By Festus Poquie
Liberia fiscal authorities’ decision to hold back on spending has led to decline economic activities as growth slows for two consecutive quarters of this year.
Growth contracted for six months end June 30, the Central Bank Said in a September 2 statement following its Monetary Policy Committee Meeting.
Factors that can cause a contraction include reduced consumer demand, falling business investment, high interest rates, and other macroeconomic shocks.
This relative period of slow growth prompted the Central Bank of Liberia to cut interest rate as key policy action to stimulate economy and maintain price stability.
“The Monetary Policy Committee observed a contractionary fiscal policy in quarter two relative to the first quarter of 2024, noting a 1.6% of GDP contraction from a relatively smaller contraction of 0.27% of GDP in quarter one 2024.
“During its deliberation, the MPC was concerned with the worsening trend of the trade deficit to 5.0% of GDP due to an 11.0% estimated growth in import payments despite the 19.4% increase in exports receipts.”
The Bank said gross international reserves declined by 6.4% to US$416.6 million partly on account of a decline in foreign liquid assets, including Special Drawing Right (SDR) holdings, and repayments of the IMF loans from previous disbursements.
In late August, the International Monetary Fund said Liberia was facing “fiscal difficulties’” proposing a $209 million aid package that would be spread over three years to help the West African country deal with prevailing economic challenges.
The arrangement, which will back up the country’s international reserves under the Special Drawing Rights tool, is intended to support the new administration’s reform agenda, the Washington based landed said in a statement.
Still at staff level, the proposed is subject to approval by the IMF’s Executive Board, which is scheduled to meet on September 25.
According to the IMF, the new country program will help Liberia restore fiscal sustainability, rebuild external reserves, ensure financial sector stability, and revitalize a reform agenda to address governance and corruption issues.
