Central Bank of Liberia Under Stress to Meet Demand For Liberian Dollars


Monrovia – Businesses in Liberia are stranded – stranded for their own monies saved with various commercial banks in the country due to the inability of the banks to payout certain amounts in both Liberian and U.S. Dollars.

Report by Lennart Dodoo, [email protected]

“It is true that the commercial banks may not be able to give out huge sums of money because there is pressure on the system. 

Now the Government is paying almost all of its employees in Liberian Dollars, so you can imagine the demand for Liberian dollars. 

Central Bank of Liberia (CBL )has put some money in the system and we hope it would reduce the pressure.” 

Martha Mulbah, head of a susu club, told this paper Tuesday that she had gone to Ecobank to withdraw some amount of money (amount withheld for security reasons) but was told that she should have written the bank placing a request for the amount three days prior to the date expected to receive it. 

According to her, it was the first of its kind for Ecobank, which she has been banking with over the past few years to tell her she had to make a written request for money, other than the usual withdrawal slips she often filled out. 

“I needed to withdraw the people’s susu money but the bank is saying that it can’t give me all that amount today. They told me I should have informed them three days ago; and even if they will give it to me, they won’t give me all in one day,” she said. 

Miss Mulbah is just one of many experiencing similar challenges getting monies out of the banks. Prince Tokpa, a local businessman explained similar ordeal to this paper. For him, he banks with United Bank for Africa (UBA Bank) but said he was turned down when he went to withdraw some amount to purchase goods. 

“I do my business in Gbarnga; I only come to town to buy and then take them to Bong County. I sell used clothes.”

“When I came to the bank to withdraw some money to buy my goods, the teller told me that something was wrong with my account, but later I got to know that there was not sufficient money available at the time. I needed L$100,000; that’s all I wanted,” he lamented. 

A FrontPageAfrica (FPA) observation of various banks showed that many people visiting the banks were rather withdrawing as there were visibly no deposit queues in some banks. 

A teller at Ecobank, who asked anonymity, told this paper, “Whenever government is paying employees, we’ll have this problem.”

“We cannot be paying out huge sums to government employees and other big clients and at the same time pay regular customers.”

“So sometimes, we have to collect from customers to be able to payout to customers,” she said. 

The Problem 

When confronted with the issue by FrontPageAfrica, the Communications Director at the Central Bank of Liberia, acknowledged the situation at various banks, but said it was because there is so much pressure on the CBL for Liberian dollars. 

Mr. Cyrus Badio said, due to the Government of Liberia’s decision to pay almost all employees in Liberian dollars, the CBL has been under immense stress to meet up with the demand. 

“It is true that the commercial banks may not be able to give out huge sums of money because there is pressure on the system.”

“Now the Government is paying almost all of its employees in Liberian Dollars, so you can imagine the demand for Liberian dollars. CBL has put some money in the system and we hope it would reduce the pressure,” Mr. Badio said. 

He, however, could not state how much have been infused into the system to ease the tension on the banks. 

It can be recalled that in May, President Ellen Johnson Sirleaf wrote the National Legislature seeking their indulgence to allow her government pay its employees in Liberian Dollars. 

The President’s letter dated May 13, 2016 reads: “I wish to inform you that commencing with the end of this month, we may be constrained to increase the level of domestic expenditure in Liberian dollars and that this is likely to affect the salary payments for all employees of government.

Currently, the level between the Liberian dollars and United States Dollars is 20 percent to 80 percent respectively for salaried presidential officials and uniform fifty percent for the general civil service.” 

The presidential communication further explained that by this measure, the government would increase the ration for payment made in Liberian Dollars for salaries, goods and services, including payments to contractors and lessors.

President Johnson Sirleaf pointed out that reason for the decision is that as the government approaches end of the fiscal year, the level of intake in Liberian Dollars has increased.

“This is also due to the fact that it has become necessary to increase the sale of United States Dollars to the Central Bank of Liberia to restore their reserves to the required target level as agreed with the International Monetary Fund,” the letter added.

Subsequently, the Ministry of Finance and Development Planning, on August 25, 2017, issued a circular instructing that all payments of recurring expenditure for most expenditure line items be made in Liberian dollars. 

The de-dollarization circular stated, “By directive of the Minister of Finance and Development Planning, please be informed that as of this communication, which began effective August 25, 2017, the following fiscal decisions will be implemented as part of a prudent budget execution. Expenses in the following categories will be paid on a split between Liberian Dollars and United States dollars”. 

According to the circular, signed by the Acting Comptroller and Accountant General, Ezekiel B. Korvah and Adolphus D. Forkpa, 100% (hundred percent)  Liberian dollars  payments  are being made for Allowance, Stipend, Honorarium, Bonus, Consultancy (local), operation, special operation, domestic travel, rental and intelligence expenditure. 

Partial Liberian Dollars  and United States dollars payments  are also being made  in Consultancy (Local) 40 percent Liberian Dollars and 60 percent United States Dollars, Goods and Services 70 percent Liberian Dollars and 30 percent United States Dollars, Subsidy 80 percent Liberian Dollars and 20 percent United States Dollars, Road contract (s) 50 percent Liberian Dollars and 50 percent United States Dollars, Purchase vehicle (S) 30 percent Liberian Dollars and 70 percent united States Dollars and petroleum 30percent Liberian Dollars and 70 percent United States Dollars, and Hundred percent United States dollars payments are being made for Foreign travels and Transfers. 

Before the circular, payments of Government recurring expenditure especially payroll was made on the basis of 80 percent United States Dollars and 20 percent Liberian dollars. It is not clear what prompted the policy change but a source at the Ministry of Finance and Development Planning indicated that given the Government’s official exchange rate, which is always lower than the market, taxpayers prefer to pay their taxes in Liberian dollars. 

For example, at the current official (Government) rate of L$116.33 and market rate of LD$123 a tax payer who owes US$100 in taxes gains LD$667 (LD$12,300 -11,633) if he/she  pays the taxes in Liberian dollars.

The preference for tax payments in Liberian dollars has left the Government holding large sum of Liberian dollars as compared to United States Dollars. 

Liberian Dollar Depreciating 

While the banks are struggling to payout Liberian dollar, the local currency continues to depreciate against the U.S. Dollar. 

The situation is causing embarrassment for local business owners and small income earners, who use Liberian dollars everyday. 

Currently, the exchange rate stands at LD$126.00 or LD$127.00 to US1.00; something that is causing serious consternation from the public, especially business owners. 

Speaking with FrontPageAfrica, the entrepreneurs lamented that they are running out of businesses owing to the rapid depreciation of the Liberian Dollars against the United States dollars and expressed dismayed over the continuous silence of the relevant authorities in the wake of the ensuing situation. 

Benetta Kebeh Paivie, a seamstress, who co-owns the JST Classic Fashion House on GSA Road in Paynesville, bewailed that she is running out of business because her customers are not buying from her as they used to. 

“The increase in the US rate is really affecting our business. Prices of all the materials we used here – from the elastic, linen, cloths, staving and to the lappers have all gone sky high. For instance, we used to buy a yard of linen for LD$50, but now we are buying it LD$75.”

“We buy the materials very expensive and when we sew these beautiful designs and priced them in such a way to get small profit at the end of the day, nobody wants to buy them. With the way things prices are up, we are not running any good business. We are just doing from hand to mouth now,” Paivie lamented. 

She averred that at this time of the year, she usually gets more customers buying and bringing in clothes for sewing, but nowadays due to the hack in the exchange rate which has resulted in the increase in price of commodities, her customers hardly come to buy. 

Consequently, Paivie said she has decided not to sew and sell clothes at her shop for now, rather to sit and wait for customers to bring in their own clothes, something she noted will cause a major setback in her business because as she puts it, “Not all of the time people will bring clothes for us to sew for them.” 

Jefferson Williams, who runs a shop in Paynesville, is another small business owner that is feeling the pinch of the situation.    

Mr. Williams told FPA that his shop is now empty because he hardly gets goods from his suppliers. 

Business is very bad because of the high US rate. We don’t even know what to buy and how to sell.

This is because the exchange rate changes every day.

For example when you buy your goods at a particular price today, tomorrow the rate will change and the price of those same goods you bought will change. Sometimes at the end of the day, we come back with the money.”

“This is actually bad,” Williams intoned. 

He explained that he usually purchases his goods in United States Dollars because his suppliers will devalue the Liberian Dollars so he will end up paying more money in the local currency than in US dollars; something he noted is affecting him.

He also called on the authorities to intervene and save his business and others who are bearing the brunt like him. 

“My call to the authorities is let us use our Liberian Currency. This will be better for us. “

“This will ease the burden on us the small business owners because there will be fixed price. This is causing serious problems for us.”

“The US Dollars is not our currency. Our currency is the LD. We should use it,” he urged. 

Ophelia Lewis Karr, another entrepreneur, explaining her ordeal called on the government of Liberia to intervene; adding that if nothing is done their businesses will collapse completely. 

“Business is not fine at all these days. Things prices have gone up because of the increase in the US rate.

So when we buy the goods, we increase the price a little to get small profit, but when the customers come they complain a lot. Sometimes they won’t buy and would just walk out.”

“Since most of our suppliers don’t like to hold the Liberian Dollars, we have to change the money to US.

Then we will buy the US at higher price before getting the goods,” Mrs. Karr said. 

Another small business owner, who also spoke to FPA, was Pinky Williams. Pinky usually inputs her goods from Nigeria.

She explained that since she uses foreign currencies to purchase her goods and sell to consumers largely in Liberian Dollars, she catches hard time in finding the United States Dollars. 

Gerald C. Koiyeneh contributed to this story