Liberia's banks expanded their lending to the government far faster than to businesses over the past year, according to monetary data published by the Central Bank of Liberia (CBL) — a pattern economists associate with the crowding out of private credit.
Claims on the private sector stood at L$159.2 billion in March 2026, barely changed from L$158.2 billion a year earlier — a rise of just 0.7 percent. With inflation running at about 4.5 percent, that amounts to a decline in real, inflation-adjusted terms: measured in purchasing power, banks lent less to the private economy than they did a year before.
Lending to the state moved the other way. Banks' claims on the central government rose to L$63.0 billion from L$45.1 billion a year earlier, an increase of about 40 percent, as the banking system absorbed more government debt through securities and direct lending.
The contrast matters in an economy where access to credit is already a binding constraint on businesses. When banks can earn steady, low-risk returns lending to the government, they have less incentive to take on the cost and risk of lending to private firms — particularly the small and medium enterprises that drive job creation but often lack collateral, audited accounts and credit histories. Government paper is, from a bank's perspective, the safer and simpler asset.
High borrowing costs compound the problem from the other side. The average Liberian-dollar lending rate stood at 13.1 percent in February 2026, and personal-loan rates remain above 16 percent — levels that keep formal credit out of reach for many businesses and households even when banks are willing to lend. Demand for credit at those rates is itself suppressed.
The aggregate picture shifted too. Total domestic claims by the banking system fell about 7 percent over the year, to L$303.1 billion, reflecting movements across government, private and other sectors. But the composition tells the clearer story: a system tilting toward financing the state rather than the private economy.
This connects to a wider feature of Liberian finance. A large share of money sits as cash outside the banking system, limiting the deposits available to lend in the first place, and the CBL's policy rate transmits weakly to commercial rates. The result is a financial sector that is shallow relative to the size of the economy and skewed toward the safest borrowers.
The pattern has real consequences for growth. Private investment depends on credit, and an economy where banks prefer to finance the government is one where firms struggle to expand, hire and raise productivity. That, in turn, limits how widely the gains from commodity-led growth can spread beyond the mines — reinforcing the concentration visible across the rest of the 2025 data.
There is a policy dimension too. Heavy government borrowing from domestic banks reflects the state's own financing needs, set against public debt near 54.6 percent of GDP; easing the crowding-out of private credit ultimately depends as much on the fiscal position as on the banks themselves.
What to watch is whether private-sector credit picks up as inflation eases and the policy rate holds, whether deposit growth deepens the pool of lendable funds, and whether banks continue to favor lending to the government over the private economy.
