The government’s $12 million financial package for intervention in the private bank’s bailout has generated both support and criticism here.
By Stephen G. Fellajuah
Monrovia, December 9, 2024: Liberia’s Finance Minister Augustine Kpehe Ngafuan has strongly endorsed the idea of a government bailout for struggling commercial banks.
In an appearance on Spoon Talk on December 7, 2024, Minister Ngafuan specifically cited the government’s intervention in the situation of SIB Liberia Limited, calling it a sound economic strategy.
Ngafuan indicated that such a bailout aims to ensure financial stability, prevent broader economic crises, and protect both depositors and the financial system.
A typical bank bailout involves the government stepping in to provide financial assistance, which may include direct funding, loan guarantees, or other support mechanisms.
The goal is to restore confidence in the banking sector and prevent a wider economic collapse.
Recently, the Government of Liberia, through the Central Bank of Liberia (CBL), intervened with a reported $8 million bailout to SIB Liberia Limited, with an additional $4 million in guaranteed default coverage.
This $12 million financial package has generated both support and criticism.
But Minister Ngafuan highlighted the importance of such interventions, stressing that when a bank is in difficulty, it can negatively impact the livelihoods of many people.
In such situations, he believes intervention is necessary to stabilize the financial system.
The Liberian Finance Minister, a former bank official, clarified that the CBL played a key role in the bailout process.
He also noted that discussions were still ongoing about the terms of the financial assistance, particularly whether it would be structured as a loan or a grant.
He emphasized that both the government and the CBL are working to ensure that Liberia’s resources are protected.
“The concept of bailing out a bank is sound, and there are conversations led by the CBL to ensure that the government is not shortchanged,” Ngafuan stated.
Addressing whether President Joseph Nyuma Boakai personally approved the bailout, Ngafuan reiterated that the CBL, as an independent institution, did not require direct presidential approval for such actions.
The bailout followed discussions between SIB executives and the Boakai administration, facilitated by former Finance Minister Boimah Kamara and CBL Governor Aloysius Tarlue.
Despite the government’s efforts, the bailout has been met with criticism.
Liberia’s former Auditor General John Morlu, has raised concerns, calling the $12 million package a “dangerous precedent” for future financial interventions.
Ngafuan, while acknowledging all criticisms, defended the bailout, noting that in such circumstances, avoiding action could have disastrous consequences for the broader economy.
Ngafuan also pointed out that the Liberian government has faced challenges in its dealings with local banks, including allegations of not paying interest on loans taken from them.
He suggested that once the bank recovers and becomes profitable, the resources used in the bailout should be repaid, ensuring that the Liberian people do not bear the long-term cost.
As the situation unfolds, it has become a concerning matter that the government will bail out the bank before commencing discussion on repayment.
