Liberia: CBL Retain Monetary Policy Rate of 20 Percent

The Board of Governors of the Central Bank of Liberia (CBL), agreed at its quarterly Monetary Policy Committee (MPC) meeting to retain the Monetary Policy Rate at 20% with an upper band of 500 basis points for standing credit facility.

The MPC, according to a CBL release also maintains the existing monetary policy measures of reserved requirement at 25% for Liberian dollars and 10% for United States dollars.

"The MPC’s decision was largely influenced by the current inflation rate of single-digit and inflation expectations, and the exchange rate dynamics for post-festive demand of foreign exchange to facilitate imports, as well as the projected 3.6% growth target of the domestic economy for 2021, coupled with global economic developments and outlooks," the CBL said.

The release added that the projections for GDP growth for the year 2021 remain unchanged at 3.6%, largely reflecting positive outlooks in the mining, agriculture, and fisheries, and forestry subsectors.

"Prospects for growth in the manufacturing subsector also appear favorable, on account of increased production of cement and beverages. The service subsector, having been constrained by COVID-19 contraction," CBL added.

However, the release said that the sectors are on course with recovery, as evidenced by the resumption of activities in the hospitality and other sectors.

Meanwhile, the CBL has disclosed that there is an increase in the stock of bank loans in the tone of L$74.6 billion over the quarter ending September 2021, but that the bulk of the loans were concentrated in the trade, services, oil, and gas subsectors.

The CBL noted that the MPC has however shown concerns for the persistently low concentration of loans to the agriculture and manufacturing subsectors and called for policy focus to support the two sectors, which are vital for spurring economic growth. 

On the other hand, non-performing loans (NPLs), as noted by MPC, remained an issue of concern, with a rise by 2.1 percentage points in the third quarter.

The CBL release noted that the favorable implications on the Liberian economy of the rise in the prices of exportable commodities including coffee, palm oil, and cocoa beans as well as the decline in the price of imported rice (fuel their decision).

It added that the decline in the prices of rubber and iron ore has been a constraint on the domestic economy. 

"The rise in global inflation, partly fueled by the rise in the price of crude oil, is expected to affect domestic inflation," CBL said in a release.

As a way of supporting the financial sector, the release notes that CBL is undertaking a nationwide public awareness campaign is now underway to inform the public about the currency reform process as well as engage relevant stakeholders on policies to sustain financial stability.

The Board decided at its fourth-quarter MPC meeting convened at the CBL on November 17.