Liberia has fallen below the minimum threshold of the West African Monetary Zone (WAMZ), the Central Bank of Liberia (CBL) has declared. According to the Bank, Liberia did not meet the WAMZ’s minimum threshold of 3.0 months of gross foreign reserves in months of import. In its Volume 15 number 2 Financial &Economic Bulletin covering April-June 2014, the CBL also declared a decline in gross foreign reserves.
“At end-June, 2014, gross foreign reserves—excluding SDR-special drawing holdings, fell by 3.6 percent to US$209.4 million,” the CBL said.
In the first quarter, January-March, 2014, gross foreign reserves amounted to about US$217.3 million. When compared with the corresponding quarter in 2013, gross international reserves declined by 9.5 percent at the end of the reporting quarter.
At the end of June, 2014, gross foreign reserves, including SDR holdings of US$274.4 million in months of import cover, stood at 2.8 months, from 2.6 months at the end of the first quarter of 2014.
All WAMZ’s member countries are required to meet the regional body’s 3.0 percent minimum threshold.
The CBL did explain, however, the reason for the decline in international reserves, but analysts have suggested that the decline could be traced to the economic slowdown in the country due to the Ebola crisis and the CBL stimulus programs.
Meanwhile, capital and financial balance also declined 2.2 percent during the quarter. According to the CBL, the decline in capital and financial account balance is largely due to a 13.4 percent fall in the financial account, which the Bank says, outpaced the 12.6 percent rise in capital transfers during the quarter.
The CBL also explained that the decline in the financial account balance in at the end of June, 2014 was mainly on account of the fall in direct investment in the domestic economy, mainly in the form of reduced reinvestment of earnings in the wake of the ongoing Ebola crisis, which has adversely created public health crisis.
Direct investment, meanwhile, fell by 15 percent, while capital transfers rose by 12.6 percent during the quarter. The capital and financial balance rose, however, by 14.1 percent in the reporting quarter, compared with the corresponding quarter in 2013. This was largely driven by the 47.1 percent rise in capital transfers. Current transfers grew by 23.6 percent both public and private, increases the CBL attributes to growing international and personal efforts aimed at combating the deadly Ebola virus in the country.
According to the Bank, net current transfer rose by 28.3 percent on a year-on-year basis and was on account of the 34.1 percent rise in public transfers as private transfers flattened out during the quarter.
Workers’ remittances rose on account of a 33.7 percent fall in outward remittances during the quarter. The decline in outward remittances reflected the decreased presence of resident ad non-resident expatriates in the country during the quarter as a result of the Ebola outbreak.
The CBL has meanwhile projected net inward remittances to surge for the remainder of 2014 on account of increased personal efforts to assist residents by non-residents in the wake of the ongoing Ebola outbreak.