By Bill W. Cooper
The Central Bank of Liberia (CBL) has announced a reduction in its Monetary Policy Rate (MPR) to 17.0 percent, citing positive macroeconomic indicators and the anticipation of stable exchange rates and moderate inflation.
The decision aims to stimulate borrowing and investment, fostering a more robust economic environment, and noted that inflation has stabilized, allowing for a more accommodative monetary policy.
The decision also follows the Monetary Policy Committee’s (MPC) final meeting for the year, held on October 16, 2024, where global and domestic economic conditions were assessed.
Delivering the communiqué at a press conference over the weekend, Acting CBL Deputy Governor for Operations, James Wilfred, outlined the key factors that influenced the Committee’s decision.
“The global economy, despite numerous challenges, has shown remarkable resilience, achieving a growth rate of 3.3 percent in 2023. We are optimistic about achieving the projected growth of 3.2 percent for 2024”, he said.
The MPC noted that while advanced economies are expected to see a modest growth of 1.7 percent, Sub-Saharan Africa’s outlook is more promising, with growth expected to accelerate to 3.7 percent in 2024.
This improvement, according to Wilfred on behalf of Acting CBL Governor and MPC Chairman, Henry Samoa is driven by easing inflation and stabilizing commodity prices in the region.
He said Global inflation has decreased to 5.9 percent from 6.7 percent in 2023, but challenges remain for low-income countries, particularly in Sub-Saharan Africa, where inflation is projected to moderate to 15.3 percent.
According to him, the committee observed fluctuations in commodity prices, particularly in agriculture, with the prices of cocoa, palm oil, and round logs rising, while rice and coffee saw declines.
“On the metal and energy front, only gold recorded a price increase, with iron ore and petroleum prices seeing reductions while on the domestic front, Liberia’s economy saw a modest recovery in the third quarter of 2024, with a real GDP growth of 1.3 percent.
This growth was attributed to stabilization in consumer prices and improved consumption. We are encouraged by the progress made in moderating inflation, which fell to 6.8 percent from 7.4 percent in the previous quarter, thanks to improved food prices and the CBL’s policy stance,” he explained.
The Acting CBL Boss also narrated, “Inflation is expected to further decrease to 6.4 percent by the year’s end and despite these positive developments, the banking sector faced challenges.”
He explained further, “While loans and advances grew by 1.2 percent, total assets, deposits, and capital all declined. There was also an increase in non-performing loans (NPLs), particularly in sectors like trade, personal services, and construction.”
The committee has at the same time expressed concerns over low intermediation in agriculture and manufacturing, sectors critical for Liberia’s economic diversification, noting, “Monetary aggregates, such as broad money (M2) and currency in circulation, showed slight declines in the third quarter.”
However, the Committee anticipates growth in the last quarter, particularly in currency outside banks, which could lead to inflationary pressures, and said, “Activity in the financial markets was described as positive, with increased subscriptions to CBL bills, while interbank market transactions, including USD SWAPs, were also favorable.”
Meanwhile, on the exchange rate front, Deputy Governor Wilfred mentioned that the Liberian dollar remained relatively stable, appreciating marginally by 0.59 percent to L$193.26 per US dollar at the end of September.
He intoned, “We are confident that the stability of the Liberian dollar will continue, anchored by effective liquidity management because the government’s fiscal operations recorded a deficit in the third quarter, mainly due to reduced revenue and expenditure.”
“The primary balance posted a surplus of US$4.8 million. The trade deficit improved significantly to US$48.9 million, from US$168.3 million in the previous quarter, driven by reduced import payments and increased export receipts.
Gross international reserves also rose by 6.5 percent. In its final deliberations, the MPC decided to lower the MPR to 17.0 percent to support moderate inflation and maintain a stable exchange rate,” he asserted.
Wilfred concluded, “The reserve requirement ratios for Liberian and US dollars will remain unchanged at 25 percent and 10 percent, respectively, until further review.”
The Bank’s Deputy Boss then reassured the public of its commitment to monitoring both domestic and global economic developments, adding, “We will continue to implement policies that enhance the macroeconomic stability of the Liberian economy.”
