Liberia: Finance Minister ‘Struggles’ to Account for US$25M Allegedly Infused in the Economy
Monrovia – There are more questions than answers relating to disbursement of the US$25 million allegedly put into the economy to mop out excess Liberian dollars in a bid to stabilize the fast-declining value of the local currency against the U.S. dollars.
Report by Lennart Dodoo, [email protected]
The infusion of the US$25 million was announced in President George Manneh Weah’s first nationwide address on the state of the economy in July this year. Among several measures he mentioned to help put the economy back on track, he said he would ensure “An immediate infusion by the Central Bank of twenty-five million United States Dollars into the economy to mop up the excess liquidity of Liberian dollars.” That was on July 16, 2018. The pronouncement was made at a time when the economy was in a free fall and none could deny the hardship the people were faced with.
Three days after the President’s pronouncement, the government announced, “In keeping with the President’s mandate to infuse USD $25 million into the economy to mop out excess Liberian dollars on the market, we are excited to announce to the public that the exercise has begun and is in full-swing. Within two days of the President’s mandate, the Economic Management Team have been able to mop out over $239 Million Liberian dollars in excess liquidity out of the market.”
However, the impact of the mopping exercise has not been felt by the commoners, leaving many, especially some inclined individuals, to wonder the US$25 million was disbursed.
Some commercial banks made it clear to FrontPage Africa that they were not involved or consulted during this exercise, though the President, in that address had promised to consult some of the best minds in fixing the economy.
True to the words of the commercial banks, Finance and Development Planning Minister, Samuel Tweah, disclosed in an interview with ELBC/LNTV last week that passing the US$25 million through the commercial banks would have made no impact.
“The goal at that point of the President’s mandate was to mop up Liberian dollars directly from the market, not to take Liberian dollars that are in the banks… so if we want to take one billion [Liberian] dollars from Logan Town, New Kru Town or Mamba Point, you don’t go to the bank account and take it from there, it’s on paper; so, you go to someone in New Kru Town who has the money and can sell his Liberian dollars to you. This was the direct mopping that happened, this was why the rate moved from 163 and it came down to 152,” he said.
It remains unclear which group of people the money was disbursed to and the criteria used for the disbursement. However, reports have it that Economic Management Team made a decision to give out the U.S. dollars to importers, mostly the Lebanese and some money exchangers.
This, the Finance Minister partially admitted to when he said the team bought Liberian dollars from individuals in the ordinary communities as a means of infusing more U.S. dollars into the system.
He, however, insinuated that only US$15 million has so far been infused into the economy for exchange of Liberian dollars and the Economic Management Team is still considering what to do with the remaining US$10 million.
“We’re still continuing to do that [buying Liberian dollar] up to the US$15 million point yesterday [at the time of interview]. The Economic Management Team is considering with the rest. Let’s face this, there’s no solution – putting US dollars in the economy and taking Liberian dollar out is not a sustainable solution because we do not have the capacity at this present time to generate foreign exchange. It’s a temporary measure,” Min. Tweah said.
The ‘Wrong’ Method
In a previous interview with FrontPageAfrica, an experienced Liberian economist, Prof David Farhat, said it is a risky venture giving out U.S. dollars to importers in exchange for Liberian dollars as a means of salvaging the economy.
“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,” Prof David Farhat said.
Prof Farhat is a former Finance Minister in the Samuel K. Doe government. He’s currently the Director of the University of Liberia’s Graduate School of Business Administration and runs a certified public accounting firm in Monrovia.
According to him, because the demand for hard currency often impacts the exchange rate, it is advisable to target importers of certain essential commodities to help ease the demand for US dollars.
He said, there could be “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”.
Sources familiar with the disbursement of the US$25 million confided to FrontPageAfrica that the government has been unable to clearly account for the money because the bulk of it were given to close associates of the powers that be.
The source said the Lebanese businessmen benefitted the most, especially those associated with the construction of the President’s personal properties.
“The reason why there has been no impact of this so-called US$25 million they claimed they put into the economy is because they gave the money to their own cronies, mostly their Lebanese friends. These people don’t spend their money here
FrontPageAfrica has not been able to independently verify this information.
Calls for Probe
Recently, a local research group raised a red flag and called on the Legislature to exercise its oversight responsibility by recommending an investigation in the situation.
Center for Policy Action and Policy or CePAR is argued 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 alarmed 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.
A direct mop up approach as adopted by the CBL in the use of the US$25 million, is susceptible to misuse and fraud, CePAR said.
The group called 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”.