreciation of 15 percent, she added that the high level of dollarization moderated the effect of the depreciation, keeping inflation at a single-digit 7.5 percent, which compares a favorably with other countries in the region.

“This was due in part to deteriorating terms of trade caused by rising demand for imports and decline in exports from rubber which, along with iron ore, represents 95 percent of total export.” President indicated.

In her annual report to members of the 53rd Legislature, she indicated that UNMIL draw down also impacted the injection of foreign exchange into the Liberian market.

President Sirleaf said depreciation was also due to speculative capital flight which, was addressed by CBL intervention in the foreign exchange market, mopped (cleaned) up excess Liberian dollar liquidity that contributed to the exchange rate volatility.

At the same time, the Liberian leader said international reserves fell from US$14million below the target level required under our (Liberian Government) program with the International Monetary Fund (IMF), implying less than three month cover.

Based upon that, the CBL’s decision placed US$22 million in commercial banks as economic stimulus lending to the agricultural and construction sectors and to Liberian businesses.

“However, the beneficial results of this action can only be assured through better coordination by the leadership of CBL and the Ministry of Finance,” President Sirleaf stated.

Authors

LEAVE A REPLY

Please enter your comment!
Please enter your name here