Amidst Economic Hardship, Worries; Consumers Give Mixed Reactions on Foreign Exchange

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The rapid depreciation of the Liberia dollars is becoming worrisome for Liberians, especially the marginalized and impoverished masses, because of the huge level of economic hardship that is being experience as a result of the unwarranted trend in the country. The exchange rate currently stands at approximately L$95 to US$1 and accompanying is the hike in prices of practically all goods and services—a situation that has become tight for many. Amidst these worries, consumers, in a Daily Observer interview, gave mixed reactions over the current state of affairs of the US-Liberian dollar exchange rate.

The consumers and some entrepreneurs are worried that they may soon be unable to buy what they need for business and personal needs.

Morris Robert, in a conversation with the Daily Observer, expressed frustration over the rapid pace at which the “local currency is losing ground.”

“I came to the market to buy my food, but I am forced to spend more because prices have gone up. I am told that the exchange rate is the reason for the increase,” he said. Robert said he earns his living in Liberian dollars (LRD), but was shocked to see that the Liberian dollar is losing ground against the US dollar (USD), which is causing Liberians to spend more money for less goods and services.

In some places such as Douala, Water Side, Red Light and Paynesville, the exchange rate stands at US$1 to L$97 or higher.

While Mr. Robert and a large segment of the population are worried about the depreciation of the local currency, others who have easy access to USD were yearning for further increase in the exchange rate. This would give them more LRD in exchange – an advantage over those who hold LRD and need to purchase goods priced in USD.

“I want a higher rate for my US dollar,” insisted Massa Paul, a university student, to the man at the forex stand. Two money changers at Caldwell junction, Moses and Aaron, attributed the depreciation of the Liberian dollar to huge demands from businesses, mainly from ‘foreign’ business owners.

“These business people need the US dollar rate intact to import their goods,” they said.

Whatever the case, “this situation warrants some level of intervention by the central government as the demand for the US dollar rises,” they indicated.

Also, many auction-sellers said, instead of their purchasing power increasing, it is decreasing on a daily basis due to the high rate of the US dollar. Auction-sellers get depreciated (a nice way of saying ‘expired’) goods from importers and sell them on the street (usually in traffic) to anyone willing to buy – and at bargain prices.

To stabilize the exchange rate situation, the CBL has begun to crackdown on ‘illegal money changers’ who, according to the bank, are somehow responsible for rapid or unconditional increase in the exchange rate. A taskforce has been setup to clear these vendors off the streets, especially in the major commercial districts of Red-Light, Duala, Waterside and others.

CBL Executive Governor said recently at a press conference in Monrovia, “To mitigate the current levels of the Liberian dollar depreciation for the first half of 2016,” the CBL intervened in the foreign exchange market with the amount of US$14.5 million as compared to (US$5.0 million in June alone); US$5.0 million lower than the level of intervention made in the same period in 2015. The bank subsequently made an additional intervention US$3 million within foreign exchange market, Weeks said.

During that auction, Governor Weeks said, the total demand was US$7.6 million, thus resulting into an oversubscription of US$4.6 million.

Usually as festive seasons (Independence or Christmas) approach, demands for foreign exchange to service import payment is usually high as evidenced by the level of oversubscription.

Additionally, he said, CBL continues with its regular foreign exchange monitoring and enforcement exercises to weed out illegal operators from the foreign exchange market.

The Governor also dispelled persistent rumours that the depreciation of the Liberian dollar is due to the printing and release into the market of additional local currency notes.

According to the recent CBL first quarter report for 2016, the exchange rate for the average Liberian dollar depreciated by 1.0 percent to L$91.42/US$1.00 at end-April, 2016, from L$90.5/US$1.00 during the previous month.

However, compared to the corresponding month a year ago, the Liberian dollar on average depreciated by 8.2 percent against the US dollar.

“The year-on-year depreciation of the Liberian dollar was mainly on account of declines in the prices of the country’s major commodity exports, rising import demand and deteriorating terms of trade,” the CBL first-quarter report said. “Major currencies in the West African Monetary Zone (WAMZ) continued to experience mixed results at end-April, 2016, relative to end-March, 2016. Except the Gambian Dalasi that appreciated in value and the Guinean Franc as well as the Nigerian Naira that remained stable, the Liberian dollar and the Sierra Leonean Leone registered slight depreciations in the reported period.”

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