— Says Liberians should be prepared for more dire liquidity crunch ahead
Liberians could face more dire economic times next year as a result of an increased shortage of the Liberian dollars, claims the Minister of State for Presidential Affairs.
The prediction, which was made by Nathaniel McGill, who is the Minister of State and Chief of Staff to President George Manneh Weah, was based on his belief that the present liquidity crisis came as a result of the 54th Legislature’s decision to deny the Central Bank of Liberia’s request to print L$7.5 billion instead approving the printing of L$4 billion.
Min. McGill argued that his forecast is unavoidable if lawmakers, upon their return next year, refuse to authorize the CBL to print additional new banknotes to mitigate the current liquidity crisis, which has limited cash flow in the country. It is a situation that has forced banks to ration daily cash-withdrawals.
If the CBL’s request is denied again, Min. McGill said, the situation will be far worse, as Liberians will find it more difficult to access cash for business transactions and will be served with more mutilated banknotes.
According to him, the current liquidity situation needs urgent attention from the lawmakers if Liberians are to easily access the Liberian dollars next year for business transactions.
“It [has] to do with the country and we [have] to change the money. It is purely a Legislative responsibility. If we do not have money in this country, they are lawmakers; they have the power to authorize it. If they do not authorize it, we will not have the money. Then, the rotten money will be there. Sooner or later, we will not have Liberian dollars to use again because of the kind of Liberian dollars we have. By the time the money gets mutilated, you can’t find it”.
“If the lawmakers do not agree to change the money, Liberian people will get problems with the Liberian dollar. They have to agree to change the money. We can’t find the Liberian dollars because majority of the Liberian dollars are rotten, “said Min. McGill in a video interview with a journalists recently.
Blame the Legislature
However, Minister McGill in that interview shifted the blame of the scarcity of the Liberian dollars from the executive branch, like the CBL did last week to the lawmakers.
In a press release, the CBL said the current financial crisis could have been avoided if the Liberian Legislature had approved their request to print L$7 billion.
The bank added the L$4 billion approved by the legislature was inadequate to replace the current amount of mutilated banknotes and, at the same time, meet the liquidity demand in the banking system.
“In its effort to preempt this seasonal pressure, the CBL in 2019 forecast L$7.5 billion based on its analysis but was authorized to print only L$4.0 billion. This amount which was brought into the country in July this year, was inadequate to replace the current amount of mutilated banknotes and, at the same time, meet the liquidity demand in the banking system,” the CBL said in their press release.
Following the CBL, McGill said the scarcity of the Liberian dollar is not the responsibility of the President but the lawmakers who have the constitutional responsibility to authorize the printing of new or additional money, but are failing to do so.
Min. McGill argued the recent failure of legislators to authorize the printing of new or additional bank notes as requested by the CBL is having a serious adverse effect on the country, the economy and people.
“This is pure legislative responsibility. The lawmakers have to decide that… we have to change the money. If we don’t agree, we will all be here and we can’t find the Liberian dollars,” said McGill.
Meanwhile, the President’s Chief of Staff added that the firing of underperforming ministers will not solve the multiple problems in the country, including the scarcity of the Liberian banknotes.
“I know people want the President to fire people everyday, but that will not solve the problem. Sometimes you have to give people the opportunity to be able to do the right thing,” he said.
The defense from Min. McGill and the CBL come as banks continue to experience a growing horde of people forming in queues just to get cash, which has been in short supply. Although the Liberian and US Dollars have been in short supply for months, the squeeze has intensified in the last few weeks forcing banks to turn away customers as they simply don’t have enough cash in their vaults due to limited cash received from the CBL.
Despite the positive African Development Bank outlook, the current liquidity crunch reminisced the same problem in 2018, meaning Liberians are in for a very rough incoming new year as the situation might persist for much longer than expected.
According to the AFDB, the Liberian economy was going to recovery by 1.6% in 2020, underpinned by mining, forestry, and agriculture with improvement in Macroeconomic stability due to the implementation of an IMF-supported program improving fiscal and monetary policies, which “tackles structural rigidities to create a favorable environment for private investment.”
However, such improvement might likely not be realized as the county is not just struggling to ensure cash flow but also finding it difficult to raise enough revenue to pay its wage bills and local debts.
Also Min. McGill, who has so far barked against reshuffle is laying the blame squarely at the legislators’ feet, since they decided to do their job by questioning the rationale behind the L$7 billion dollars printing request when the CBL has been finding it difficult to ensure that the country’s money is not predominantly outside of the banking sector.
The situation between the Executive and the Legislature started when President Weah’s administration asked lawmakers to grant the CBL request to print additional L$7.5 billion dollar banknotes to address the problem of money shortage in the banking sector.
Though the request from the Executive was endorsed by a recommendation from the Senate Committee on Banking and Currency, chaired by Senator Marshall Dennis of Grand Gedeh County, the Senate plenary did not endorse the committee reports on ground that there were lots of Liberian dollar in circulation, so printing such a huge volume could have been bad.
The senators argued that such a move could have put the Liberian people in serious financial jeopardy, because many financial and economic questions have gone unanswered, especially when the money in circulation at that time (2019) was L$21 billion that needed to be removed from the market.
Meanwhile, Min. McGill has said that it is wrong for Liberians to continue to blame the President for their economic difficulties in the county instead of holding those appointed accountable.
“We who are Cabinet Ministers; you know sometimes people do not blame us. They blame the President for everything, but we [have] to do our job. I think the message the Liberian people are giving us, the Cabinet Ministers will understand so, when the President starts to take actions our people will know that the President is serious. It’s not that the President is joking”. Min.McGill added.