Liberia: Stakeholders Defend Proposal for Amendment of CBL Act for Autonomy over Printing of Banknotes

On Tuesday, June 9, 2020, the Senate Committee on Banking and Currency invited stakeholders in the sector to include; the Banker Association, the Liberia Business Association, Former heads of Banks in Liberia, and former officials of the National Investment Commission.

MONROVIA – The Central Bank of Liberia (CBL) submitted to the legislature several provisions of the Act creating the CBL for amendment consideration. The CBL believes these amendments will solve some of the issues the Bank faces, which limits its capacity to operate effectively.

Report by Henry Karmo, [email protected]

One of the many provisions in the request the Legislature for authority to be given to the CBL to print new Liberian Banknotes every two years without going to the Legislature for approval.

Section 2 of the proposed amendment states that: The Central Bank of Liberia shall have functional independence, operation autonomy, and power and exclusive authority to issue Liberian Dollars, banknotes and coins subject to constitutional requirement as exercise every two years.

However, Article 34 d.  of the Constitution states that the Legislature shall have the power to levy taxes, duties, imports, exercise and other revenues, to borrow money, issue currency, mint coins, and to make appropriations for the fiscal governance of the Republic.

The current Act of the CBL

The current Act of the CBL gives it powers to have functional independence, power and authority to: issue legal tender banknotes and coins; administer the currency laws and regulate the supply of money; provide credit to bank-financial institutions on a discretionary basis; act as fiscal agent for the Government;  administer the New Financial Institutions Act of 1999 and regulate banking activities; regulate bank and non-bank financial institutions, as well as non-bank financial services institutions;

In the Act, the function of the CBL is also to: hold and manage the foreign exchange reserves of Liberia, including gold; advise the Government on financial and economic matters; conduct foreign exchange operations; play an active role in collaboration with bank-financial institutions in the creation and maintenance of efficient and safe mechanisms for payments, clearing and settlements to meet the needs of the financial markets, commerce, government agencies and the general public.

“The Central Bank shall execute this responsibility through permanent consultations with the bank-financial institutions and through implementation of the proper regulations and standards.”

Invitees at the hearing

On Tuesday, June 9, 2020 the Senate Committee on Banking and Currency invited stakeholders in the sector to include; the Banker Association, the Liberia Business Association, Former heads of Banks in Liberia and former officials of the National Investment Commission.

Mr. Davis who heads the Liberian Banking Association as president in his opening statements endorsed provisions in the proposed amendment and asked the Senate to use their wisdom to concur on most of the recommendations. “We also take note with the senate on recommendation of imputing more vision in the act.”

For his part, Senator Marshall Dennis (CDC-Grand Gedeh County) Senate Committee chairman believes replacing the existing bank notes is necessary but asked for guarantee that the CBL request to remove restriction on the Bank could lead Liberia’s Economy in the right path.

“Acts can be amended from time-to-time and the proposal is with us and we as Senators will review it, take a look at some of the recommendations made by those invited but we cannot promise whether or not the committee will consider giving the legislature powers to the CBL.”

 Dr. Musa Dukuly Deputy Governor for Economic Policy who represented the CBL at the hearing guaranteed the Senate that the Bank will remain transparent in its business and that the current management team will do everything to ensure transparency but warned against making a law that will punish non-financial services institutions caught in hulling of the Liberian banknotes as a result of lack of confidence in the banking sector.

“If the Microeconomic is good no financial institution will want to get their money out of the bank to keep. People are withdrawing because of speculative motive because of the devaluing of the currency. As of today, we have a currency management committee at the CBL, we will inform the Senate at every stage of the way on the process of printing of money. You should have assurance that this management team has remain in line of all the instruction given by the CBL.”