Following President George Manneh Weah’s address on the state of the Liberian economy yesterday, two financial and economic experts say he is in great error for thinking that his proposal will yield any good result.
Via mobile phone, a former international banker said much is required to be done rather than thinking about superficial measures that have no capacity to alleviate the astronomical economic challenges that Liberia is faced with.
“I think the President needs to think outside the box. With the news circulating that huge sums of Liberian banknotes are being counterfeited by some unscrupulous individuals across the country, infusing US$25 million dollars into the country’s economy in an effort to ease the rising hardship could reward pushers of counterfeit,” the banker said.
President Weah in his address said, “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.”
Elaborating what his government has planned to do in order to mitigate the growing economic crisis, Weah said: “An immediate infusion by the Central Bank of US$25 million into the economy to mop up the excess liquidity of Liberian dollars; a mandate to the Central Bank to provide more effective supervision and regulation of money-changers or foreign exchange bureaux; a mandate to the Central Bank to provide more robust oversight of banks under its supervision,” among others, will be his government’s focus for the coming days.
He added that CBL will “Conduct a comprehensive review of regulations on the hoarding of both Liberian dollar and U.S. dollar outside the banking system, and provide incentives and safeguards to encourage the utilization of the banking system, including financial instruments.”
The banker, on the other hand, said while it is still early to doubt the ability of the Weah Administration to succeed on its campaign promises, good measures have to be taken. “From where will this money come? Who or what source will make this money available? He has to be clear in explaining to the public the “how” part of his speeches,” he said.
Another financial expert who also preferred anonymity, agrees that Weah is even more wrong for saying that he “will instruct the CBL” to infuse a certain amount of money into the economy for whatever reason.
“What should be known here is that the CBL is an autonomous body and should not be commanded by the President or anyone else to go about doing things without a careful study of the negative trickle-down effect underway,” the financial expert said.
About the daily skyrocketing exchange rate between the U.S. and the Liberian dollars in which the local currency continues to depreciate, he said there is no need for anyone to compare the country with other countries in the Sub-region or anywhere else.
“While it is true and correct that the exchange rate between the U.S. dollar and other currencies may of course appear high according to the understanding of many people, it is not the determiner of inflation or underdevelopment. I say so to mean that once a country produces some of its basic commodities that it could have been importing from other countries there is a possibility of saving millions — if not billions — of dollars that can be directed towards other programs and initiatives,” he said.
Though in the respective West African countries, the exchange rate is 9000 Guinea Francs, 370 Naira (Nigeria) and 7,700 Leones (Sierra Leone) to to US$1, he said, that is not what is important. L$160 or more is now exchanged for US$1. He noted that the denominations of currencies in some countries are high but with less value as compared to others with low denominations, yet with appreciable value.
According to the former official, if the CDC-led government should succeed, it has to direct a lot of its fiscal budget to agriculture and education. “I am not saying that health and other sectors are not important but, considering how much of the budget is used annually on the importation of food, particularly rice, there is a need to allot some good money to agriculture,” he said, noting further that if Liberia can feed its citizens and stop the importation of pepper, onions, and other basic agricultural products, it stands a chance of prospering even amid the harsh global economic challenges.
“Today, five months later, it is not for us to complain about the bleak situation we inherited; or to cast blame upon previous administrations,” President Weah said in his address. “Rather, ours is a duty and responsibility to find new and sustainable solutions to these age-old problems that have stubbornly defied solution in the past. We were very aware of these systemic problems when we decided to run for the high office of President of Liberia, and so we are not surprised.”
He added, “And we are fully aware that we were elected with the expectation that we will solve these challenges. This is a task that we are now embarked upon with strong determination, focus, and commitment. As a first step in this direction, we have placed emphasis and urgency on the formulation of a comprehensive development strategy that will be supported by a strategic implementation plan. The development strategy, to be known as the Pro-Poor Agenda for Prosperity and Development, is nearing completion, and will very shortly be presented to all stakeholders, including our foreign development partners, the private sector, and the general public, for consultation, input, and buy-in, before being finalized into a strategic implementation plan.”
He promised that, “Over the next several weeks, the Government, through its Economic Management Team, and in close collaboration with the Central Bank of Liberia, will announce a series of monetary and fiscal measures that we believe should help reverse the decline in the value of the Liberian dollar,” the President concluded.