UNMIL Drawdown Dries Up Foreign Exchange

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Former CBL Executive Governor, Milton A. Weeks

Milton A. Weeks, Executive Governor of the Central Bank of Liberia (CBL), said the July 1 drawdown of United Nations Mission in Liberia (UNMIL) has considerably reduced the inflow of United States dollars into the economy, thereby putting further pressure on the Liberian dollar.

Governor Weeks said UNMIL, a major spender in the economy, is also affecting micro and medium enterprises as well as informal workers; many of whom operate in the services sector catering to the domestic market.

“To mitigate the current levels of the Liberian dollar depreciation for the first half of 2016,” the CBL intervened in the foreign exchange market with the amount of US$14.5 million as compared to (US$5.0 million in June alone); US$5.0 million lower than the level of intervention made in the same period in 2015.

Governor Weeks spoke yesterday on the current exchange rate and other economic issues affecting the country at the Information Ministry regular press briefing in Monrovia. He told the media that on July 6, the bank intervened in the foreign exchange market with US$3.0 million.

During that auction, Governor Weeks said, the total demand was US$7.6 million, thus resulting into an oversubscription of US$4.6 million.

He said as the festive seasons (July 26, December 25) approach, demands for foreign exchange to service import payment is usually high as evidenced by the level of oversubscription.

Additionally, he said CBL continues with its regular foreign exchange monitoring and enforcement exercises to weed out illegal operators from the foreign exchange market.

Governor Weeks dispelled persistent rumors that the depreciation of the Liberian dollar is due to the printing and release into the market of additional local currency notes.

“This assertion is not true, because the CBL is proceeding with its stated objective of replacing worn and mutilated (tear-tear) currency with newly printed banknotes in the shortest possible time. To date, no additional currency had been released into the system,” Governor Weeks clarified.

He said working with the fiscal authorities at the Ministry of Finance and Development Planning (MFDP), the CBL is engaged in a program of mopping up excess Liberian dollar liquidity using available financial instruments with the aim of reducing the level of excess liquidity in the system.

According to Governor Weeks, the imminent release of the new banknotes will be aimed primarily at replacing worn and mutilated (tear-tear) notes.

He said the CBL is, however, aware that there are some business executives who are reportedly hoarding large quantities of Liberian dollar at home instead of using the banking system.

He said these suspected hoarders have the tendency of using cash “hoards to adversely and artificially impact the exchange rate; actions that have the propensity to be interpreted as economic sabotage.”

Governor Weeks then assured the public that the CBL is devising strategies to encourage the return of these cash hoards to the banking system.

“The current volatility in the Liberian dollar exchange rate is not unique to Liberia,” he said.

Barley a week after he took over at the CBL, Governor Weeks announced what he called the Bank’s “overreaching goals of developing and supporting a vibrant domestic private sector, driven by Liberian-owned businesses.”

But a recent depreciation of the Liberian dollar against the US dollar has raised concerns in the public with rising prices of goods and services.

However, at yesterday’s press briefing, he assured Liberians that the CBL will continue to work with its mandate to address the issues, given the available monetary instruments, adding, “We will continue to also collaborate with MFDP and other relevant institutions in the area of liquidity management to mitigate the exchange rate depreciation.”

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