Former Information Minister, Eugene Nagbe, responding some time ago to questions from journalists about reports indicating that this government had dipped into donor money from their accounts at the Central Bank of Liberia (CBL), said it is “dig hole, cover hole” operations.
What the Minister actually meant was that you borrow money to settle a debt leaving you still in debt and to settle that debt you have to again borrow money to settle it. It is a vicious cycle of debt.
But donors, apparently upset by such unauthorized use of their funds, demanded that GoL or the CBL restitute the funds. It is not clear at this time whether restitution has been made.
However, such unprecedented move by the donor community serves to further engrain the widely held public impression that the GoL/CBL had indeed unauthorizedly dipped into funds (reserve requirements) owned by the various commercial banks.
To the best of available information, GoL has not made restitution. This has created a situation where commercial banks display a tendency to refuse to encash government checks. This has served to create a crisis of confidence.
Compounding the woes of this government is the scarcity of Liberian dollar banknotes to facilitate local transactions. Worse still is the continued presence of mutilated banknotes on the market which is causing much distress to the public.
Officials of this government including officials of the CBL had attributed the scarcity of Liberian dollar banknotes to what they called the refusal of the Legislature to authorize the printing of additional banknotes in order to ease the liquidity crunch.
Surprisingly, it has emerged that neither the CBL nor the Executive has submitted to the Legislature a request to print additional banknotes. This has left the public with an impression that officials have been lying to the public.
According to a source at the Legislature, most members of that body had appeared disinclined to authorize the printing of new banknotes when those printed previously have not been fully accounted for.
And so the public is left wondering just why would officials tell stories which eventually turn out to be unfounded. Didn’t Minister of State Nathaniel McGill, for example, tell the public that the Legislature is to blame for the liquidity crunch because they have refused to authorize the printing of new banknotes?
Was he not aware that the CBL had not placed any request to the Legislature for the printing of new banknotes? Did the CBL governor, for his part, inform the Minister that he had placed such a request before the Legislature or did he not?
Now he (CBL Governor) has told a very skeptical public that the cost of printing the new banknotes (LD$27 billion) amounts to 21 million US dollars. But the public appears not to believe this.
And this is not by any means surprising, says a former legislator (name withheld). According to him, the case of the “missing” L$16bn banknotes lies at the core of the problem.
All the accused (CBL officials) were eventually absolved of guilt. It left the public feeling that the entire trial was meant and intended to be a fiasco in order to conceal the involvement of top officials, both past and present.
It now seems the ghosts of the missing billions, thought to have been laid to rest since the absolution of accused CBL officials, have resurrected and may continue to linger and haunt monetary policy for a long time to come.
This is evidenced by the current liquidity crunch which, according to CBL Governor Tarlue, is seasonal. He declared that the CBL in 2019 made a forecast of 7.5 billion Liberian dollars but was instead authorized to print 4 billion.
This was brought into the country in July but he maintained that the amount was inadequate to meet liquidity demands and replace the mutilated banknotes currently in circulation.
Commenting on the scarcity/paucity of Liberian dollar banknotes, Governor Tarlue maintained: “The issue of paucity of the Liberian dollars is a grave concern, and whether we need additional banknotes or we need new banknotes, the fact is we need money on the market to be infused into the economy in a three-year period”.
But apparently the CBL Governor and the Finance Minister are not on the same page.
“Printing money is not the solution. So even when we print new money the problem cannot be solved and the reason why it cannot be solved is the quantity of money that is not coming back but staying outside of the banks.”
Finance Minister Tweah’s assertion that the lack of confidence in the banking system is the fundamental problem, has some validity.
However he fails to state that this problem can be attributed largely to GoL’s failure to restitute money unauthorized taken from the reserve requirements of the various commercial banks, according to a retired Liberian banker.
Now that the Legislature has returned from break, it is expected that this matter will figure prominently on its agenda, given its critical nature.
But whether the Legislature will grant blanket approval without doing sufficient due diligence remains to be seen. What is clear is that the Liberian people need relief and they will not wait forever. This is a message from the Liberian people to President Weah.