Liberia’s $25m economy lifeline not in bank records
The US$25 million reportedly infused in the economy to curb the rise in the exchange rate of Liberia is not in bank records .
A FrontPage Africa Investigation has
found that commercial banks have no record of receiving or transmitting
portion of the money.
found that commercial banks have no record of receiving or transmitting
portion of the money.
Most banking institutions speaking on
condition fearing reprisals from the Central Bank of Liberia are
expressing disappointment that they were not consulted by the Executive
branch of government regarding disbursement of the
money intended to inject flow of cash in the struggling financial
market.
condition fearing reprisals from the Central Bank of Liberia are
expressing disappointment that they were not consulted by the Executive
branch of government regarding disbursement of the
money intended to inject flow of cash in the struggling financial
market.
While the state of the economy is showing
no impact from a move that was supposed to be a means of salvaging the
situation, some observers say the extra Liberian dollars printed were
switched with the US$25 million.
no impact from a move that was supposed to be a means of salvaging the
situation, some observers say the extra Liberian dollars printed were
switched with the US$25 million.
There are also unconfirmed reports that
the government rationed the US$25 million to selected importers instead
of using the commercial banks.
the government rationed the US$25 million to selected importers instead
of using the commercial banks.
It is more than two months since the
government of President George Weah promised to infused the US$25
million to “mop up excess liquidity” as a means of stabilizing the
uncontrollable hike in the exchange rate.
government of President George Weah promised to infused the US$25
million to “mop up excess liquidity” as a means of stabilizing the
uncontrollable hike in the exchange rate.
President Weah on July 16 addressed the
state of the economy and said: “The government will announce a series of
monetary and fiscal measures that we believe should help reverse the
decline in the value of the Liberian dollar…
state of the economy and said: “The government will announce a series of
monetary and fiscal measures that we believe should help reverse the
decline in the value of the Liberian dollar…
“I am fully aware that we are faced with a very difficult macroeconomic situation in Liberia.
For many decades, we have incurred trade deficits because we import more than we export.”
For many decades, we have incurred trade deficits because we import more than we export.”
Including the infusion of US$25 million,
President Weah also mandated the Central Bank of Liberia to provide more
effective supervision and regulation of money-changers or foreign
exchange bureau, provide more robust oversight
of banks, conduct a comprehensive review of regulations on the hoarding
of both Liberian dollars and U.S. dollars outside the banking system,
and provide incentives and safeguards to encourage the utilization of
the banking system, including financial instruments.
President Weah also mandated the Central Bank of Liberia to provide more
effective supervision and regulation of money-changers or foreign
exchange bureau, provide more robust oversight
of banks, conduct a comprehensive review of regulations on the hoarding
of both Liberian dollars and U.S. dollars outside the banking system,
and provide incentives and safeguards to encourage the utilization of
the banking system, including financial instruments.
The government claims it has since
disbursed the money in the economy although details are elusive; while
the CBL or the Presidency is yet give break down of how the money was
disbursed.
disbursed the money in the economy although details are elusive; while
the CBL or the Presidency is yet give break down of how the money was
disbursed.
Recently, a local research group raised a
red flag over the reported infusion of the US$25 million in the
economy, calling on the Legislature to exercise its oversight
responsibility by recommending an investigation in the situation.
red flag over the reported infusion of the US$25 million in the
economy, calling on the Legislature to exercise its oversight
responsibility by recommending an investigation in the situation.
Center for Policy Action and Policy or
CePAR is arguing that there has been no proper accounting that L$3.7
billion was mopped up over the period covering July 16, 2018 to
September 22, 2018 as claimed by the government.
CePAR is arguing that there has been no proper accounting that L$3.7
billion was mopped up over the period covering July 16, 2018 to
September 22, 2018 as claimed by the government.
CePAR claims that the government did not
use the Commercial Banks when the Liberian Dollars were ‘mopped’,
alleging that the CBL exercised a direct mop up option through the use
of lorries in acquiring the ‘Liberian Dollars’ from
the market.
use the Commercial Banks when the Liberian Dollars were ‘mopped’,
alleging that the CBL exercised a direct mop up option through the use
of lorries in acquiring the ‘Liberian Dollars’ from
the market.
A direct mop up approach as adopted by
the CBL in the use of the 25m United States Dollars, is susceptible to
misuse and fraud, CePAR said.
the CBL in the use of the 25m United States Dollars, is susceptible to
misuse and fraud, CePAR said.
The group is calling on the CBL to
provide to the Legislature the “underlying analysis that found the use
of foreign exchange outlets as an attractive outlet as opposed to
commercial banks when it was financially prudent to do
so through the commercial banks”.
provide to the Legislature the “underlying analysis that found the use
of foreign exchange outlets as an attractive outlet as opposed to
commercial banks when it was financially prudent to do
so through the commercial banks”.
Meanwhile, an experienced Liberian
economist weighing-in on the situation says there are several risks when
importers are directly used to mop up excess liquidity.
economist weighing-in on the situation says there are several risks when
importers are directly used to mop up excess liquidity.
“When you talk about mop up, it means
buying the Liberian dollars from the market. But I don’t know whether
they used it to buy the Liberian dollar or they used it to help
importers to lower the exchange rate,” says Prof David
Farhat, Director of the University of Liberia’s Graduate School of
Business Administration.
buying the Liberian dollars from the market. But I don’t know whether
they used it to buy the Liberian dollar or they used it to help
importers to lower the exchange rate,” says Prof David
Farhat, Director of the University of Liberia’s Graduate School of
Business Administration.
Prof Farhat, a former Finance Minister in
the Samuel K. Doe government, says because the demand for hard currency
often impact the exchange rate, it is advisable to target importers of
certain essential commodities to help ease
the demand for US dollars.
the Samuel K. Doe government, says because the demand for hard currency
often impact the exchange rate, it is advisable to target importers of
certain essential commodities to help ease
the demand for US dollars.
The former Minister of Finance who now
runs an certified public accounting firm in Monrovia, suggests that
there could “some risks” when the government opts to give hard currency
directly to business people.
runs an certified public accounting firm in Monrovia, suggests that
there could “some risks” when the government opts to give hard currency
directly to business people.
“Maybe they [the business
people] have some other plans for money; they could use the US dollars
to remit to their principles – and it might not be used for import
purpose which will leave
no impact on the purpose of the mopping up,” he said, adding that
“moping excess liquidity through the commercial banks will ensure that
the intervention makes some impact”.
people] have some other plans for money; they could use the US dollars
to remit to their principles – and it might not be used for import
purpose which will leave
no impact on the purpose of the mopping up,” he said, adding that
“moping excess liquidity through the commercial banks will ensure that
the intervention makes some impact”.
With little impact from the US$25 million
on the economy and a laissez-faire oversight approach by the CBL; local
forex bureaus are applying several unscrupulous methods to elude the
CBL official rate, which is now at LD$155 to
US$1.
on the economy and a laissez-faire oversight approach by the CBL; local
forex bureaus are applying several unscrupulous methods to elude the
CBL official rate, which is now at LD$155 to
US$1.
When a FrontPage Africa reporter opted to
exchange US dollars for LD at a bureau down town Monrovia as a means of
determining the actual street rate, a vendor cunningly used the
calculator to display the rate.
exchange US dollars for LD at a bureau down town Monrovia as a means of
determining the actual street rate, a vendor cunningly used the
calculator to display the rate.
It is a sneaky means of showing the
exchange rate to customers without falling in trouble – it’s a tactic
many forex bureaus employ to dodge the CBL rate, FPA can confirm.
exchange rate to customers without falling in trouble – it’s a tactic
many forex bureaus employ to dodge the CBL rate, FPA can confirm.
