As the Liberian dollar continues to depreciate against the United States dollar at an alarming rate, the plenary of the Liberian Senate yesterday voted unanimously to mandate its Secretariat to invite the Ministry of Finance and Development Planning (MFDP) and the Central Bank of Liberia (CBL) to appear before them on Thursday.
According to a motion proffered by Margibi County Senator Oscar Cooper, the leadership of the two fiscal and monetary institutions will be requested to give reasons for the disturbing decline of the local currency, and recommend a way out.
On the second part of Sen. Cooper’s motion, the plenary again agreed on a public hearing that will feature the CBL, MFDP, Ministry of Commerce, the Liberian Revenue Authority (LRA) and financial experts to be held within a month.
The decision was taken following an exhaustive debate on the report read before plenary on Tuesday, but the debate was deferred to yesterday.
Bong County Senator Henry Yallah and several of his colleagues agreed that the introduction of a single currency regime will be one of the best ways out, and cited some neighboring countries currently enjoying single currency regimes,although with some imbalances.They, however, suggested that international financial experts be invited to explain the implications of reaching such a decision.
For his part, Grand Kru County Senator Albert Chie reminded plenary that one of the areas that government could realize sufficient foreign currency that has been overlooked over the years is the gold mining sector.
The Senator, who chairs the Committee on Lands, Mines, Energy, Environment and Natural Resources, disclosed that some African countries have gold as part of their reserves used to stabilize financial crises such as the one now confronting the country.
“Millions of dollars worth of this precious mineral is smuggled out of the country by especially some Fulani traders,” Sen. Chie said.
The Banking and Currency Committee in its concluding statement called for the Government of Liberia to be more proactive, instead of reactive – as is now occurring.
“As we prepare this report, the Liberian dollar is trading at LD95 to US$1in some places; and one of the immediate contemplated stabilization steps is for the CBL to arrange for about US$5 million to buy back the surplus LDs and mitigate what is known as the ‘Gresham Effect,’ where a currency of less value tends to drive out that of the high value,” the Committee said.
The Committee, however, warned that the infusion of more US dollars to offset this effect is temporary, adding: “the foreign exchange unit, the USD, must be earned from a transactional source. With the current slump in the price of our foreign exchange earners, sooner rather than later, the stabilization effect will be defeated if nothing is done to maintain stability or even retain appreciation of the Liberian Dollar.”
In order to sustain a stable economic growth, the government will have to do strategic economic planning, and will have to engage and promote economic diversification.
“The nation’s dependency on enclave sector-led economic growth, anchored on export of largely irreplaceable commodities, can create panic and internal economic volatility by the slightest disturbance of an international economic stimulus.”
The Committee concluded that equal priority must therefore be given to infrastructural and industrial development –infrastructure that will provide the multiplying effect for the production of the country’s consumables and reduce their import, thus reducing the flight of foreign exchange.
The Committee through its Chairman, Grand Gedeh County Senator A. Marshall Dennis, then recommended that the Bill presently in the Committee Room of the Senate, regarding the introduction of the single currency regime, be reviewed by the Senate plenary and passed into law as a mitigating factor for depreciation in the value of the Liberian Dollar.
“Liberia is the only country presently in the sub-region, if not the entire continent of Africa, that has a dual currency regime and with the worst economic status on the globe,” they noted.
The Committee’s recommendation also cautioned that the CBL be continuously mindful of the necessity to solve the liquidity problem as the country enters the festive season; and suggested that the Bank do a comprehensive briefing to the Committee on Banking System and advise a means by which hoarders will be compelled to return that amount into the banking system for proper accountability.
The Committee further recommended that CBL present a comprehensive audited financial statement with all notes attached to prepare the plenary through its committee to help take steps necessary to improve the economic situation, especially the increase in the exchange rate between the Liberian dollar and the United States dollar.
It can be recalled that Grand Bassa County Senator Nyonblee Karnga Lawrence on June 20, 2016, wrote the Senate on the high speed depreciation of the Liberian dollar, and requested Senate plenary to invite the relevant authorities for hearings.