SINCE THE BEGINNING of 2016 Liberia has been experiencing sharp depreciation in the value of the Liberian dollars to the United States.
THE ECONOMIC SITUATION characterizing the devaluation of the Liberia dollar has proven to be one of the worse in the recent history of the country. Even during the war years or the economic instability characterized by international sanctions against the regime of former President Charles G. Taylor, the Liberian dollar did not fall in such high value to the United States dollars.
THE EXCHANGE RATE NOW stands at US$1 to LD$97 and in some commercial areas such as Red Light and the Du Port road all in Paynesville, the exchange rate is even higher.
IN A COUNTRY that operates dual currency regime-Liberian dollar trading along with the United States dollar, the United States dollar is highly regarded since it is traded internationally as compared to the Liberian dollar which cannot be used on the international market.
PRICES OF BASIC commodities have skyrocketed going in the same pattern as the exchange rate since traders who travel outside Liberia are compelled to only travel with the United States dollar and will have to let go the Liberian dollar they generate in the country from trading.
IN AN ATTEMPT to provide some explanation, the Governor of the Central bank of Liberia said “In recent times, the Liberian dollar depreciated due to several underlying factors on account of external, structural and monetary. Export receipts declined by more than 37 percent in 2015 relative to 2014 as a result of the declines in the country’s primary commodity exports (iron ore and rubber) on the global market. Though, in the same period, import payments also declined by 15.5 percent; however, it was not enough to mitigate the persistent trade deficit. This has caused severe pressure on the foreign exchange market and the revenue generating capacity of the government. Although personal workers’ remittances have increased over the period, the persistent trade deficit has continued to outweigh the impact of the inflow of remittances”.
THE CBL IS KNOWN for releasing figures yearly but the policies that will protect the local currency against such situation like the current cannot effectively be communicated to the people.
CBL GOVERNOR MILTON Weeks provided sundry of reasons for the deprecation in value of the Liberian dollar to the United State dollar citing the global commodity price slump continues to adversely impact the growth prospects of the Liberian economy.
SAID GOVERNOR WEEKS “The prices of the country’s two major export commodities (iron ore and rubber) have experienced prolonged slumps. The average price of iron ore declined by 67.1 percent, from US$168 per metric ton in 2011 to US$51.4 per metric ton recorded in June 2016. The decline continues to affect production, additional investment and the level of employment in the iron ore sub-sector. This has also undermined government’s revenue generating capacity and its foreign exchange earning capacity. Similarly, global rubber price in recent years has declined significantly which continues to affect production and contribution of the sector to national revenue. The average global price of rubber which was US$2.19 per pound in 2011 has declined by more than 68.0 percent to US$0.67 per pound in June, 2016”.
SOME OF THESE FACTORS outlined by the Governor are global and Liberia as a country must devise a way of mitigating against some of these factors.
ALSO, THE CBL GOVERNOR cited the drawdown of the United Nations Mission Liberia but fail to state the specific percentage of money UNMIL presence was infusing in the local economy and how much of that is no longer circulating in the local economy.
THE ONLY EXCUSE IS THAT UNMIL, a major spender in the Liberian economy and its withdrawal is affecting micro and medium enterprises and informal workers, many of whom operate in the services sector catering to the domestic market.
GOVERNOR OF A CENTRAL BANK should not be speaking like the average Liberian politicians who make statements without caring to know whether what they saying exist in the real world.
GOVERNOR WEEKS SHOULD BE releasing concrete data on situations cited for the depreciation of the Liberian dollars against the United States while at the same stating the policies or measures being taken to handle the situation. It is becoming common in Liberia where there are no technicians but all politicians who promise to build bridges in places there are no rivers.
IN SUCH A SERIOUS ECONOMIC situation facing the country where the Government is taking a decision to pay salaries in Liberian dollars while at the same time the currency of payment is deprecating against the United States dollar which is the major means of transaction, the Central Bank should be speaking with statistics on how to deal with this situation.
GOVERNOR WEEKS NEEDS TO take clue from other Central bank Governors in the West African sub region-Nigeria, Ghana and other countries and see how these governor make public statements on serious economic issues.
GOVERNOR WEEKS FAILED TO SAY the amount of Liberian dollars pumped into the economy by the CBL its loan scheme which could possibly have infused more Liberian dollars in the country chasing few United States dollars.
THE CBL NEEDS TO come clear and stop playing politics with economic issues affecting the lives of the Liberian people.