MONROVIA — The Central Bank of Liberia (CBL) has announced its decision to retain the Monetary Policy Rate (MPR) at 17.0%, citing both domestic and global economic factors. The decision, taken by the Monetary Policy Committee (MPC) on January 17, 2025, comes amid rising inflation and a slowing domestic economy.
The MPC also maintained the Liberian dollar and US dollar reserve requirement ratios at 25.0% and 10.0%, respectively. Additionally, the committee reintroduced the monetary corridor system, offering a standing credit facility at MPR plus 2.5 percentage points and a standing deposit facility at MPR minus 7.5 percentage points.
Domestic Economic Developments
Liberia’s economic growth has shown signs of deceleration, with the Quarterly Real Gross Domestic Product (QRGDP) moderating to 1.7% in the fourth quarter of 2024, compared to 5.3% in the first quarter of the same year. The MPC attributed this slowdown to post-holiday inventory replenishment by businesses.
Inflation, a key concern for the committee, rose sharply to 8.7% from 5.9% in the previous quarter and is projected to climb further to 10.3% in early 2025. This increase is primarily driven by rising domestic food prices.
The banking sector saw mixed outcomes, with total assets, deposits, and loans declining by 3.4%, 3.3%, and 5.5%, respectively, reflecting the impact of exchange rate appreciation. Non-performing loans, however, fell to 19.2%, a 2.1 percentage-point improvement, though still exceeding the acceptable limit of 10.0%.
Credit distribution showed concentration in key sectors, including trade (26.0%), personal loans (14.9%), and services (14.2%). However, significant growth was noted in manufacturing and agriculture credits, which surged by 57.3% and 40.4%, respectively, during the third quarter of 2024.
The Liberian dollar gained strength against the US dollar, appreciating by 4.46% on an end-period basis, largely due to increased remittances and tight monetary policy measures.
Global Economic Impact
Globally, economic growth slowed to 3.2% in 2024, down from 3.3% in 2023, as countries adopted tighter monetary policies to combat inflation. Sub-Saharan Africa, however, faced rising inflation, reaching 18.1%, due to structural weaknesses in agriculture and food price hikes.
Commodity price trends proved favorable for Liberia, with export prices for gold, iron ore, rubber, and palm oil increasing, even as global rice and fuel prices declined.
The MPC highlighted ongoing risks, including the potential escalation of the Russia-Ukraine and Israel-Hamas conflicts, which could reignite global inflationary pressures.
Despite challenges, the CBL expressed optimism that government policies in the coming quarter could stimulate economic activity and reduce uncertainties surrounding inflation and exchange rates. The MPC reaffirmed its commitment to monitoring economic developments and implementing measures to ensure financial stability and foster growth.
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