Liberia’s monetary authorities have taken steps to stimulate the domestic economy and maintain financial stability following a three month period of declined growth.
The Central Bank of Liberia (CBL) late Monday announced a reduction in its Monetary Policy Rate (MPR) from 20% to 17.5%. This decision was taken by the Monetary Policy Committee (MPC) during its recent meeting, considering the domestic and global macroeconomic developments, it said in a statement
The MPC’s decision was influenced by several key factors. Firstly, the global economy has been grappling with the lingering effects of the COVID-19 pandemic and the ongoing Russia-Ukraine conflict, leading to inflationary pressures and tight monetary policies worldwide.
However, the committee noted that global inflation is expected to moderate from 8.7% in 2022 to 5.9% in 2024, although it remains high in low-income countries like Liberia.
Domestically, the MPC observed a decline in headline inflation from 10.2% in the first quarter of 2024 to 7.4%, reflecting moderating prices in food, non-alcoholic beverages, and recreation and culture.
The committee expects this downward trend to continue, projecting inflation to reach 6.5% by the third quarter of 2024, largely due to the bank’s tight monetary policy stance.
“The Monetary Policy Committee’s decision to lower the interest rate is a strategic move to support the Liberian economy amidst the challenging global environment,” said the CBL’s Governor. “By reducing the MPR, we aim to stimulate private sector credit growth and investment, ultimately contributing to economic growth and stability.”
The MPC also noted that the banking sector in Liberia remained well-capitalized and liquid, with a marginal decline in non-performing loans (NPLs).
However, the committee expressed concern over the persistent dollarization of the Liberian economy, with the US dollar component of credits to the private sector accounting for 94% of the total.
To address this issue, the CBL will continue to monitor developments in both the domestic and global economies, implementing policies that ensure the stability of the Liberian economy, the Bank said.
