When President George Weah appointed Mr. J. Aloysius Tarlue Jr., as Executive Governor of the Central Bank of Liberia (CBL) on November 8, 2019, critics claimed that he was unfit for the job. Among other things, critics claimed Mr. Tarlue did not have the requisite credentials and practical experience in banking and therefore, they believed, he did not deserve this prestigious post of the country.
However, after two years of service in the post, Governor Tarlue seems to have proven his critics wrong by instituting several monetary policies including the response to persistent liquidity challenges in the banking system and contribution to macroeconomic stability that has restored some level of public confidence in the banking sector, which some financial experts say were rarely seen in the immediate past administration of the CBL.
While undergoing confirmation two years back, Tarlue almost got disqualified due to lack of qualification and experience at the time as several Senators expressed concern over his shortcomings in terms of required credentials and practical experience despite Tarlue’s proclamation that he worked at a bank in the United States where he had lived for some years.
Senators, who spoke anonymously to the Daily Observer, said Governor Tarlue did not have the requisite experience and qualification to lead the government’s reserve into resuscitating the country's drowning economy.
The Committee on Banking and Currency chaired by Senator Marshall Dennis, rejected the nomination of Governor Tarlue and some current governors of the CBL, but that decision was overturned by the same Senators after a reported intervention from President George Manneh Weah.
“Yes many of our colleagues have issues with his experience and qualification, but whether they will maintain that stand is what we need to see tomorrow,” one of our Senator sources said at that time.
Now, two years later, having completed the tenure of former Governor Nathaniel R. Portray, Gov. Tarlue is again before the Senate Committee on Banking and Finance for confirmation. This time he is seeking confirmation to be Governor in his own right for the next five years. And he appears to have a list of achievements to show.
Upon assuming the leadership of the CBL in January 2020, the new Management under Tarlue embarked on strategic partnerships with some sister central banks in Africa, namely Bank of Ghana, Central Bank of Nigeria and National Bank of Rwanda.
With a limited mandate to print banknotes, the Bank has been able to strategically respond to the demands of commercial banks, thus mitigating the pressures during the festive seasons in July and December 2020.
These strategic partnerships were aimed at promoting knowledge sharing, capacity building and technical assistance between the CBL and the respective central banks. While significant progress has been made in finalizing the formalities of these partnerships with the Bank of Ghana and Central Bank of Nigeria, the process has been delayed due to COVID-19.
The CBL has been able to contribute to macroeconomic stability through achieving low inflation, maintaining broad exchange rate stability and promoting financial stability. Since 2020, the Bank has maintained a tight monetary policy stance, which has significantly contributed to the declining inflation trend.
As part of a Comprehensive Economic Assistance Package (CEA) from the Federal Government of Nigeria at the request of President, Dr. George Manneh Weah, Sr., the Central Bank of Nigeria (CBN) has provided a 10.0 billion Naira Revolving Trade Facility to the Central Bank of Liberia for Liberian businesses.
The facility is intended to promote trade between the Federal Republic of Nigeria and Republic of Liberia under the West African Monetary Zone (WAMZ) framework. The CBL, under his leadership, is currently working with the relevant government agencies to conclude the necessary framework to launch the facility.
In addition to the above, the Bank has also benefited from several specialized training programs from USAID through Nathan and Associates in the areas of file management for staff of the CBL and inflation forecasting and modeling for staff of Research, Policy and Planning.
There are ongoing efforts for the hiring of a Long-term Resident Advisor for the Bank and further technical assistance from USAID in establishing a Policy Unit Team (PUT) for strengthening the research capacity of the Bank. USAID’s technical assistance also included developing and implementing an effective communication strategy for the procurement of the L$4.0 billion, a process that is expected to be extended to the ongoing currency reform program.
These new technical assistance programs are in addition to the ongoing technical assistance programs provided by the IMF in several critical areas of the Bank through efforts of the new Management, including monetary policy and operations, banking supervision, currency management, anti-money laundering and terrorist financing, etc.
The Bank is also presently benefitting from a long-term resident advisor technical assistance for the Regulation and Supervision Department.
As a result of the policy stance of the CBL, broad stability in the exchange rate and low international oil prices, average inflation has declined from about 20.3 percent at end-December 2019 down to 13 percent by end-December 2020.
The policy thrust of the Central Bank in the medium-term will remain focused on achieving single digit inflation, building a strong reserves buffer, maintaining a stable exchange environment and promoting digitization of the Liberian economy.
His major achievements as Executive Governor of the CBL includes amendment of CBL Act, completion of three (3) year strategic plan, development of procurement policy, development financial implementation manual, effective documentation of all banknote series, transparent procurement of L$4 billion and strengthening compliance function.
Others are approval for currency changeover, alignment of budget to activity, development of secondment policy, undertaking the construction of regional cash hubs to facilitate liquidity in country, ensure awareness for the use of digital platform to enhance financial inclusion, encourage MNOs to reduce tariffs on digital transaction, organized talk shows for public awareness on key monetary and economic developments as well as acquired technical supports from USAID on currency procurement, AfDB on resident advisor, IMF on supervisor and liquidity forecast, respectively.
The new Management took over the Bank amidst several internal controls and governance challenges. We have made significant progress in addressing most of these challenges.
As part of efforts to strengthen the internal operations of the bank, appointments of new directors for internal audit, banking and human resource management departments; beefing up the capacity of internal department, finance department, banking department, management & information technology department and Communication Unit with additional staff, establishment of currency management unit in banking department responsible for managing the movement of cash in and out of the reserve and operational vaults; revision and amendment of key policies as well as drafting new policies to enhance internal controls in critical operation functions of the bank, including Finance Department and banking department, among others.
In this regard, the Bank has been able to significantly reduce its budget deficit. The Bank is now living within its means, which has significantly contributed to the effective functioning of the Bank.
Governor Tarlue, who was reappointed by President Weah in the middle of June, 2021, due to his performance, undertook a comprehensive review of several existing contracts with regard to the Information Technology and Payments System Infrastructure which have the major source of huge recurrent financial burdens for the Bank and renegotiate the terms of those contracts to ensure value for money and alignment with the medium to long-term strategic plan of the CBL.
These re-negotiations are expected to save the Bank several thousand United States Dollars; adopted a biometric system to track staff attendance at work and enhance the performance management framework to ensure a transparent staff evaluation and appraisal system and as well as adopted a new strategic plan (2021-2023) aimed at transforming the Bank to be responsive to both current and future realities.
In this regard, the Bank has revised its organogram to reflect new critical functions at the Bank, including a dedicated compliance function as recommended by IMF Safeguard Assessment Report; for visibility and in keeping with the Amended and Restated CBL Act, the Insurance Section has been elevated to a departmental level; and the Bank has also adopted a Secondment Policy aimed at ensuring transparency in the selection and Secondment of CBL staff to regional and international institutions.
Amendment of Central Bank of Liberia Act of 1999
One of the most important achievements of the Bank is the passage of the amendment and restatement of the Central Bank Liberia Act of 1999 in October 2020.
The amended Act has strengthened the Bank’s operational independence while ensuring a high degree of transparency and accountability to the National Legislature. It has also expanded the mandate of the Bank. In addition to price stability, the Bank’s mandate now includes financial stability and support for the government’s economic policy consistent with the price stability mandate of the Bank.
The amended Act also requires the establishment of the Monetary Policy Committee (MPC) at the CBL for the first time since the Bank was established in 1999. The MPC will include independent external members who will bring independent perspectives to the monetary policy decision-making of the CBL, thus enhancing the credibility of the decisions of the Committee.
The amended Act further grants limited autonomy with regard to printing of banknotes for a period of three years subject to Legislative approval, and at the same limits CBL’s lending to the Government to prevent monetary financing by the CBL as mentioned earlier.
Review of the new Financial Institutions of 1999
As part of its reform of the financial system, the CBL with technical assistance from the International Monetary Fund (IMF) is working on the amendment of the new Financial Institutions of 1999 which is more than 20 years old. The revision is intended to enhance the regulatory, supervisory and resolution authority of the CBL consistent with current international practices.
Adoption of Comprehensive Banknote Procurement
Another important milestone achieved by the Bank is significant improvement in the currency procurement procedures and processes at the Bank. With technical assistance from the United States Government, the Bank, for the first time, implemented a thorough and transparent process for the procurement of L$4.0 billion under the close supervision and guidance of Kroll & Associates, which was delivered in the country in July 2020.
The US technical assistance helped with ensuring a seamless and transparent procurement, delivery, storage and infusion of LD$4B, and end-to-end documentation of the process.
The operating framework for the L$4.0 billion procurement is being used to guide the ongoing currency reform program. The procurement of the L$4.0 billion significantly helped in mitigating the Liberian dollar liquidity pressure during July and December 2020, and update, we have not seen or experienced any pressure on the banking system.
Review of the Payments System Act
With technical assistance from the World Bank, the Management of the CBL approved the revision of the Payments System Act, to address gaps in the face of increasing innovations in the payments system ecosystem.
The revised Act has been submitted to the Legislature for review and passage. When passed into law, the Act will fast track the digitization of the Liberian economy, leading to a shift from the currency cash-based economy to a more cash lite economy, thereby building an inclusive financial system.
CBL’s Response to COVID-19
Like many other developing countries, the containment measures at home and abroad to mitigate the COVID-19 pandemic also had a toll on the Liberian economy. The economy contracted by an estimated 3.0 percent, from a contraction initially projected at 2.5 percent in the first half of 2020, thereby resulting in a nominal GDP loss estimated at US$109.3 million.
This deteriorated the economic activity gap as consumption and production were subdued. The suspension of businesses, imposition of travel restrictions and social distancing translated into adversity on the services subsector that further contracted by 12.7 percent, from negative 7.5 percent recorded in 2019.
Despite the relatively favorable international prices of Liberia’s primary exports (gold, iron ore and rubber) in 2020, domestic production generally slowed down. However, the impact of the pandemic was moderate on inflation and the exchange rate.
As part of the general government’s response to mitigate the impact of CIVIC-19 on the population, the CBL in collaboration with the commercial banks and mobile money operators, waived all fees and charges for mobile money transactions for a period of three months; and increased the limits on mobile money transactions to respond to the increased demand from the public for payments.
The Bank also granted regulatory forbearance on provisioning rules on non-performing facilities to borrowers in the aviation, hospitality, trade, small and medium enterprises that were hard-hit by COVID-19 as a means of reducing the financial pressure on the private sector and to facilitate restructuring of such facilities.
From a financial stability perspective, the CBL continues to maintain robust regulatory and supervisory systems to promote a safe and sound financial system. The financial system remained resilient during the period under review, but has been negatively impacted by COVID-19, leading to rising of non-performing loans (NPLs).
The CBL is taking steps to address this situation and ensure that the financial system continues to support the private sector to create jobs and income.
With the approval of the National Legislature, the Bank under our leadership is currently implementing a comprehensive currency reform in 20 years and on a massive scale ever before. This process is being meticulously guided to ensure its credibility, with the primary objectives of restoring public confidence in the financial system and promoting macroeconomic stability and economic growth.
Based on its contributions toward macroeconomic stability, Liberia was able to receive two disbursements under the Extended Credit Facility (ECF) programs in December 2019 and January 2021, thus projecting the positive image of the Country internationally. We are currently working with the IMF to conclude the 3rd Review of the ECF which will lead to another disbursement to the Government soon.
The broad commitment of the CBL under the ECF program is to promote price stability of low and stable inflation, promote stable exchange rate environment by building up the international foreign exchange reserves of the country, maintain stable financial system and promote de-dollarization and public confidence in the Liberian dollar as the currency of preference and choice for economic transactions.
Construction of Regional Cash hubs and its associated benefits
In order to respond to the needs of the population, the government and the commercial banks in the rural areas, the Board of Governors approved the establishment of 4 regional cash hubs across the country beginning 2021. The first hub is expected to be completed during the third quarter of this year.
The benefits of the cash hubs include but are not limited to reducing the cost of cash shipment by commercial banks to various parts of the country; enhancing the cash management and operations of the CBL, including replacement of mutilated banknotes from circulation; encouraging the expansion of financial services across the country; etc.
Support to the National Payments System
The National Payments System remains a strategic goal of the Central Bank and an important catalyst for the digitization of the Liberian economy. The year 2020 reflected continuous growth and expansion in the digital financial services ecosystem with Mobile Money activities and other electronic products and services of banks.
The total Mobile Money Agents recorded for 2020 increased by 22 percent to 18,039 compared to 14,793 reported for 2019. Also, in 2020, the number of subscriptions rose cumulatively by 8 percent to 4,442,021, from 4,114,914 reported in 2019.
CBL in 2020 issued the first licensed Payment Service Provider, TIPME Liberia LLC to provide Mobile Money and eCommerce services, in addition to Lonestar Mobile Money and Cellcom Mobile Money companies. This development coupled with increasing electronic and digital products introduced by commercial banks has led to significant expansions in the payments system ecosystem.