In the wake of the rising foreign exchange rate of the Liberian dollar to the U.S. dollar, which now stands at L$191 to US$1, President George Weah has announced several ‘economic measures’ to curb the country’s soaring inflation rates which has contributed to increased unemployment, commodity prices, falling real income and the plummeting value of the Liberian dollar.
However, President Weah fell short of announcing any short-term measures that will immediately alleviate the current economic hardship Liberians are experiencing—a move which has angered lots of Liberians.
“My fellow Liberians, I want you to know that I am aware of the difficulties and hardships that the rising exchange rate is causing you; and the effect it is having on prices of all goods and commodities in the market. I am deeply concerned about these issues. I am working day and night to resolve them,” President Weah said on Wednesday, May 29, 2019 when he addressed the nation.
The measures in question, economists explained, if properly implemented, will initiate the country on a new path of growth, employment, and transformation and rebuild investors’ confidence in the country’s banking sector, properly end state capture, and restore good governance at state-owned enterprises.
Furthermore, economists added the measures also can reduce the budget deficit by bringing government revenues closer to expenditures, which made government debate payment easier and demonstrate a government’s fiscal discipline to creditors, and credit rating agencies.
However, the President said his government will shortly announce a series of policy measures that are intended to stabilize the economy in the short-term and position it for growth in the medium to long-term.
“We are working with stakeholders on measures that are intended to bring down prices,” President Weah said. “We are working to attract new investments in agriculture; and we are working to improve our business climate to reduce the costs and hurdles of doing business in Liberia.”
President Weah added that the measures will include introducing salary caps for government workers, and working with the legislators to share the burden as well.
“To achieve this will require sacrifices from all, because our actions will involve reform of our large wage bill; rationalizing government spending to put more resources to critical sectors like health, education and agriculture; improving the way government makes payments to government entities, and vendors who supply the government with goods and services; and some actions on domestic arrears that the government owes local vendors as a stimulus to the economy,” he said.
Other measures, Weah announced is that the budget for the fiscal year 2020 will be based on ‘realistic estimates’ of revenue generated to enable the government to reduce budget deficits, and to undertake realistic projects.
“We are delivering a new and improved fiscal policy that will be announced with the passage of a credible national budget for the 2019-2020 fiscal year. In the last several years, we have passed a budget that exceeds our revenue potential. We are now working together with counterparts in the other branches of government to pass a realistic budget.”
The economic measures announced by the President comes months after an IMF team led by Mika Saito earlier this year, raised the alarm that productive spending is being crowded out by a wage bill, including discretionary allowances; that totals about two-thirds of government-funded expenditure.
“This is not a new issue—it has been a characteristic of the Liberian economy for a number of years. However, as grants and other external assistance declines, this is no longer a tenable situation. Freeing up resources in an equitable manner for Pro-poor development, will likely require effective actions to reduce the share of government resources devoted to this budget item,” the IMF team report said.
On the monetary front, President Weah said his administration will soon start taking actions to instill greater confidence in the CBL and the banking sector at large.
“In this regard, I wish to announce that the Government of Liberia, under my leadership, will no longer borrow from the CBL for its short-term liquidity needs,” Weah said.
He said the integrity and independence of the CBL will be assured and protected under his administration, and this resolve will be critical in the time ahead.
The move by President Weah’s to stop borrowing from the CBL was contained in the IMF report, which stated that without central bank borrowing, financing a sufficient level of public service provision will require policies to prioritize, and improve the composition of expenditure, enhance its efficiency, and expand the resource envelope.
“Increased uncertainty and volatility in the external environment argue for further measures to safeguarding the foreign exchange reserves of the central bank. The creation of a well-functioning monetary policy framework would reduce the need for foreign exchange intervention. Acceptance of greater exchange rate flexibility would help preserve reserve stocks, and absorb external shocks. In addition, reducing the central bank’s operational deficit would be vital,” the IMF report said.
The President announcement also comes a month after top foreign diplomats in a letter called on the government to stop “the so-called borrowing initiative,” which damages donor confidence in government’s use of its resources, and in its ability to serve as an effective partner on development programs.
President Weah furthered added to provide the opportunity for the CBL have a new direction, and therefore, he has accepted the resignation of the Dr. Mounir Siaplay, Deputy Governor for Economic Policy; and announced that Executive Governor Nathaniel Patray is scheduled for age-related mandatory retirement in the next three months.
“During that period, we will work to transition the bank to new management. The new CBL leadership will be recruited by a vetting committee to be established,” President Weah said.
He added, “It will be composed of an independent team of professional Liberians, to be named shortly. Meanwhile, I will also announce a new Board of Governors next week.”
The retirement of Patray from the CBL is in the midst of s serious liquidity crisis, which, and report of systematic flaws in the banking procedures.
It is also reported that Patray is seeking half a million united states dollars as a severance package for retirement.
President Weah said his move is based on the fact that multiples reports on the alleged missing L$16 billion and US# 25 million mop-up exercise like the Kroll, PIT and GAC reports show major lack of systems, and controls at the CBL, which call into question the ability of its present leadership to effectively revamp its internal mechanisms to provide greater accountability and professionalism, so that confidence and credibility would be restored to the institution.
However, the move by the president to replace the entire Board of Governors of the CBL, according to observer, is in violations of the CBL acts part IV, section 13 (1-5) that: “A member of the Board of Governors can be removed from office only by impeachment by the Liberian Senate upon a finding by a majority of the Board of Governors and the recommendation of the President, for any of the following reasons: (a) gross breach of duty; (b) misconduct in office; (c) conviction of a felony; (d) being declared bankrupt; and (e) violation of paragraphs (a) and/or (b) of subsection 1 of Section 13.
“The President may, however, remove a Governor upon a determination by a competent medical authority that he is medically unfit to execute his duties, or is permanently incapacitated.”
“For monetary policy to work, Liberians must develop confidence in the banking sector. Today, most of the Liberian dollars in our economy is outside the banking sector,” the president said. “We are shortly going to announce new policy initiatives that should increase the confidence of Liberians in the Liberian dollar. These policies will provide strong incentives for Liberians to keep their money in the bank and for commercial banks to invest more in the Liberian dollar. economy.”
On fighting corruption, President Weah added his administration will begin reviewing performance and revenues from our state-owned enterprises, ensuring that leakages or inefficiencies do not undercut the ability of government to support its people.
“We intend to intensify our fight against corruption. But as we battle corruption, our fight will be based on the facts and the evidence of corrupt activities that are adduced by reports from audits that have been professionally conducted, rather than mere perceptions and unsubstantiated allegations.
“In the next several days, my Government will begin the review of all GAC audits over the past 10 years, and will commence legal actions against every person that is implicated in these audit reports. Anyone found culpable will face the full force of the law,” President Weah said.
President Weah added in this same spirit, his government intends to contract international auditing and investigative firms to go after all monies and resources that were illegally taken from Liberia over the last 10 years.
“We must all take the fight against corruption to a new level as a form of social justice for all our people,” the president tells Liberians.