CBL Acts to Stabilize Prices and Revive National Economy
At its first monetary policy meeting since the adoption and approval of the new Monetary Policy Framework, the Board of Governors of the Central Bank of Liberia took the following decisions:1. Increase the Standing Deposit Facility (SDF) rate to 30% and set the Standing Credit Facility at 500 basis points above the SDF
2. Issue shorter tenor instruments (two weeks, one, three, six and twelve months) at 30% per annum
3. Reduce the Liberian Dollar Reserve Requirement (RR) to 15% from 25%, and increase the US Dollar RR to 15%, from 10%
4. Suspend the 25% Remittance Split Policy for the month of December, 2019
The above decisions are aimed at executing the Central Bank’s core mandate of achieving and maintaining price stability and were based on global, regional and domestic economic developments and financial market conditions.
Growth in the global economy is projected to weaken in 2019 in view of the ongoing trade tension between the United States and China, heightened downside risks, and weakening global trade. However, developments in Sub-Saharan Africa remained mixed across countries.
The CBL’s measure of economic activity indicated that output declined at a rate of 0.1 percent at the end of September 2019, compared with a decline of 0.8 percent at the end of June 2019, on the back of weak production and consumption activities. Growth for the year is projected to be 0.4 percent, from 1.2 percent in 2018.
Inflationary pressures have heightened as the Liberian dollar weakened. Both consumer price inflation and the rate of depreciation of the Liberian Dollar 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 measures taken are expected to help contain inflation, control the level of the Liberian dollar in circulation and ease the pressure on the Liberian dollar exchange rate vis-à-vis the United States dollar; promote confidence in the Liberian dollar; provide investment opportunity for Liberian dollar with a higher rate of return; and, in the medium-term, impact the savings rate and boost domestic capital mobilization for long-term investment.
The CBL wishes to assure the public of its full commitment to moderating the current inflationary pressure to support stable macroeconomic environment in Liberia. These policy measures will be reviewed every three months as the Board meets to assess their effectiveness.