Former Deputy Finance Minister for Expenditure &Debt Management Arthur Fumbah has called for a stronger collaboration between the Ministry of Finance and the Central Bank of Liberia (CBL) to stabilize the economy. Speaking exclusively to our business desk on Tuesday, January 7, 2014 Mr. Fumbah observed that stronger collaboration and coordination between the fiscal and monetary managers of the government would lead to a quicker resolution of some of the practical issues including financing of infrastructure projects by the government and tackling the soaring exchange rate between the U.S. and the Liberian dollars, which currently stands at about US$1.00 to L$85.
The exchange rate continues to soar over the past three months prompting the Central Bank of Liberia to have made an announcement recently that it is running short of foreign exchange to intervene on the money market.
In its 3rd Quarter report, the CBL noted that there is rising pressure on the domestic currency due to circumstances beyond its control.
As a matter of fact, the CBL auctioned about US$14 million in the 3rd Quarter, down from about US$35 million in the 2nd Quarter of all of 2013.
The Bank blamed the decline in its intervention to several issues; one of which is the economy’s failure to manufacture substantial produce locally for the export market to raise foreign exchange to back the domestic currency.
The CBL also attributed the challenge to the government’s policy to raise reserves in foreign currency and this is also a major requirement of the International Monetary Fund (IMF).
The other reason, according to the CBL, is that the country is heavily an import-dependent economy that imports most of the goods and services it consumes. Amidst these constraints, economic experts have observe, there seems to a distant between the fiscal and monetary arms of government in terms of practically working together to tackle some of the small burning issues affecting the economy, such market intervention.
With most of the citizens depending on the Liberian dollar for their daily livelihoods, Fumbah believes that if both the CBL and the Ministry of Finance work collaboratively, the foreign exchange market will stabilize to a large extent.
“There must be stronger and practical collaboration between the authorities at the Ministry of Finance and the CBL to tackle this challenge. This is because, and we must understand that one of the things about money supply is that as the money goes out, it must be followed by investment in order to curtail inflation,” Mr. Fumbah stated.
The Harvard-trained Liberian implored the central government to ensure that the country’s export sector continues on its current growth trajectory in order to reduce poverty.
Turbulence Times for the Economy
The global financial crisis coupled with slow growth rate of the Liberian economy is also a concern for the former Deputy Finance Minister for Expenditure &Debt Management. As growth largely depends on the enclave mining sector, the government is challenged to attract both foreign direct and indigenous investments that are sustainable, preferably in the agriculture, manufacturing and service sectors.
But it entails daunting challenges as the country’s economy is injured largely by the lack of basic infrastructure mainly road and electricity.
Mr. Fumbah confirmed these challenges recounting how the government and its development are working to get the economy back on course.
“There are a lot of trials for us as a country, but there are also some economic indicators that need to be looked at,” he said.
In the fiscal sector, the issue of corruption needs to be properly addressed in the budget tool such as revenue collection, Fumbah added.
Comparing today with his days as Deputy Finance Minister for Expenditure &Debt Management during the height of the global financial and economic meltdown in 2008-210, Mr. Fumbah noted that there a bit slowdown in revenue performance today.
Addressing a recent press briefing at the Ministry of Information, Cultural Affairs &Toursism (MICAT) in Monrovia, Finance Minister Amara M. Konneh, however, defended the current revenue administration at the Ministry noting that revenue collection had improved.
Minister Konneh made reference to what he called “the rise in government’s revenue generation.”
The government’s fiscal 2013/2014 budget has a single envelope containing about US$582 million in core revenue.
The fiscal 2013/2014 budget has no contingent provision. Ministry of Finance has argued that including contingent revenue in the overall government budget has the propensity to raise unnecessary public expectation. What is happening instead is that, when contingent revenues are realized, they are submitted to the legislature for appropriation to finance projects earmarked by the government.
CBL’s Rural Community Bank Initiative
The Central Bank of Liberia (CBL) has been commended for taking a bold initiative last year to begin erecting rural community banks in rural Liberia. The commendation is coming from Mr. Arthur Fumbah, senior manager at Baker Tilly Liberia on Broad Street.
According to Mr. Fumbah, the opening of the bank by the CBL sets the platform for inclusive economic development.
“The bank is going to help with the movement of money from one community or county to another,” he said.
Fumbah observed that having all of the banks in one central point (Monrovia) discourages savings.
“I encourage the CBL to extend this project to other rural communities across the country,” he said.
The CBL, in late 2013, inaugurated a rural community in Nimba County. The Bank, according to CBL Executive Governor Dr. J. Mills Jones, is the first of several other ones that are expected to be built in other rural communities across the country.
Dr. Jones noted that the rural community banks will be managed by the communities they are built in and will help create economic opportunity for rural women and businesses, amongst others.