Over L$18bn Out Of Banking Sector –As CBL Introduces New Policy To Ease Situation

The Central Bank of Liberia (CBL) has admitted for the first time that over eighteen billion (18bn) Liberian dollars is outside the banking sector in the country. The bank’s statement came as a confirmation to Finance, Development and Planning Minister, Samuel Tweah’s assertion that over 99 percent of the local currency in the economy was out of the banking system- in which he said, is one of the contributing factors leading to the inflow in the economy. Minister Tweah, appearing on a local radio talk show disclosed that the government is instituting new policy to ensure the guarantee and the safety of monies kept in the commercial banks.
The CBL’s latest revelation is also a sharp response of mounting reactions and counter claims over the disappearance of 16bn new banknotes that was printed by the Ellen Johnson-Sirleaf led administration to presumably replace mutilated banknotes on the Liberian market.
Addressing a major press briefing on the introduction of a new monetary policy, Central Bank Deputy Governor for Economic Policy, Dr. Musa Dukuly, told journalists on Monday, November 18 that the bank’s newest move is aimed at helping to contain inflation, control the level of Liberian dollars and promote the confidence of the Liberian dollars amongst other things.
Dr. Dukuly emphasized that the decisions that influenced the latest policy is aimed at executing the CBL’s core mandate of achieving and maintaining price stability and were based on global, regional and domestic economic developments and financial market conditions.
The CBL’s Officer-in-Charge iterated further that the bank’s new policy is also meant to stabilize prices and revive the national economy owing to the downward trend and the current economic constraints the country is now engulfed with.
Weeks ago, Finance Minister Tweah disclosed that the Government of Liberia was working on new monetary policy aimed at resuscitating the country’s struggling economy. This newest consolidated monetary policy came as a rallying effort from the country’s fiscal managing experts with the hope of reviving and moderating the current inflationary pressure to support stable macroeconomic environment in Liberia. The bank further disclosed that its action was drawn from several consultative meetings held with key financial, and the banking community, so as to ensure that the new policy resonates and implemented to the fullest.
Deputy Governor Dukuly also announced that CBL decided on four new steps at its first monetary meeting since the adoption and approval of the new monetary Policy Framework. He named increasing the standing deposit facility (SDF) rate to 30% and set the standard credit facility at 500 basis points above the SDF; issuance of shorter tenor instruments (two weeks, one, three, six and twelve months) at 30% per annum and the reduction in the Liberian dollar Reserve Requirement (RR) to 15% from 25%, and at the same time increase the US dollars Reserve Requirement to 15% from 10%.
The CBL also disclosed that that inflationary pressures have heightened as the Liberian dollars weaken. According to the bank, both consumer price inflation and the rate of depreciation of the Liberian dollars are in double digits in the wake of worsening trade balance and growing inflation expectation. “The current gross foreign reserves position is less than three months of import cover,” the bank added.
Commenting on the necessity of the new policy, Dr. Dukuly intoned, “There will be potential growth because there will be potential investment.”
The suspension of the 25% Remittance Split Policy for the month of December, 2019 is also another decision reached by the board of governors of the CBL.
It can be recalled that Finance and Development Planning Minister, Samuel Tweah informed the public that Liberians including foreign entities’ owners have lost confidence in the banking sector, and as a result, they are keeping their money out of the banking system. Minister Tweah noted that the new policy to increase interest rate and guarantee customers savings will restore hope to the banking sector respectively.
He indicated that the new fiscal measures are intended to excuse government from borrowing from the CBL’s reserve, adding “when government borrows or when government spends beyond its bounds it adds to the inflation pressure.”
Meanwhile, the Central Bank of Liberia has announced that they will revert to using MobileMoney transaction for the settlement of salaries for the Christmas. “If we use MobileMoney it will ease the liquidity pressure as well,” CBL intoned. D. Webster Cassell writes