UL Professors Slam CBL Regulation Governing Inward Remittances
Monrovia – Two University of Liberia (UL) lecturers have slammed the Central Bank of Liberia (CBL) regulation governing inward personal remittances received via money transfer institutions from abroad.
Report by Danesius Marteh, [email protected]
Professor Wilson Tarpeh believes the regulation amounts to a financial chaos while Dr. Lester Tenny says it is a financial stupidity.
The regulation, which was issued on November 29, 2016 and became effective on December 1, 2016, ordered the payments of money transferred from abroad to a recipient in Liberia to be made 25 percent in Liberian dollars and 75 percent in United States dollars respectively.
The Liberian dollars payment will be made at the CBL’s published selling exchange rate prevailing on the date of the payment of the transfer to the recipient.
The exchange rate shall be conspicuously displayed on the premises of the financial institutions or paying agents of the financial institutions.
The regulation, (CBL/RSD/004/2016), will apply to all licensed financial institutions engaged in money transfer services, including Western Union, MoneyGram, Ria and similar services operating in the country.
The regulation, however, will not apply to inbound money transfers credited directly into recipients’ accounts at commercial banks (eg. SWIFT transfers).
CBL director of regulations and supervision Musa Kamara said they acted in keeping with their statutory responsibilities to stabilize the currency market.
“The Central Bank of Liberia is the monetary authority of the country.”
“And because of that, the bank can always come-up with policy that it sees fit and in the best interest of the country, and particularly, in terms of effectively managing the economy.”
“So this regulation is exactly intended to achieve that goal.
“Again, this is not something surprising. You know in every country that you travel to people received 100-percent in the domestic currency.”
“Liberia has been an exception to this rule for a long time. So there is nothing private or strange that we are doing,” Kamara told UNMIL Radio’s Coffee Break program on November 30, 2016.
But Tarpeh, former UL vice president for fiscal affairs and finance from May 2009 to March 2015, argues that the regulation imposes unnecessary tax on recipients, who must purchase goods and services in United States dollars.
“This is a financial chaos and a form of tax that the government has imposed indirectly on us. Let’s say your friend or relative sent you US$200.”
“The commercial bank where the money is sent gave you US$150 and L$5,000 at the prevailing rate of US$1 to L$100.
“You need to buy a television, which is sold for US$200. Remember now, the bank’s prevailing rate may not correspond with the rates outside.
Assuming that is the case, you will need to buy back your Untied States dollars because the guy in the store is not accepting Liberian dollars.
“So you go to a foreign exchange bureau and the buying rate is US$1 to between L$102 to L$105 depending on the amount of hard currency that you want.”
“So you received L$5,000 from the bank but you are going to spend at least L$100 in order to correct your TV money. That L$100 is an additional tax,” said Tarpeh.
The former finance minister said the regulation would have been a good idea if the government accepts Liberian dollars.
“We paid for passports, driver’s license, license plates and birth certificates
in United States dollars. We paid for LEC [Liberia Electricity Corporation] units in United States but the government recently began to pay in United States and Liberian dollars, including salaries and benefits and debts but it can’t accept Liberian dollars for services it renders,” Tarpeh added.
For his part, Tenny, who holds a doctorate degree in economic modelling, said CBL governor Milton Weeks would have been made to resign in a serious country.
“Technically and because I am a doctor [of economics], I wouldn’t say it is stupid. If there is anything more than stupidity, I will say that is the word.”
“We don’t address an economic problem symptomatically. Our problem here is the nature of our budget.”
“We have 83 percent of our budget on consumables. Who are receiving these huge salaries? An elite few!
“In one of my papers, I told the government that ‘you need to address the issue of your expenditure.’
“The threshold amount that I gave them was US$245 million. That is all our economy needs to spur growth.”
“You are looking for US$600 million [to fund the budget]. Where do you get that money from?
From Sinje or the airport? It is not possible,” said Tenny, who studied fiscal economics at Obafemi Awolowo University in Nigeria.
He accused the government of being insensitive to economic realities and unable to read empirical evidence.
“We just sit down and imagine figures and think that it will come about like that. Economics is not like that.”
“You must have people who will do the computation and tell you what direction to go. What do you need US$600 million for?
To pay people, who come to work, four times in a month, US$15,000?
“So you suffer the economy. You suffer the budget. And as a way of ameliorating the gap, you have now imposed additional tax on our people by seizing, hijacking 25-percent of their remittance for their own survival.”
“You have imposed 25-percent additional problems on them. This is stupid,” added a furious Tenny.
Tarpeh and Tenny were speaking at a roundtable dialogue as part of the United States-Africa Partnership on Illicit Finance (PIF), which was organized by the Institute for Research and Democratic Development (IREDD) with support from Trust Africa and United Nations Development Program at the Boulevard Palace in December 2016.
But in her final annual address to the legislature, President Ellen Johnson-
Sirleaf amusingly said it is intended to encourage the wider use of the Liberian dollars.
“The positive results of this regulation are already being felt, as the bank is using part of the proceeds surrendered to intervene in the foreign exchange market, thereby smoothening volatility in the Liberian dollar exchange rate.
“All these measures fall short in addressing the major problem–the low productive capacity of the real sector that leads to a high degree of dollarization in the existing dual-currency regime,” Sirleaf said on January 23.