Liberia: CBL to Prioritize Policy Support for Agriculture Development

The Board of Governors of the Central Bank of Liberia (CBL), during its 25 February 2021 sitting, unanimously agreed to support policies toward the development of the agricultural subsector with a goal of stabilizing food prices in the medium term, and consequently build the country’s foreign reserves.

Despite the downward inflation trend, the CBL Monetary Policy Committee (MPC) decided to maintain the monetary policy rate at 25.0% for the fourth time with the aim of managing Liberian dollar banknotes outside banks, counteracting inflation expectations and stimulating interest rate transmission in the financial sector.

Other decisions of the MPC included implementation of strategies to increase public sensitization for the greater use of digital/electronic payments, enhance loan recovery to address the structural liquidity problem, and promote the take-up of investment in CBL’s financial instruments from the diaspora.

It should be noted that these decisions of the MPC were informed by developments in the global and domestic economies.

Global Developments

The MPC noted the projected contraction of 3.5% in the global economy, which represents a negative 1.4 percentage point improvement more than the previous contraction of 4.9% projected in the October 2020 World Economic Outlook. Accordingly, global economic growth for 2021 is projected at 5.5%, on account of anticipated containment of COVID-19 and other policy measures.

In addition, the MPC observed that global commodity prices improved in the last quarter of 2020. Inflation remained subdued in most advanced economies but rose in emerging markets and developing countries, including sub-Saharan Africa, and expected to decline in emerging and developing economies in 2021.

Monetary policy rates in advanced economies were relatively stable and remained broadly unchanged within most of the countries in the West African Monetary Zone (WAMZ) in the fourth quarter of 2020.

Domestic Macroeconomic Developments

Liberia’s real gross domestic product contracted by 3.0 percent, while contraction in the manufacturing sub-sector improved, in contrast to growth in the agriculture & fisheries, forestry, as well as the mining & panning sub-sectors, howbeit not strong enough to offset the negative 12.7 percent decline in the services sub-sector. Non-performance loans (NPL), as a percentage of total loans, was put at 21.2 percent,