JANUARY 1, 2009 TO DECEMBER 31, 2009 i CENTRAL BANK OF LIBERIA Office of the Executive Governor January 20, 2010 Honorable Members of The Legislature Capitol Building Capitol Hill Monrovia, Liberia Honorable Ladies and Gentlemen: In accordance with part XI Section 49(1) of the Central Bank of Liberia (CBL) Act, 1999, I have the honor on behalf of the Board of Governors and Management of the Bank to submit, herewith, the Annual Report of the Central Bank of Liberia to the Government of Liberia and the Legislature for the period January 1 to December 31, 2009. P.O. BOX 2048, cnr WARREN ‘n CAREY ST’s, MONROVIA, LIBERIA TEL.: (231) 226-991, FAX: (231) 226-144, TELEX: 44215 i MISSION AND OBJECTIVES MISSION STATEMENT The Central Bank of Liberia was creat ed by an Act of the National Legislature in 1999 as a functionally independent institution which seeks to carry out its statutory responsibility in the public interest. It is to contribute to the sound economic and financial well-being of the country. OBJECTIVES The Bank seeks to achieve this mission by devising and pursuing policies designed to: • Promote, achieve and maintain price stability in the Liberian economy; • Maintain constant regulatory surveillan ce and effective prudential controls over the domestic banking sector, whil e encouraging competition, improved financial services and accessibility for the benefit of the public; • Encourage the mobilization of domestic and foreign savings and their efficient allocation for productive ec onomic activities to engender sustained economic growth and development; • Promote macroeconomic stability; intern al and external equilibrium in the national economy; • Facilitate the creation of financial and capital markets that are capable of responding to the needs of the national economy; and • Foster monetary, credit and financia l conditions conducive to orderly, balanced and sustained economic growth and development. • Provide sound economic and financial advice to the Government. ii BOARD OF GOVERNORS Dr. J. Mills Jones Executive Governor and Chairman of the Board John G. Bestman David K. Vinton Board Member Board Member Mildred Reeves Betty J. Saway Board Member Board Member Samuel W. Thompson Deputy Governor iii BOARD OF GOVERNORS INTERNAL AUDIT RESEARCH, POLICY & PLANNING DEPARTMENT LEGAL EXECUTIVE GOVERNOR BANK SUPERVISION HUMAN RESOURCE MANAGEMENT DEPARTMENT DEPUTY GOVERNOR EXTERNAL RELATIONS GENERAL SERVICES MANAGEMENT INFORMATION SYSTEM BANKING DEPARTMENT FINANCE DEPARTMENT Table of Contents - Foreword by the Executive Governor - Board of Governors - Organizational Structure - Highlights Chapter I: Developments in the Global Economy……………..…… 1 – 4 1.1 Global GDP Growth 1.2 Global Inflation 1.3 Commodity Market Chapter II: Governance……………………………………………… 5 – 9 2.1 The Board of Governors 2.2 Committee of the Board 2.3 Major Issues Considered by the Board 2.4 Communication with Stakeholders 2.5 Key Internal Committees Charter III: Operations of the CBL………..……………………….. 10 – 18 3.1 Risk Management and Audit 3.2 Fiscal Agent for the Government 3.3 CBL Accounting and Finances 3.4 Supervisory and Regulatory Activities 3.5 Research and Publications 3.6 Information Technology (IT) 3.7 Human Resource Management 3.8 Relations with International Institutions 3.9 Regional and Sub-Regional Organizations 3.10 Anti-Money Laundering v Chapter IV: Developments in the Liberian Economy………………. 19 – 39 4.1 Price Developments 4.2 Monetary and Exchange Rate Developments 4.3 Exchange Rate Developments 4.4 Remittances 4.5 Real Sector Performance 4.6 External Sector Developments 4.7 National Stock of Debt Chapter V: Banking Sector Developments…………………………… 40 – 44 5.1 Overview of the Banking Sector 5.2 Structure of the Banking Sector 5.3 Financial Performance of the Sector 5.4 Structure of the Balance Sheet 5.5 Outlook for the Banking Sector 5.6 Commercial Bank Credit 5.7 Interest Rates Chapter VI: Microfinance…………………………………………….. 45 – 49 vi List of Tables Table 1: The Global Economy (Percentage change, Year over year) Table 2: Movements of Selected Currencies against the US Dollar (Percent) Table 3: Year-On-Year Rate of Inflation (2007 – 2009) Table 4: Liberia: Harmonized Consumer Price Index (HCPI) 12 Month Percent Changes by Major Group Table 5: HCPI and Core Inflation (In Percent) (January – December, 2009) Table 6: Liberian Currency in Circulation (2007 – November 2009) (In Millions L$) Table 7: Money Supply and its Sources (December 2007 – November 2009) (In Millions L$) Table 8: Broad Money (M2): Share of US and Liberian Dollars (2007 – November, 2009) Table 9: Monthly Averages of Buying and Selling Rates of Liberian Per US Dollar (January 2007 – December 2009) Table 10: Exchange Rates: Liberian Dollars per US Dollar (January 2007 – November, 2009) Table 11: Remittances: Inflows and Outflows (2007 – November, 2009) (In Millions US$) Table 12: Liberia: Sectoral Origin of Gross Domestic Product (GDP) at 1992 Constant Prices (2007 – 2009) (In Millions US$) Table 13: Key Agricultural and Forestry Production (2007 – 2009) Table 14: Key Industrial Output (2007 – 2009) Table 15: Level of Employment Total Number of Employees by Sector (2007 – 2009) Table 16: Employment by Industry (2007 – 2009) Table 17: Exports, Imports and Total Merchandise Trade (2007 – November, 2009) (In Million US$) Table 18: Commodity Composition of Exports (2007 – November, 2009) (In Million US$) Table 19: Commodity Composition of Imports (2007 – November, 2009) (In Millions US$) vii Table 20: Liberia’s External Debt Profile (As at June 30, 2009) (In Millions US$) Table 21: Outcome of Domestic Debt Verification and Discounting (In Millions US$) Table 22: Financial Soundness Indicators (In Percent) (2008 – November, 2009) Table 23: Balance Sheet of the Banking Sector (In Thousands L$) (2008 – November, 2009) Table 24: Commercial Banks’ Loans by Economic Sectors (2007 – November, 2009) (In Millions L$) Table 25: Interest Rates (2007 – November, 2009) Table 26: Leading MFIs Client Based on Gender and Location Table 27: Liberty Finance Clients based on Gender and Location Table 28: LEAP Client Based on Gender Table 29: BRAC Client Based on Gender and Location Table 30: Outstanding Loan Portfolio (In Thousands L$) viii List of Charts Chart 1: Year-on-Year Rate of Inflation (2007 – 2009) (December, 2005 = 100) Chart 2: HCPI and Core Inflation (In Percent) (January – December, 2009) Chart 3: Liberian Currency in Circulation (2007 – November 2009) (In Millions L$) Chart 4: Money Supply (M1) (In Millions L$) 2007 – November 2009 Chart 5: Broad Money (M2) (In Millions L$) 2007 – November 2009 Chart 6: Broad Money (M2): Percentage Share of US and Liberian Dollars (2007 – November, 2009) (In Millions L$) Chart 7: Monthly Averages of Buying and Selling Rates of Liberian Dollar Per US Dollar (January 2007 – November, 2009) Chart 8: Remittances: Inflows and Outflows (2007 – November, 2009) (In Millions US$) Chart 9: Exports, Imports and Total Merchandise Trade (2007 – November, 2009) (In Millions US$) Chart 10: Commodity Composition of Exports (2007 – November, 2009) (In Million US$) Chart 11: Commodity Composition of Imports (2007 – November, 2009) (In Millions US$) Chart 12: Percentage Distribution of Liberia’s External Debt Profile (As at June 30, 2009) Chart 13: Outstanding Loan Portfolio (In Thousand L$) (January – November, 2009) ix Acronyms Used AACB - Association of African Central Banks ABLL - Access Bank Liberia Limited AfDB - African Development Bank AIG - America International Group ARC - American Refugee Committee ATM - Automatic Teller Machine BOP - Balance of Payments BRAC - Building Resources Across Communities CAR - Capital Adequacy Ratio CBL - Central Bank of Liberia CBN - Central Bank of Nigeria CC - Compliance Committee CCNA - Cisco Certified Network Associate CDs - Certificate of Deposits CEBSA - Central Bank of Liberia Staff Association DRF - Debt Relief Facility ECOWAS - Economic Community of West African States FATF - Financial Action Task Force FIs - Financial Institutions FIU - Financial Intelligence Unit GBLL - Global Bank Liberia Limited GDP - Gross Domestic Product GIABA - Inter-Governmental Action Against Money Laundering GoL - Government of Liberia GTBLL - Gauranty Trust Bank Liberia Limited HCPI - Harmonized Consumer Price Index HIPC - Heavily Indebted Poor Countries IC - Investment Committee IDA - International Development Association x IFC - International Finance Corporation IFRS - International Finance Reporting Standards IMF - International Monetary Fund IOU - I Owe You KYC - Know Your Customer LBA - Liberia Bankers’ Association LBDI - Liberia Bank for Development and Investment LEAP - Local Enterprises Assistance Program LEDFC - Liberian Enterprise Development Finance Company LIFS - Launch or an Inclusive Financial Sector LISGIS - Liberia Institute of Statistics and Geo-Information Services MCPI - Monrovia Consumer Price Index MDRP - Monetary Data Reporting Procedure MFIs - Microfinance Institutions MIS - Management Information Services MMPRC - Money Management and Policy Review Committee MoF - Ministry of Finance MOU - Memorandum of Understanding NDA - Net Domestic Assets NFA - Net Foreign Assets NGO - Non-Governmental Organization NPLs - Non-Performing Loans ODA - Overseas Development Assistance OPEC - Organization of Petroleum Exporting Countries PCCF - Post-Conflict Countries Facility PRGF - Poverty Reduction Growth Facility RBS - Risk Based Supervision SAM - School of Applied Microfinance SD - Supervision Department SDR - Special Drawing Rights SMEs