The Central Bank of Liberia (CBL) has announced a major financial sector stimulus reducing interest rates on existing stimuli with banks for Liberian businesses and paying off the outstanding loan obligations of all private schools, from kindergarten through high school. According to the CBL, the commercial banks have already provided the CBL with the list of schools and the amounts involved.
In a special statement on the impact of the Ebola virus disease (EVD) on the economy on yesterday, CBL Executive Governor Dr. J. Mills Jones said “this intervention serves two purposes: it helps to relieve the banks of the burden of provisioning, where schools find themselves unable to repay the debts, and it helps to relieve the potential burden on parents who may already be experiencing financial difficulties from increased fees that schools may have to impose in order to meet the obligation of the banks.”
He said the Bank’s decision is due to the prolonged closure of schools as a result of the Ebola crisis which has contributed to increased debt burden of the private schools that have borrowed from banks.
The CBL Executive Governor also listed a number of measures [interventions], which he said, are aimed at alleviating the stress posed by the Ebola crisis on both the banking system and the economy in general.
Among the seven-count measures is the adjustment in banking hours from 9:00 am to 2: 00 pm on Mondays to Fridays and 9:00 am to 12: 00 noon on Saturdays. He said the Board of Governors has put in place a mechanism to provide liquidity support to the banking system, in case the need arises, considering the CBL’s role as Lender-of-Last Resort.
Governor Jones declared the CBL will exercise dispensation on specific regulations in order to reduce the provisioning burden on non-performing loans (NPLs) associated with the Ebola crisis to help the commercial banks in restructuring and refinancing the private sector, which he said, is necessary for the rapid recovery of the economy.
The CBL boss also declared that the commercial banks have agreed with the CBL to be flexible in the restructuring of delinquent facilities associated with the Ebola Crisis.
“Also, all default charges will be waived, and some, if not all accrued interest, will be waived on a case-by-case basis,” said Governor Jones.
The CBL Executive Governor also announced an extension of the repayment period for banks participating in its stimulus package by two years.
“The repayment period to the CBL for all participating banks that received funds associated with the various stimulus initiatives of the CBL will be extended by 2 years, and the interest rate reduced from 3 to 2 percent, as a means of reducing the financial burden of the crisis on the banks and helping to improve their balance sheets,” he said.
As an additional support to the banks, he said, the CBL has also waived interest on the CBL’s initiative for the period of the Ebola crisis requiring commercial banks involved in implementing the stimulus initiatives of the Bank to restructure delinquent facilities under those initiatives with a 6-month grace period for resumption of payment.
“Interest will also be waived for the period of the Ebola crisis. This is intended to provide time for Liberian small medium size enterprises (SMEs) to restart their activities,” said the CBL boss.
Reacting to CBL’s pronouncement, Liberia Bankers’ Association (LBA) president John B. S. Davies, III applauded the government of Liberia’s Economic Management Team (EMT) that he believes agreed with the CBL.
Mr. Davies noted that the measures by the CBL including tax holidays for banks and intervention on the foreign exchange market that led to 10.8 percent appreciation of the Liberian dollar are in the right direction.
“What pleases me most is the intervention on behalf of private schools because it has a trigger down effect on the general public. The LBA president, who is also CEO of the Liberian Bank for Development and Investment (LBDI), noted that this intervention by the CBL is one of a kind in the history of the banking industry in Liberia.