‘Exchange Rate Undermines Weah’s Presidency’

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GTI CEO Woryee Diggs

Liberian entrepreneurs says, wants currency change

Uneasiness appears to be gradually creeping in the ruling Coalition for Democratic Change (CDC) as some staunch proponents of the administration are harboring fear that the tough economic situation in the country is putting early blemishes on the presidency of George Weah.

One of the most contentious issues so far since the President Weah’s ascendancy is the worsening economic conditions that are being impacted by the ever depreciating Liberian dollars to its US dollar counterpart.

The depreciation of the Liberian dollar, which has immensely contributed to hike in the prices of basic commodities and necessities, remains a concern for many Liberians and more frustrating for them is that the government is doing nothing to mitigate the problems.

These unfortunate economic situations are putting the administration of the populist leader, who was overwhelmingly elected six month ago, into jeopardy as agitations are creeping up in corners around the country. Liberians are beginning to protest for immediate actions.

The Liberian currency, has significantly depreciated in terms of value on the exchange market, trading as low as L$157 to US$1, the worst in the recent history of the country. This surge has led to precarious economic situation.

And so according to a top Liberian entrepreneur, L. Woryee Diggs, the country’s dreadful economic realities have begun to undermine the CDC-led administration. Mr. Diggs indicated that the current situation is an orchestrated plan of former President Ellen Johnson Sirleaf.

Diggs, who is the founder and managing director of Global Tech International (GTI), knows President Weah to be a patriot and a man of his words. He said that the seeds of hardship that are germinated now were planted by former President Sirleaf, who intentionally “floated the market with huge unspecified sum of the local currency.”

He has therefore called on the President to change the currency by reintroducing something of his own that will help him achieve his ambitious development goals. “Liberians need to sit and retrospect on the high increase of the US rate that was polluted by the past government. He wants President Weah to change the entire Liberians dollars, including the L$500 note. If the money is not withdrawn from the market, it will undermine Weah’s good intention and that the Pro-poor agenda will not feel his presence,” Diggs said.

Members of the student community, especially from the Students Unification Party (SUP) at the University of Liberia (UL), recently took to the streets protesting against the country’s economic quagmire. They were later joined by marketers from Redlight, the nation’s largest commercial district, to called the government, which they feel pretends not to be in the know of the conditions that the masses are enduring, to take some actions.

The President , little over six months ago, received a resounding mandate from the Liberian people when he got over sixty percent of the total votes cast in the presidential runoff elections in which he out muscled the candidate of the then ruling Unity Party Joseph Nyuma Boakai. Weah’s ascendancy, which ensures a historic transfer of power being the first in over six decade, was greeted by a nation that was yearning not just for change, but change for the better.

It, however, appears paradoxical that in less than half a month, there seems to be some agitations among Liberians. The economy appears to be the biggest test for the administration so—a situation that is having a go at the popularity of the President.

President Weah considers himself a winner—a successful over comer of obstacles, and his professional and political lives are testaments to this feat. Many are anxiously waiting now to see how he navigates his way through this tumultuous economic challenge.

It is no secret that operating a dual currency regime with the United States and Liberian dollars as legal tenders, fluctuations in the exchange rate greatly affect the prices of basic commodities that are mostly sold in Liberian dollars but traders have to purchase in United States dollars on foreign markets.

To compensate for the loss in value in the Liberian dollars when exchanged to United States dollars, traders increase the prices of their commodities, leaving the consumers to feel the pinch.

Bomi County District #1 Representative Edwin Melvin Snowe, recently warned that the rate saga may lead to political crisis if care is not exercised.

The UP lawmaker urged officials at the Ministry of Finance to get to work and deactivate themselves from the “campaigning mood.”

Snowe spoke to his colleagues in the plenary of the lowest house on Tuesday when the house committee on banking and currency release a report concerning the continuous unprecedented depreciation of the local currency.

The committee observed that there is more supply of the local currency that is chasing fewer goods on the market.

“The more the supply of the money, the more devalued it is and vice versa,” the report said.

The report says the reverse requirement ratio also has an effect on the money supply or demand on the market, adding that the higher the reverse requirement, the less the supply of a particular currency and vice versa.

The value of the Liberian dollar continues to fall with a corresponding rise in the exchange rate, a situation that is creating more hardship for the ordinary people especially for small Liberian business who trade in Liberia dollars but are required to pay taxes in U.S. dollars.

2 COMMENTS

  1. It is the economy, not the exchange rate that is undermining Mr. Weah’s presidency. NO DEVELOPMENT PLAN = FAILURE.

  2. The inflationary pressure in the nation can’t be resolved simply by arbitrarily replacing, from an emotional perspective, the Liberian dollar (“LD”) by printing new ones (e.g., every new president printing his own currency). In fact, that undermines the Market’s trust in the “full faith and credit of the government” behind its currency. Market forces in the economy are currently affecting the LD. Any artificial act of the government considered manipulative and inconsistent with free enterprise market supply and demand could aversely impact improving the economy. That’s why respecting the autonomous and independent functioning of the Central Bank of Liberia (“CBL”) is important. For example, in the U.S., the Federal Reserve Bank (“Fed”), the U.S. equivalent of the CBL, monitors both inflationary (high prices, low value of US dollar) and deflationary (low prices, high value of US dollar) pressures. Based on empirical economic data, the U.S. Fed may adjust the interest rate, buy or sell government treasury notes that impact the money supply and affect the value of the currency and prices paid for goods and services. I’m not sure what authority the CBL has in decision making in these areas of the economy, but it should be empowered to regulate systemic risks to the economy, and have in its employed subject matter expert of independent thoughts, not partisan loyalty. Three things could happen if these are implemented. First, there could be a demand for the LD, driving it’s value up. Secondly, the CBL could regulate the amount of the government’s own notes out in the secondary market (i.e., they can buy back or sell more). The third is the amount of LD held by foreign governments and International NGOs (non governmental organization). The more they hold the less will be on the market, thus increasing its value, and vice versa. Remember, if investors and marketers lack full faith and trust in the government, you will see a trigger down impact in the economy.

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