Liberia: The Problem with Printing New Money
LIBERIA IS IN THE MIDST of an economic recession and desperate times appear to be resorting to desperate measures as the George Manneh Weah-led government appears to be convinced that printing more Liberian dollars is a way out of the messy state of the country’s economy.
TODAY, THERE IS A decline in economic activity and consumers are not spending as they should. Thus, businesses are losing and struggling to survive
THE APPOINTMENT OF A NEW Governor of the Central Bank of Liberia, the recall of members of the Legislature from the “Constituency Break” for special session; all point to the conclusion that the plan to print more money is in full effect.
THIS COMING in the aftermath of two major scandals and controversies involving missing and misapplied funds from the Central Bank of Liberia.
IN SEPTEMBER 2018, shipping containers filled with newly printed Liberian dollars from Swedish banknote manufacturer Crane AB disappeared from Liberia’s entry ports between 2016 and 2017. The Central Bank of Liberia denied the allegations and stated that the money was stored in vaults across the city.
BEFORE THAT, President Weah, who came into office in January 2018, announced that the central bank would pump $25m into the economy to help resuscitate the local currency. The scheme, popular referred as a “mop-up” exercise, took place between July and October 2018 and intended to reduce the amount of local currency in the economy to slow further depreciation.
TO THE CONTRARY, THE LIBERIAN DOLLAR has since been in a freefall, leading to higher import costs and inflation with many consumers and vendors having to dig deeper into their stash and savings to purchase expensive items as prices rocket through the roof.
TWO REPORTS – one from the government’s Presidential Investigative Team (PIT) and the other, the USAID-funded Kroll report, raised concerns around the exercise amid unanswered questions about the shipments of cash into Liberia. Both reports found flaws in how the government policy was implemented in each case. In the final analysis, neither the PIT nor Kroll were able to account for all of the newly printed Liberian dollars or the additional US dollars in the country.
ADDITIONALLY, THE General Auditing Commission (GAC), charged with the responsibility to audit all government entities, has advised the government against the printing of new local currency, especially in the wake of yet-to-be answered questions over how the first monies were dispensed and why there is a shortage of currency, so soon after LD16 billion went missing.
ON OCTOBER 8, 2019, the GAC sent a communication to the Speaker of the House of Representatives, Bhofal Chambers and President Pro-Tempore of the Senate, Albert T. Chie, urging the national legislature not to accept the request made by the Executive, “because it will have an adverse consequence on the economy and the people.
THE FACT that both the CBL and the government have so far failed to explain to the Liberian people why there is a shortage of local currency in circulation, speaks volume about why officials of government are treading such a dangerous line that could come back to haunt them, as did the now failed Eton and Ebomaf deals which came with much hype but fell short of coming to fruition.
MORE IMPORTANTLY, the GAC, in its communication to the legislature raised questions as to whether the CBL has implemented measures to address the lapses noted by both Kroll and PIT.
WHILE IT IS CLEAR that the government is desperately seeking ways to fix the messy it has created for itself, doing so without fixing the first problems, is a lightning rod for problems down the line.
CONTRARY TO WHAT REP. Acarous Moses Gray( Montserrado County District #8) has been trumpeting on social media, that the printing of the new banknotes will help the CDC government pay civil servants for Christmas, the truth of the matter is, past history of recession in countries who have gone through them, does not point to this having a good ending.
THE BEST THAT COULD happen, is perhaps, a temporary supply of local currency in the country.
THE WORST THAT COULD HAPPEN, a scenario of hyperinflation in Zimbabwe, which for a period, experience currency instability. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe’s hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe’s peak month of inflation is estimated at 79.6 billion percent month-on-month, 89.7 sextillion percent year-on-year in mid-November 2008.
In 2009, Zimbabwe stopped printing its currency, with currencies from other countries being used. In mid-2015, Zimbabwe announced plans to have completely switched to the US by the end of 2015. In June 2019, the Zimbabwe government announced the reintroduction of the RTGS dollar, now to be known simply as the “Zimbabwe dollar”, and that all foreign currency was no longer legal tender. By mid-July 2019 inflation had increased to 175% sparking concerns that the country was entering a new period of hyperinflation.
AND THAT’S THE WORST that could happen for Liberia.
PREVENTION THEY SAY is better than cure. Perhaps, it may be a good idea to avoid the Zimbabwe scenario before it comes back to haunt, or one we might regret, later on.
THE GOVERNMENT, before venturing down the road to uncertainty must make sure that all T’s are crossed and all I’s dotted, down to the last detail.
PAYING CIVIL servants for Christmas may be a good short-term fix, but what happens when the next problem arises? Just something to think about before we end up biting more problems, than we can chew.
A HINT TO THE WISE!!!