Monetary Policy Rate (MPR) from 18.5% to 17.0%, following the Monetary Policy Committee’s (MPC) final quarterly meeting for 2024 on October 16.
By Jaheim. Tumu- [email protected]
This decision reflects the CBL’s confidence in maintaining a stable exchange rate and managing inflation as Liberia approaches the final quarter of the year, buoyed by positive macroeconomic indicators.
In a statement released on October 18, the MPC reviewed current economic conditions and outlined its monetary policy actions for the upcoming quarter.
Honorable James Wilfred, the CBL’s Acting Deputy Executive Governor for Operations, emphasized that the global economy has demonstrated resilience despite challenges such as supply chain disruptions, pandemic effects, and geopolitical conflicts, notably the ongoing Russia-Ukraine war and the Israel-Hamas crisis.
“Despite these headwinds, the global economy managed to avoid a recession in 2023, achieving a real GDP growth of 3.3%,” Wilfred noted, though he projected a slight decline to 3.2% for 2024. He attributed this stability to tight monetary policies that have moderated global inflation, which is expected to decrease from 6.7% in 2023 to a projected 5.9% in 2024.
Domestically, Liberia’s economy showed signs of improvement in the third quarter of 2024, with the country’s Quarterly Real GDP (QRGDP) growing by 1.3%, reversing a previous quarter’s contraction. The MPC linked this growth to a moderation in consumer prices and increased consumption.
Inflation rates also showed signs of easing, moving from 7.4% in the second quarter to 6.8% in the third quarter, with expectations to further decline to 6.4% by year’s end due to improved food prices and effective monetary policy.
Nevertheless, Wilfred raised concerns about the performance of Liberia’s banking sector, highlighting a 1.2% increase in loans and advances while indicating declines in total assets, deposits, and capital. Non-performing loans (NPLs) also saw a rise by 1.79 percentage points.
The MPC reported a 1.6% contraction in the broad money supply (M2) during the third quarter and a slight decline in currency circulation. However, activity related to CBL bills showed strong growth, with subscriptions increasing by 24.8%.
Liberia’s fiscal operations recorded a deficit in the third quarter, attributed to a 9.7% drop in revenue collection and a 0.5% reduction in expenditures. Nonetheless, the primary balance reflected a surplus of US$4.8 million.
Additionally, Liberia’s trade deficit narrowed significantly to an estimated US$48.9 million from US$168.3 million in the previous quarter, credited to lowered import payments and a rise in export receipts. Gross international reserves increased by approximately 6.5%, enhancing the country’s import cover from 2.2 months to 2.9 months.
The exchange rate of the Liberian dollar showed relative stability, appreciating marginally to L$193.26 per US$1.00 by the end of September 2024, although it experienced an average depreciation of 0.68% during the quarter.
The MPC’s decision to lower the MPR is driven by expectations of moderating inflation and a stable exchange rate in the coming months.