Central Bank of Liberia’s (CBL) Executive Governor Dr. Joseph Mills Jones has assured the public that the economy is not on the brink of collapse as it is being speculated in the country. According to Governor Jones, those who are giving the impression that the economy is on the verge of disaster are wrong. Speaking at the annual dinner of the Liberia Bankers’ Association (LBA) in Monrovia Friday, the CBL boss said though there are serious challenges relating to the strategy and pace of economic reform, job creation and poverty reduction, it is difficult for one to comprehend that an economy whose growth has averaged 6.9% over the past six years could collapse.
The mounting depreciation of the Liberian dollar to the US dollar from L$72.5 for US$1.00 at the beginning of 2013 to L$81.00 for US$1.00 in December has led many people in the public (non-economists) to harbor the belief that the economy is on the verge of collapse. Their fear is further exacerbated by the rising unemployment among the country’s youth population, which makes up 60% of the workforce.
Although most of these people are not economists, they earn their living on the depreciating Liberian dollars. Others, however, are of the view that the Liberian dollars has lost its value to the US dollar simply because the country is import-dependent. They want a stronger and productive private sector driven by Liberians, amidst this debate
On many occasions, Governor Jones has made clarion calls for concerted efforts in supporting the productive sector of the economy to enhance productivity of the sector in order to pay for the country’s trade deficit.
He told the gathering on Friday night that strong intervention by the CBL has helped to contain the pressure in the foreign exchange market. But, he said, further intervention by the CBL has been curtailed due to the availability of limited foreign exchange to the CBL.
Giving further reasons for the depreciation of the Liberian dollars, Jones noted: “The CBL does not make the US dollars that it sells to the market. The economy has to earn it, as it has to earn any other foreign currency.”
He also explained that the other reason for the depreciation of the Liberian dollars is that the government has prevailed on the CBL to prioritize the accumulation of reserves.
“It is important to point out that under such circumstances, any increase in pressure on the foreign exchange market will more likely lead to additional depreciation of the exchange rate,” said the CBL boss.
Amidst these challenges, the Governor emphasized that those who would give the impression that the economy is on the brink of disaster are wrong.
“They are wrong!” he said. “An economy where debt burden is relatively low and at the moment sustainable; where inflation is in single digit; where international financial institutions, including insurance companies, are knocking on the doors of the CBL to explore the possibility of operating in Liberia; and an economy where there is positive engagement with the African Development Bank (AfDB), the World Bank and the International Monetary Fund (IMF); that economy is not about to collapse,” he stated.
In a prepared speech, Governor Jones reaffirmed the CBL’s belief in the future of the economy, which he insisted, is being built on one of the timeless principles of the country—-the free market.
The CBL Executive Governor challenged related state functionaries and the private sector to consider challenges such as those relating to the strategy and pace of economic reform, job creation and poverty reduction as an opportunity for collective effort to draw on the talents that the country has–“talents,” as he put it, “born out of knowledge and experience—to forge a more innovative strategy to lift the economy and lift the standard of living of Liberians.”
He told the LBA and its officials that the CBL joined them in celebration of the Bankers’ Week and to observe the continued progress of the banking system.
“We have come to celebrate the continued progress in the banking sector, being cognizant of the fact that without such improvement, the level of economic growth, coupled with broad macroeconomic stability that has characterized the economy over the past several years would not have been possible,” the CBL boss said.
He called on those managing the Liberian economy to break with the past in terms of how they manage the country’s economy. “This is something that must be done,” he said “as we usher in ‘that’ new dispensation of having a growing and vibrant middle class.”
The Governor also assured the public that the Board of Governors of the CBL is committed to continuing its microfinance initiative to enhance inclusive financial sector support.
Earlier, LBA president John B.S. Davies, III observed that access to finance must be the first and last priority of every banker if the country were to have a healthy economy.
According to Mr. Davies, if the banking sector cannot achieve strong access to finance it means they (banks) have failed.
“That is why the naming and shaming exercise will continue,” Davies said. The LBA boss, who is president &CEO of the Liberia Bank for Development and Investment (LBDI), observed that banks in Liberia are growing from strength to strength because the industry has created more employment opportunities for both young and old people.
In 2006, the banking industry had less than 300 hundred bank employees. But the industry now has over 1,200 full-time employees with the number increasing significantly on a yearly basis.
The LBDI CEO also spoke of the significant increase in the industry’s overall loan portfolio from US$200 million over the years to about US$600 million in 2013, with support from partners.
But the LBA boss named the issues of arm robbery, fraud, and the lack of cheap electricity and human resource as some of key challenges facing the industry.