The Executive Governor of the Central Bank of Liberia, Nathaniel R. Patray, III, has underscored a number of challenges he says are responsible for depreciation of the Liberian dollar on the financial market.
Depreciation of the Liberian dollar resulting in the high exchange rate was one of the issues raised against the former ruling Unity Party during the presidential election of 2017 that contributed to Vice President Joseph Boakai’s defeat.
During this time, the exchange rate was at most L$120 to US$1.00, but as it stands now, the exchange rate in most areas is L$201 to US$1.00; something many Liberians least expected to see happening in the current administration.
Explaining factors leading to the depreciation recently at the launch of the bank’s Monetary Policy Formulation and Implementation Forum in Monrovia, Governor Patray named low supply of foreign exchange; limited flow of remittances; struggle and argument for foreign exchange to pay imported goods and duties; and current account and trade deficit due to balance of payments as some of the factors.
Also among factors causing the impediment are capital deficit due to decline in direct foreign investment; scale down in activities of non-governmental organizations, low budget support as the national budget is only based on what government through the Liberia Revenue Authority (LRA) collects; much money accordingly being outside the of the bank instead of in; and the effect of UNMIL’s departure from the country.
Providing some explanations on each of these existing hurdles, Governor Patray said the departure of UNMIL reduced the inflow of foreign exchange because the presence of the peacekeepers and organizations here just allowed that.
He said many NGOs are scaling down their activities and many Liberians working with them are sacked, thereby weakening payment of taxes and flowing of the US dollars from possessors to the market.
He also indicated that investors are interested in where they can make money, and that they cannot invest in an environment where they will not maximize profits.
He said because of the high demand for the US dollar, inflation is expected to rise in the last quarter of 2019/2020 because the Liberian dollar will at this time depreciate grossly against the US dollar.
Governor Patray further noted that the CBL has been involved with taking different initiatives to address the exchange rate issue and implement other monetary policy issues as the bank’s duties call for, but uncertainty has engulfed the effort with information about “Missing L$16 billion and misapplying of US$25 million for the mop-up exercise.”
He said at present inflation rate has exceeded 20 percent, and growth is expected to slow amid the prevailing circumstances.
In addition to the exchange rate issue, Patray said trade competitiveness is also an issue of concern to the CBL in recent days. Thus, the policy dialogue, meant to bring economic and financial intellectuals together bimonthly, is one of several initiatives the Bank is taking to deal with the issues at hand.
He said as the dialogue continues with monitoring of the monetary system, the CBL will review public feedback, apart from informing the public about what is happening in the economy.
In a philosophical assertion, Governor Patray said “What goes up must come down,” and it is on the basis of this that the CBL is working tirelessly to adjust the rising exchange rate so that prices of basic commodities can come down to the level of the Liberian people.