Liquidity Crisis: Global Prices, US$444m Remittance or Bankruptcy?

Central Bank of Liberia

By J. Yanqui Zaza

The demand for the US dollar has contributed to the decline of the value of the Liberian dollar since 2006. It declined from L$62 to US$1 in 2006, to L$108 to US$1 in 2016; and in 2018, it is L$126 for US$1. The exchange rate decline is now being exacerbated by the liquidity crisis. Nowadays, due to the shortage of cash, commercial banks are reluctant to cash government checks or provide credit lines to government contractors, according to the President of the Liberian Banking Association when he served as a panelist at the Governance Commission Seminar on December 15, 2017.


In thousands of Liberian dollar values In thousands of Sierra Leonean Leones
2016 2015 2014 2013
TOTAL ASSETS  120,161,176.0  94,376,298.0  4,476,515,202.0  3,428,515,740.0
TOTAL LIABILITIES  (111,775,299.0)  (87,084,332.0)  (4,061,821,540.0)  (3,231,836,506.0)
TOTAL EQUITY  8,385,877.0  7,291,966.0  414,693,662.0  196,679,234.0
LESS AMOUNT DUE FROM GOVERNMENT  (26,982,782.0)  (24,776,827.0)  (39,057,652.0)  (1,284,803.0)
EQUITY POSITIVE/(NEGATIVE)  (18,596,905.0)  (17,484,861.0)  375,636,010.0  195,394,431.0
ADD DEPOSITS OF GOV. AGENCIES  18,219,613.0  16,280,911.0 -0-  -0-
AMOUNT OWED TO THIRD PARTIES  (377,292.0)  (1,203,950.0)  -0-  -0-
OTHER ASSETS  (1,080,417.0)  75,167,308.0
INTANGIBLE  (808,090.0)  -0-
TANGIBLE ASSETS  (3,081,032.0)  76,595,558.0
TOTAL NON-CASH EQUIVALENTS  (4,969,539.0)  151,762,866.0
TOTAL REVENUE  2,106,841.0  45,381,828.0
TOTAL DUE TO THIRD PARTIES (USED LD 126)  (5,346,831.0)  -0-


Predictably, had the Central Bank owned excess cash in the amount similar to Sierra Leone’s 500,361,787 Leonean, it could have fulfilled item # 2 of the ten functions of the Central Bank of Liberia (“Administer the currency laws and regulate the supply of money”). (See page # 5 of the 2016 Central Bank of Liberia Audited Financial Statements.) It could use the excess cash deposited in banks located outside of the country to pay government’s debts owed to commercial banks, including some of the US$14 million and, or US$24 million government bonds sold to commercial banks in 2015 and 2016 respectively, if the government did not reverse the sale of bonds. (See page# 27 about the sale of government bonds or treasury bills within the 2015-2017 Economic Analysis Report of the Central Bank.)

Although, the 2016 Central Bank of Liberia’s Annual Report indicates that Liberia has reserved US$180 million Net International Reserve, the US $180 million is not cash-equivalent for the Bank to fight inflation, exchange rate, liquidity problem, etc. This is because the US$180 million is denominated into Special Drawing Rights (i.e., is a privilege to borrow money) and long-term loans and advances owed by the Government of Liberia (i.e., a bankrupt borrower), according to page #36 of the 2016 Annual Report of the Central Bank.

In fact, for the purpose of calculating cash and cash-equivalents, one can safely deduce that the Central Bank is broke since its parent (i.e., the Liberian government) cannot pay its debt of US $214,149,063 (i.e., L$ 26,982,782,000/L$126) within the next twelve months.

The Governor of the Central Bank of Liberia, Mr. Milton Weeks, commenting on the liquidity crisis, stated that the US$444 million outflow of remittances was responsible for the liquidity crisis. However, if the Governor’s theory [“the outflow of US $444m remittances is responsible for the shortage of US dollars”] is true, how come Liberia’s exchange rate did not improve when the Liberian market received an abundance of US dollars in 2006 through 2015 from donors and our international partners?

Instead, the value of the Liberian dollar continued to decline, from L$62 in 2006 to L$126 in 2017. More importantly, the Governor of the Central Bank of Liberia should remember that the Bank was established to reduce the impact of capital flight, impact of exchange rate fluctuations, impact of trade deficits, impact of global influence on import and export prices, etc., but not to focus on the source of the problem.

The practice of searching for the culprits and not solving the problem did not start with the Governor. In September of 2016, just few months after President Ellen Johnson Sirleaf had signed the 2017/2018 national budget into law, she called for a Special Meeting with the Liberian Lawmakers to revisit the budget. The President and her advisers stated that the decline in global prices of commodities was the source of Liberia’s liquidity crisis.

Subsequently, President Sirleaf, along with many of her advisers, etc., deceptively began indicating that global prices of commodities had reduced Liberia’s revenue and government could not pay expenditures such as debts owed to commercial banks.

However, the revenue record says otherwise, according to page # 45 of the Central Bank of Liberia Report for revenue, covering the twelve months of 2015 and 2016 and the four months of 2017. For example, total revenue for the months of March and April of 2017 was higher than the same two months in 2015 and 2016. Specifically, taxes on import (i.e., taxes, which constitute 50% of Liberian government revenue) were up in November and December of 2016 and the four months of 2017.

Further, corporate taxes and payroll taxes were up in 2016 and for the four months of 2017. More so, the two entities (i.e., Liberian Firestone Rubber Plantation and ArcelorMittal Liberia), which account for the largest volume of Liberia’s export, sell Liberia’s exports to their parents, mitigating any global influence on the price between these Liberian subsidiaries and foreign parents.

Revenue collection was normal; therefore, it can be concluded that the Central Bank cash management is responsible for the liquidity crisis. For example, the bank had lent US$17,507,579 [L$2,205,955,000/L$126 [L$26,982,782,000 as loans in 2016 minus L$24,776,827,000 loan in 2015)] to the government of Liberia. Also, it used US$28 million (L$3,705,706,000/L$126) of government revenue to pay the bank’s operating expenses  since it did not own a significant amount of excess cash to generate revenue outside of Liberia.

For example, in comparison, the Central Bank of Sierra Leone collected seventy-five percent (75%) of its revenue from interest earned from banks located outside of the country, while Liberia collected just about three percent (3%). The bank reduces its cash flow when it uses US dollar on the Liberian market to lend money to the government or pay its expenses.

Further, while Sierra Leone’s Central Bank, during the Ebola period, increased its equity by 180,341,579 Leones (375,636,010 Leones in 2014 minus 195,394,431 Leones in 2013), the Liberian Central Bank did not disclose in the 2016 financial statements what happened to the US$14 million and US$24 million proceeds of the government bonds sold in 2015 and 2016 respectively.

In conclusion, had the Central Bank of Liberia accumulated excess cash reserves and added some portion of the proceeds of the bonds sold in 2015 and 2016, the bank would have accumulated adequate cash to pump US dollars onto the Liberian market, thereby, mitigating the impact of capital flight and alleviating the current liquidity crunch.


  1. Just make it plain and simple. Liberia is BANKRUPT. It will be business as usual. More “BAD LOANS; over More BAD LOANS”… The signs of things to come, doesn’t look good for the Incoming Administration. G.W is inheriting a “BANKRUPT COUNTRY-LIBERIA.”

  2. Just like in the US, the next president will inherit the outgoing mess. It can be the economy or national security. Next president will not get it easy. Infact, the next president have to start from fresh and establish his own economic and financial institution. President George Weah will be tested in fixing the economy, and all it’s financial institutions. Campaign is over, let the real work begins.

  3. The plain fact is that the Governor of CBL, Milton Weeks, lacks the experience and expertise for the job. But for the fact that he is a Weeks, a family clan with which Madam Ellen Johnson has a long-standing relationship, he would have never landed such a job that is far greater than his ability or capabilities to efficiently and effectively carry out in the interest of the country. Recommendation to the incoming government: tenure or tenure, immediately replace the guy with someone with fresh expertise rather than family connections. The economy is too critical to the success of any government to play around with. In fact, the ongoing terrible economic and financial situation the Ellen government is bequeathing to the new government played no small role in the defeat of the UP in the recent elections.

  4. Prof Yanqui Zaza’s analysis is very troubling and does reveal a major case of incompetence or corruption or both at the Central Bank during the tenure of the Sirleaf administration. Very urgent steps must now be taken to hold the former Governor and all others concerned responsible for malfeasance. These crooks cannot be allowed to get away with imposing such a heavy burden on the Liberian people. The new government will have no time to waste.

  5. After a nine-year hiatus, it’s a pleasure once again to be able to catch up with Mr. Yanquoi Zaza. Zaza is a genuine Liberian patriot. At times, Zaza raises issues that some may consider to be controversial, and sometimes some responders embrace him irrespective of what his distractors may say or think. Personally, I’ve had disagreements with him as it relates to his blatant repudiation of Johnson-Sirleaf’s economic, political and social policies of our country. As Zaza will tell anyone, I was a staunch supporter of Johnson-Sirleaf’s policies from east to west early on. Not anymore! In so many ways ladies and gentlemen, I was wrong and Zaza was right! I am not proud to admit my mistakes. Having said so, I am not suggesting that Zaza is always right. Of course not. I will disagree with him when I think he’s out of sync and yes I will truly support him when I think he’s right. That’s how demoncracy functions, less we forget the issue of checks and balances.

    But despite our infantile differences, we are both patriots and comrades who wish for the best of the best for our beloved brothers and sisters of Liberia. May God bless us all.

  6. On her innuaguration to the presidency, the world community generously offered Ms Sirleaf a clean slate by forgiving almost all of Liberia’s debts and went on to inject additional money into the country’s economy for development. Yet, Sirleaf, who prides herself as an economist has borrowed more money and placed the Liberian economy in a state of bankruptcy. We have a country that produces rubber but there is not one company in Liberia that produces plastic containers. Liberia produces iron but must import steel rods and steel bins for construction. We grow coffee and cocoa but do not process them to finished products. Our forest is being depleted while we import lumber. In short, there has been no vision by Sirleaf and where there is no vision, the people perish. Shame!


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