“Weah’s Proposal of US$25M to Stabilize Economy Not Meaningful,” Experts say

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President Weah

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.

Authors

10 COMMENTS

  1. I am not banker, much less an economist in order to have an expert knowledge on the current financial situation unfolding in Liberia. But from a layman’s perspective, this illogic of a solution to counter the liquidity situation in Liberia by this proposed infusion of more US$ is just downright stupid. What sense does it make to infuse more of the same doggone $US that counterfeiters are in search of? As I said, mine is just a layman’s view, but that proposal doesn’t seem to make any sense at all. Perhaps the introduction of another currency, something like the erstwhile Tolbert or Doe coin would solve this problem. Either that, or make the US$ illegal in the country. Or better yet, only the banks should have the authority to exchange US currencies in Liberia, since they will have the means to detect counterfeits, Liberian or otherwise.

    • I am absolutely in agreement with the point taken by our “anonymous expert” that the counterfeiting of the Liberian currency should be stopped and that perpetrators should be hunted down by law enforcement at all cost. But our “banking expert” did not mention the fact that the agricultural sector of our domestic economy seems to suffer because of the lack of farm-to-market roads. He somehow down-played the significance of the healthcare delivery system in Liberia’s domestic economy. It will o take people who are healthy to venture into the aggro-industry which, in the absence of mechanized industry, depends mostly on man-power. President Weah stated that the immediate infusion of the US$25 million is necessary for the short term in order to mitigate the dire situation the country is presently faced with. A more workable solution is in the pipeline to help turn the economy around.

  2. Well I think the government should start to focus on the agro sector so as to create a more vibrant economic based that will firstly make us self sufficient in food and other consumables, then every other thing will fall into place,remember the agriculture sector is a very large sector which is a conglomeration of various departments that has the potential to stimulate the economic wheels of any country .therefore government should start to make more allocation in national budget for this sector by so doing there will be massive cut down in terms of money spent on the importation of every consumable goods which will have a positive impact on the country domestic investment.

  3. The President just made these proposals, give him some time to have them implemented. And stop looking for instant and quick solutions. These problems did not happened overnight. They were long in making. Liberians, you must exercise patience… Get off the bandwagon…Grow some food behind your house…help sustain yourselves…Stop complaining about the price of cassava leafs, pepper and etc..Stop the laziness grow the basics for you selves. Raise your own chicken.. My mother and others did that before…

    • It seems some of you either out of ignorance or pure sycophancy speak before you think? So if rats were eating your cheese or rice in your attic, your solution will be to add more rice to the pile? The president gives us the impression that he understands (which we even doubt) that the $LD is being counterfeited and obviously for the $US, and his answer is to dump more $US dollar on the market? With that level of stupidity for thinking, don’t you think we will be right back to square one or even deeper in the hole after one -two months of that “free throw?” Nobody in their right mind would expect a quick fix to the economic problems of Liberia, but at the same time we expect rational approach to fix the problem. And when people express their disagreement with the stupidity some of you associated losers have problem with that? Let’s see where such stone age mentality will land us. We inside.

    • Hmmmmm lol Bro. Mclntosh! But at this place and time in world economics, raising your own chickens (any form or “off grid” self subsistence will not solve the economic issues) is not sustainable for a whole country. If you are to keep your country’s name on the global economic map, you will have to do more than raising your own chickens in your backyard! But, your point “holds water” provided you are a loner/hermit in the deep forest where civilization is not welcome, given the ideal conditions that your birds (any other form of self subsistence activity) are disease free (ideal conditions), will multiply and there is no prey (danger) !

  4. A point. Use the 25 U.S. million dollars to recover all Liberian currencies not seen in circulation, regardless the time printed or minted or under all of the past, present administrations or interim governments. Put them in the coffers of the Central Bank under ground or up floors and prepare to study demand and supply as regards mutilation and coinage elemental transfer as per periodic chart of newly invented chemical elements as related to the dynamics of physics for foreign exchange. For example, the seven corners minted out of cobalt during Soldier time , the paper currency 1828 before and after Cape Palmas was attached to the mainland. Silver and brass coins could induce new metallic inventions. Also shredded metrics from muted currencies abstracted for forensic and/or medical research will project some economic reserves. Not telling you more. I will only accept Liberian money for my knowledge. Do not answer my box. Tell Liberian people. Gone to silent majority.

  5. I believe, it is time those with expert knowledge about market volatility resulting from imbalance in the exchange rate of the local currency and the more favored foreign currency (e.g., U.S$) to be allowed and trusted in the analysis they conduct on the actual reasons for the downturn in the economy and the solutions they provide, though they might suggest stringent measures. What I have read, and to the credits of those who have explicitly indicated their naivety in economic matters before commenting, is that many others commenting on this issue have no practical understanding of the facts, and the solutions they provide will bring no remedy to the problems. For example , suggesting the infusion of US$25m into the economy without indicating the how (e.g., what sector of the economy going to receive the US$25m, or if not sector oriented, how is the amount going to be appropriated)? What analysis was conducted to determine the impact the amount will make to the economy in hard pressed sectors in the short term? It’s depressing every time when positive critiques are made, you have commenters expressing their disdain and bringing in the history of events from the founding of the country or prior administrations as if those would help alleviate the current problem or prevent future events. The fact is that the current government is responsible for enhancing the economic welfare of the citizenry and creating an environment for sustaining improved economic activity. I am also troubled by suggestions that a President or his administration should be directly influential over the Central Bank. The Central Bank should always be an autonomous agency for the public interest with expert staffs, similar to the Federal Reserve Bank of the U.S., that, as I suggested in prior comments, should be allowed the independence to review the economic activities within the nation and take appropriate safeguard measures to prevent both inflationary or deflationary pressures from crashing the economy. To do that, they have to be empowered and allowed to make those decisions without undue interference from government officials. Stop babysitting the president with claims that he just took office and so needs time to grow. That’ why candidates run for offices through political parties. Political parties develop platforms for governance from which they implement policies once they come into office. To suggest that there should be a learning curve means that the current CDC led government had no such platform of goals and plans to implement once they came into office. That’s why you have this surprise inflationary pressure that could derail other areas that the administration should’ve been focused on. That’s why you had loans taken through agreements with firms that in all practical purposes would raise major red flag had this being in the U.S., under Anti-Fraud provision and Anti-Money Laundering laws. I know we have Liberians who are experts in economics, finance, law and engineering. Though I studied economics and subsequently law, most of the Liberians I know and went to school with in the U.S., are in the other fields mentioned with incredible successes in their respective fields, with incredible integrity and I have no doubt they would seek the best interest of the country in any analysis and suggestions they provide. They should be sought out, and I know many are willing to provide input. It is disheartening that, while I don’t know any of those in the current administration, there are many whose public comments on matters of the economy and law have being of concern on whether they are in this for themselves first, the political party second and only for the country where there’s a residual default benefit to the decisions they make. I suggest the following to the current government: (1): determine what sector of the economy need the most infusion of short term stimulus and then provide the appropriate amount. This would be an area that would have a positive impact in other areas of the economy when it is vibrant. (2) Allow the CBL the independence to assess and determine the ratio of currency that is appropriate for the current state of the economy and allow them to make independent judgment of what needs to take place (e.g., amount of LD$ legal tender that’s needed versus the US$, level of reserve ratio to be maintained by banks at the central banks, etc0 (3) Establish an anti financial crime agency similar to the U.S. Financial Crime Enforcement Network (FinCEN), if none exist and if one exists, have it collaborate with financial institutions in identifying counterfeits LD$ and US$ and teaching local businesses how to identify the legal currencies with the security markers. Obligate all financial institutions to have Anti Money-Laundering, anti-fraud policies and departments that can work directly with the government’s Financial Crime Enforcement Network to track suspicious financial transactions at any financial institutions.
    This is a truncated version of what I had prepared after conducting research on some of the issues currently existing in Liberia. I try to be as factual in my thoughts without any assumptions based on hearsay or political leaning, not having lived in the country for most of my life, with most previous time being 2007 and 1985.

  6. As someone anonymous, perhaps an Economist have pointed out, the decision to increase or restricts “MONEY SUPPLY” should be left up to THE CENTRAL BANK. President Weah is neither an ECONOMIST or a BANKER. He can/may make said decision only upon the advice of the “CENTRAL BANK’S EXPERTS. Yes indeed; President Weah may have good intentions. However, Liberia’s Monetary Problems are complex. They require studies and analysis by EXPERTS. The President’s ORDER(S) to the central bank, might just make matter worst. As sources tell us, there are Liberian counterfeit notes in circulations. The President may very well be playing in the hands of “THE BAD GUYS ie THE COUNTERFEITERS. The best thing, get The Justice Department to put the streets’ MONEY CHANGERS OUT OF BUSINESS, then go after the counterfeit notes and the COUNTERFEITERS. When caught, “A COUNTERFEITER” should be send to Bella Yallah and forgotten.

  7. The point here is that there was not enough Liberian dollars legitimately printed or minted to offset the amount of foreign currencies flowing in especially USD . An expert might not even be needed to see this unbalance situation in Liberia. Can you presently exchange 50 million United States Dollars right now in the Liberian market for any form of Liberian money right now? It cost money to make money. The smaller the denomination the more costly it is to print or mint and if plated, might cost the same amount of ink or metal in equal sets. How many ten dollars or five dollars do you have to print to get 500 thousand? They could not afford to print twenty ones as would have drain their pockets. So they took away the 500 and 100 singles and left the burden to the taxpayers or the poor to print the 5 LD for changing. To retrieve the higher out of the banking system right now in other nations the world, simply use the amount in USD to stock any form of the Liberian money in excess and those who need American dollars will soon send the Liberian dollars back to Central Bank. Do not reply this box. Do not worry they will soon answer. Just let the Liberian people know.

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