Gov’t to Infuse US$25M to Mop-up Excess Liquidity

9
1516
Pres. Weah says meeting with the oppositions will strengthen peace and unity.

President George Manneh Weah has committed his government to instituting a few stop-gap measures aimed at addressing the deteriorating state of the Liberian economy. Prime among these few is the infusion of US$25 million into the economy to help mop up excess liquidity of the Liberian dollar on the market.

While addressing the nation on the state of the economy yesterday, President Weah informed the nation that his government, through its Economic Management Team, is endeavoring to put together a team of “Liberia’s brightest” economic experts, both at home and abroad as well as international partners, and in close consultation with the Central Bank of Liberia (CBL) to work on series of monetary and fiscal measures that would help reverse the decline in the value of the Liberian dollar.

The Liberian economy is experiencing its worst decline, since the war years, and many are feeling the pinch as prices of basic commodities continue to escalate accompanied by a rapidly declining Liberian dollar against the US dollar. “I am fully aware of the negative impact of the declining exchange rate on the economic well-being of the Liberian people, and the serious hardship that this is beginning to cause,” Weah said.

“To lessen the immediate negative impact on our people, it will be an urgent imperative to devise and implement short-term fixes to the current problem — an immediate infusion by the CBL of US$25 million into the economy to mop up the excess liquidity of Liberian dollars,” he said.

In economic parlance, liquidity refers to how easily assets can be converted into cash. Assets like stocks and bonds are very liquid since they can be easily converted to cash.  As part of an immediate term strategy to resuscitate the economy, Pres. Weah said there would be an aggressive enforcement of existing monetary policy.

“It is clear that our monetary policy regime over the past several years has been too lax,” he said, adding: “In fact, it could well be said that we do not have the capability to exert effective control over our monetary policy, since more than 90 percent of the money supply is held out of the banking system.” Towards this end, the President promised to mandate authorities of the CBL to provide more effective supervision and regulation of money-changers or foreign exchange bureaus.

The President blamed the deteriorating state of the economy on the slump in prices of traditional export commodities and the drawdown of the United Nations Mission in Liberia (UNMIL), which he said contributed significantly to the economic decline.

“While the fall in the prices of our traditional exports and the UNMIL drawdown have contributed significantly to this situation, we believe a stronger and more aggressive enforcement of monetary policy, along with the relevant fiscal instruments, should go a long way to partly address the problem,” he said.

The President also blamed trade wars between the major manufacturing countries as exerting more pressure on the prices of Liberia’s major exports.

He spoke of the need to ensure domestic competitiveness and the existence of a strong private sector that would be oriented towards domestic consumption, import substitution and export.

“This is a goal we seek to achieve in the Pro-poor Agenda for Prosperity and Development,” he told an expectant nation hoping for a reduction in the exchange rate. Stressing that many of the current problems his government faces were inherited, including a weak underperforming economy facing solvency and liquidity challenges, President Weah said, “Our currency was experiencing rapid and unprecedented depreciation, contributing to rising inflation. Unemployment was very high, and our foreign reserves were at an all-time low.”

The President however said that this is not time to complain or to cast blame upon previous administrations, “rather, ours is a duty and responsibility to find new and sustainable solutions to these age-old problems that have stubbornly defied solutions in the past. We were very aware of these systemic problems when we decided to run for the Presidency, and so we are not surprised.”

As a first step in resuscitating the economy, the Weah-led government has placed emphasis and urgency on the formulation of a comprehensive development strategy, Pro-poor Agenda for Prosperity and Development, which will be supported by a strategic implementation plan.

The strategy, he said, is nearing completion, and will very shortly be presented to all stakeholders, including the country’s foreign development partners, the private sector, and the general public, for consultation, input, and buy-in, before being finalized into a strategic implementation plan.

“This development strategy and implementation plan will serve as a road-map for the urgent and important next-steps to be taken in giving direction to our economic recovery, and will consist of short-term interventions, medium-term reforms, and long-term restructuring of the Liberian economy,” he noted.

The President however admonished Liberians to be patient as finding lasting solutions to the present macroeconomic challenges will take some time, because nothing less than the structural transformation of the Liberian economy will produce sustainable recovery and growth.

“The key to success in this endeavor is for Liberians to produce more goods and services locally, so that we reduce our importation of goods and services from abroad, whilst at the same time increasing our exports and adding value to the raw materials that we ship to the world,” he said.

9 COMMENTS

  1. I am no banker, much less an economist in order to have an expert knowledge on the current financial situation unfolding in Liberia. But from a layman’s perspective, this illogic of a solution to counter the liquidity situation in Liberia by this proposed infusion of more US$ in the economy is just downright stupid. What sense does it make to infuse more of the same doggone $US that counterfeiters are in search of, in the first place? As I said, mine is just a layman’s view, but that proposal doesn’t seem to make any sense at all. Perhaps the introduction of another currency, something like the erstwhile Tolbert or Doe coin would solve this problem. Either that, or make the US$ illegal in the country. Or better yet, only the banks should have the authority to exchange US currencies in Liberia, since they will have the means to detect counterfeits, Liberian or otherwise.

  2. Mr Snyder, get a good grip, if proposals from Administrations between 1847 and 1980 had solved Liberia’s perennial economic malaise, underdevelopment, and backwardness, and hostile divisions, we wouldn’t have heard this speech, or those you referenced. Instead of pretending that the land was flowing with milk and honey under a TWP-One-Party-led Oligarchy, join the process regarding Weah’s promise that “In seeking solutions to this problem, we intend to engage the minds of the best and the brightest Liberian economists, both here and abroad”.

    Mind you, not even speeches on the economy by US Presidents have ever satisfied both sides of their political divides, or all political persuasions, and, frankly, many thought Weah’s speech was fair. For starters, it rightfully owned decades of accumulating socioeconomic dysfunctions; second, he didn’t give the impression that only officials had all the answers; third, a concrete action of putting US $25 million to stop the foreign exchange bleeding is being taken; and fourth, a more comprehensive plan to heal the nation’s economic health would be presented at a latter date.

    Of course, US $100 million to mop-up excess liquidity of Liberian dollars would have sounded better, but currently the country doesn’t have that kind of money considering all the other obligations. Anyway, we would encourage government to not waste time unveiling the promised national economic strategy, which hopefully would include reconstituting of the Ministry of Planning and Economic Affairs, a necessary autonomous institution that was ill-advisedly merged into Finance Ministry. Thank you, Mr. President, for quickly addressing the foreign exchange situation, because rising costs of basic foodstuffs is hurting the downtrodden, your base, the most. (Well, we won’t be silenced).

    • Thank you sir. Liberians are always looking for instant answers and simple solutions to complex problems. Thanks to the President.

    • This Sylvester Moses man must really be trying and very hard at that, to justify the stipend we are informed he is getting from the Weah administration for countering criticisms of that administration on the internet. An example of some of the obvious misuse of much needed funds that could be redirected in so many other priority areas to impact the lives of dying people.

      But that diversion aside for a minute, it is unscrupulous and opportunistic leeches like Sylvester Moses, with not much to lose given how many years he has left on this earth that take advantage of vulnerable people and situations to sponge off of. The kind of predatory mercenaries largely responsible for the “shithole” fate of the Liberia we are faced with today.

      And could this be the same Sylvester Moses, who, just few months ago, and throughout Ellen’s 2 terms was a certified vitriolic pundit, berating any and all programs and policies of that administration? And now because of some selfish interest he has now become some “crime-stopper” chastise reprimanding anybody who dare criticize the lousy eccentric behaviors of this government?

      But here this other self-contradictory nonsense from him, “Mind you, not even speeches on the economy by US Presidents have ever satisfied both sides of their political divides…” If that’s the case then why is Sylvester Moses flipping heels over head about others having difference of opinion about this brainless approach to solving the current inflationary situation in Liberia?

      Also, if Sylvester Moses was not out for one of those old inherent diabolisms which he and associates did that led to the downfall of the Doe regime, he would be self-advised to simply remain quiet and let well-meaning figure out what works or doesn’t about the quest for the betterment opt Liberia. He has the audacity to rebuke others for their opinions? Those days are long gone Sylvester!

  3. Thanks for all your comments, what we need now is what can we do to help our country.
    1. Let’s return to the soil
    2.Empower Liberian business owners
    3. Educate Liberian about the important of growing what we eat.
    4. Let the government make agriculture the #1 priority
    5 .Look at the shipping and clearing process at the port

  4. It is never too late to study Liberia’s past economic success story of the 60s & 70s and replicate it.

    Call me nostalgic or call me a day-dreamer, but I still remember Liberia’s economic boom of the 60s. Liberia, at that time, used a single currency: the almighty U.S. Dollar.

    In the 60s Liberia’s GDP (Gross Domestic Product) was the second highest in the world next to Japan. Jobs were in abundance in proportion to Liberia small population: 1.2 million people in 1965.

    There were companies all over Liberia looking for skilled and unskilled workers. There were companies like LMC (Liberia Mining Company); Bong Mines; Mano River Mines; Firestone; LAMCO; VAMPLY; Cavalla River Rubber Company; B.F.Goodrich; Caterpillar; STANLEY; Many Logging Companies; Saw Mills; Diamond Mines; Agriculture companies; CEMENCO, LIBSUCO (in 70s) and many more non-governmental entitles that helped boost Liberia economy. Liberia exports were on the rise.

    This new government needs to look way back into the past (the 60s & 70s) and study the positive attributes in Liberia’s past booming economic history to evaluate if some of those valuable economic principles of President Tubman’s Open Door Policy could be replicated. Here is an old YouTube video on Liberia’s economic boom of the 60s and 70s: “The Wealth of Liberia Restored” by Yor-El Francis.

    Though Liberia had an economic boom during those years of President Tubman, he and his True Whig Party Elites did not develop Liberia’s infrastructure. Nor, did they invest in Liberia’s human resources……..education of the ordinary Liberian people. Most of the wealth received during those economic boom years of the 60’s and early 70’s went into bank accounts of the upper echelons in President Tubman & Tolbert government.

    I remember vividly when many African immigrants, mostly from West Africa, flocked into Liberia to find work. During those years, many African countries like Ghana, Guinea, Togo, Sierra Leone, Gambia, and just to name a few were going through economic hardship. Our African brothers and sisters found Liberia, which used only the U.S. Dollar as its legal tender, a place of refuge and economic pasture. Many Nigerians (mostly the Igbos) came to Liberia as refugees because Nigeria was going through its Civil War (Jul 6, 1967 – Jan 15, 1970) at that time.

    We all know that this new government inherited an economic mess! On the contrary, this new government inherited a far better economy than the totally collapsed economy President Sirleaf inherited in 2005. This is not the time to cry over spilled milk President Weah! The ball (the economy) is now in your court!

    President Weah, you are now the Leader. You and your CDC had 12 years-in-waiting: to develop your economic, social, political, domestic, foreign and educational policies just in case you won the election you so long fought for.

    However, it is never too late to fix Liberia’s economic problems. As you said, to paraphrase: bring all the sharp minds together: the International economic experts; the local economic experts, and last but not least, bring in Liberian economic experts living in the Diaspora.

    Studying Liberia’s positive economic stories of the past will help put things into perspective for now and the future. Extract the positive attributes from past economic success stories. However, throwing a meager $25M is like robbing Peter to pay Paul.

    We need to kill the deadly economic cancer: which is, finding a permanent solution to Liberia’s current economic crisis. Call me nostalgic!!!!

    • You are not nostalgic my brother , but times have changed, many of the lessons learned from the 60s will be difficult to replicate today! It’s a new ball game, companies have become “greedier”. I am one of those who believe that using a single currency (in this case the USD) temporarily might contribute to solving the problem. However, this is not a straightforward solution, as there are many unknown variables to this “multivariate polynomial system” ( the tons of problem our economy is facing) that must be solved before we even think of solving the accompanying “matrix” (the infusion to stabilize our economy—> I am not sure of how just US$ 25M will help the economy). What are the underlying problems for the inflation? How much USD is in circulation in Liberia (I personally there is much more USD under matresses than in the bank ) ? How much money is leaving the country and not benefiting the country ? Who are those taking these “monies” out (What corrective measures can be put in place to stop this)?

      Liberia needs products, and it has several , the Liberia’s ship and corporate registries, mining sector (various mining activities) , agriculture (cocoa,coffee,rubber,vegetables,etc) ,tourism (there is a potential here if developed, Gambia, Kenya and some other African countries for example have gone a far way in developing their tourism industry),etc, etc. Why is Liberia not developing these products and/or why is it not benefiting Liberia the way it should ? Infusion without backing is just like “pouring water on a duck’s back”, (it has no intended effect in essence).

      Create more jobs (from non traditional Liberian sources, like Liberians handling customer service/call centers for US or European companies —> that will require fixing the internet infrastructure) , encourage micro scale manufacturing of various commodities,etc.

      It is also sustainable that Liberia invests in several “stable” foreign funds (if the cash is there) , profits could be re-injected into the economy when need be , otherwise save profits for future use!

  5. Kopia, you are good. That is what Liberia as nation needs now. Decisive action together as a people and be consistent.

LEAVE A REPLY

Please enter your comment!
Please enter your name here