CBL threatens sanction

By Lewis S. Teh

The Central Bank of Liberia (CBL) has threatened to impose valid and stringent sanctions and restrictions against delinquent borrowers in 2023.

“The CBL has given up to the end of the first quarter of 2023 to all non-compliant delinquent borrowers to improve their [delinquency] or risk several supervisory sanctions,” CBL Executive Governor J. Aloysius Tarlue warned over the weekend.

He said the sanctions will include restrictions to access banking services until they can settle on their obligations.

“You cannot benefit from a system, while at the same time undermining the same system. This is unfair,” Tarlue said when he installed into office elected officials of the Publishers Association of Liberia (PAL).

Governor Tarlue explained that while the CBL is aware of the impact of Ebola and Covid-19 on some businesses, this can not be an all-right excuse for people not to settle their obligations, especially when they have the means to do so. 

Smartly dressed in a sky blue coat suit, Governor Tarlue smiled when he said it is important for people to understand that the monies commercial banks give as loans are other people’s monies (the depositors and other creditors).

“If people can’t pay on their loans, it will affect financial intermediation because banks will be reluctant or selective in granting loans to the private sector, and this is not good for the economy,” he warned.

According to him, the CBL is seriously concerned about delinquent borrowers’ situations.

He noted that recently, the bank issued a press release to this effect urging individuals and businesses once again in this category to engage their commercial banks.

He suggested the need for them to work out modalities to either restructure or commence payment on their outstanding obligations.

Tarlue stated that before taking over the leadership of the CBL, the bank had lost public confidence, and was in the media most of the time for the wrong reasons.

He named issues affecting the image of the bank including the alleged missing 16 billion Liberian Dollars, and the mishandling of US$25 million intended for a mop-up exercise.

He also named the unprecedented level of the inflation rate, and an acute and persistent liquidity issue, which he said undermined public confidence in the banking system.

He explained that these problems caused a virtual cycle of a liquidity crisis.

Moreover, he said the problems included an unsustainable budget because of high employment, and a non-transparent procurement process.

In addition to those unfavorable situations, Tarlue talked about a more general macroeconomic challenge, which according to him necessitated the accession of the country to the International Monetary Fund (IMF) Extended Credit Facility (ECF) program in late 2019.

To put the bank on a positive trajectory, he said President George Manneh Weah appointed a new management team, which he heads. He noted that the president also restructured the Board of Governors.

Following the restructuring of the CBL, he said the bank under the guidance of the Board of Governors, embarked on a concerted reform with a focus on correcting all existing weaknesses at the bank.

He said that included internal controls, procurement, currency management operations, regulatory, and supervisory processes, among others.

He said the CBL has developed a new strategic plan (2021-2023) anchored on rebranding the image of the bank and its mandate as enshrined in Section 5 of the Amended and Restated Act of the CBL (2020).

He termed it as one of the milestone achievements.

” As a result of our reforms, we have made significant progress in turning the situation around and rebuilding public trust in the Bank and the banking system in general, thanks to the ECF program,” said Mr. Tarlue.

Governor Tarlue pointed out that the CBL has reformed its internal control processes and system and adopted a prudent financial management policy.

According to him, the reform has put the bank on a strong financial footing which has enabled it to carry out its monetary policy more effectively than in the past.

“We have made significant improvement in reducing inflation rate from as high [as] 30 percent by end of 2019 to as low as 6.9 percent average inflation rate,” he said.

Tarlue detailed that this represents one of the lowest inflation rates in the West African sub-region, largely on account of Liberia’s effective monetary policy stance, coupled with prudent fiscal management by the government.