Who’s To Blame for Liberia’s Falling Economy – Sirleaf or Legislature?
Monrovia – Speaker of the 54th Legislature, Bhofal Chambers, blames the country’s deteriorating economy on former President, Ellen Johnson Sirleaf, accusing her of printing Liberian dollar banknotes in excess and has now flooded the market.
Report by Lennart Dodoo, [email protected]
Madam Sirleaf’s decision to print new banknotes was approved by the Legislature, however, in an attempt to distance that batch of legislators (which he was part of) from woes the country is faced with, Chambers said, the past government was warned of printing new banknotes, but the former President was adamant.
Chambers, a fierce critic of Sirleaf, said she adopted a “Soviet-style economic and military fashioned scenario to compel compliance on economic activities.”
The Liberian dollar has depreciated to an all-time low record, currently standing at L$158 to US$1.00.
Liberia is a dual currency country – the Liberian dollar being the primary and the US dollar being the secondary.
Predictions are that the situation could get even worst if government does not take strict but sound economic policies to salvage the economy.
Speaker Chambers’ fix to the situation is the abolishing of the Liberian dollar currency and sticking to the U.S. dollar.
Chambers also contended that low-security features on the new banknotes printed by Madam Sirleaf’s regime has given rise to the wanton counterfeiting of the Liberian dollars.
Chambers’ Argument Countered
Renowned Liberian Economist Samuel Jackson reacted to Dr. Chambers’ suggestion of making the U.S. dollar the sole currency in the country.
Jackson argued that with the country’s limited export capacity, it would be difficult attracting U.S. dollars to sustain the circulation on the local market.
Jackson referenced a 2016 paper on Liberia’s dual currency being a double-edged sword.
According to him, “despite the high rate of dollarization, Liberia’s economic recovery has in fact been supported by the use of the dual currency system both for technical reasons driven by market forces and by the politics of time. Thus efforts to reduce dollarization by going to a single currency should be studied very carefully to avoid the associated shocks. Despite seemingly more advantages in decreasing dollarization, yet there are several pitfalls. There is no guarantee that moving to a single local currency would decrease dollarization. Many countries that sought to decrease dollarization had in fact changed tract and supported increased dollarization.”
Jackson continued, “It must be stated clearly that moving toward a single currency requires making a determination of the optimum economic circumstance. In doing so, policymakers should not only base their determination solely on technical empirical analyses, such as increased export earnings or growth in GDP but also in the confidence of economic actors in the ability of Liberian monetary and fiscal managers. No matter how strong the reasons for a technical market driven compulsion to go the route of a single currency, if economic actors are unsure of the level of financial probity in the country, the drive toward a single currency could be disastrous. In other words, corruption could undermine faith in the Liberian economy and devalue any national currency. As a result, I am convinced that now is not the time to go to a single Liberian dollar currency as we are still mostly an unproductive economy, with too many structural defects that need to be repaired. We cannot be sure that we can withstand the “epic shocks” to use the words of one of Liberia’s leading financial minds.”
Boakai Jaleiba, Director for the Center for Action and Research (CePRA), slammed the Speaker’s blame game, pointing out that the Speaker’s accusation is short of supporting facts.
“For the speaker to allege that the current economic challenge the government is faced with stems from the excess printing of Liberian Dollars will imply that he has evidence about the quantity printed. Such an allegation should be based on the available data – something I don’t think he’s privy to. Sadly, I don’t even think he is interested in arming himself with the facts. As a policy maker, public utterances should be guided by the facts. Liberia’s monetary policy officials will not be that irresponsible to adopt such a horrible measure with the intent of willfully causing the Liberian Dollars to depreciate,” he said.
Boakai noted that the printing of the new banknotes sought the approval of national legislature where he served-representing Maryland, where both President and Vice President served as Senators.
He advised that whilst dollarization has a lot of advantages, it also carries several disadvantages including but not limited to the following; loss of seigniorage revenues reflected as profits by the central bank except there’s an agreement that profits will be shared by the US and Liberia.
“Liberia should be prepared to cede its monetary autonomy to the United States including the capacity to provide liquidity support to its banking institutions in emergency situations. In a highly import-based economy like ours, we risk losing the physical cash to even small retailers from neighboring countries, etc,” he added.