CBL Governor Patray’s Senate Confirmation Statement Provides Much Food for Thought But Unanswered Questions Remain

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On July 4, during his confirmation hearings before the Liberian Senate, newly appointed Central Bank Governor told the Senate that Liberians should wait for the unfolding of the comprehensive set of economic policies from the Technical Economic Management Team (TEMT), before drawing any conclusions about the direction in which the economy is headed.

The Daily Observer has since patiently waited for a few weeks following Governor Patray’s appearance before the Senate during his confirmation hearings. The wait was underpinned by the Daily Observer’s implicit trust in the promise that by now the GoL would have submitted its comprehensive policies to the nation and to our international partners.

More so, Mr. Paltry himself advised the Liberian Senate and the general public to wait for the comprehensive policies to be submitted by Technical Economic Management Team (TEMT) by the President George Weah because “…many of the goals…” he “…mentioned above may not be consistent with each other.”

Interestingly, two senior cabinet Ministers, Mr. Mobutu Nyepan, Minister of Public Works and Mr. Eugene Nagbe, Minister of Information, Cultural Affairs and Tourism, at their August 1, 2018 Press Conference, emphasized that the priority of the Pro-poor government was “road connectivity,” thereby implying that agricultural programs would be secondary to road connections.

This view is in contrast to that of Governor Patray’s. The Executive Governor had earlier indicated that the priority program was agriculture. He stated that, “If we should ensure a sustainable growth and development of our economy, we will need to review our current economic strategy in terms of reducing our reliance on the enclave sector and move towards the agricultural and manufacturing sectors, in order to create more jobs for our people.”

This newspaper agrees with the Executive Governor that agriculture should be the priority area of focus. However, seeking $1 billion from our International Partners such as the World Bank, US$536 million from Eton and US$420 million from EBOMAF just for road construction would leave little or no borrowing space to get the resources needed to finance agriculture.

To the best of available information, there is no study to support the view that spending $2 billion or the anticipated $4 billion on “Road Connectivity” would generate the needed economic activity. Should we however proceed on the assumption that road connectivity leads to the creation of other economic activities, we find it difficult to explain why there is a serious deficit in food production in areas with good road connectivity.

There are, for example, a limited number of economic activities within and around communities located along the paved roads from Monrovia, Montserrado County through Kakata City, Margibi County and through Gbarnga City, Bong County and Ganta, Nimba County. Similarly we find that there are no meaningful economic activities carried out by residents along the roads going from Monrovia, Montserrado County to Bo Waterside, Grand Cape Mount County.

Also, too, we see increasing migration to urban cities such as Ganta, Nimba County; Kakata, Margibi County; Harper City, Maryland County; etc. all because people are lured by illusions of prosperity in the cities away from the back breaking toil associated with life in the rural areas. Nowadays, many youths of this country display great reluctance to help their parents produce food as they once did prior to the fourteen-year civil war.

Additionally most residents in Lofa County, for example, do not have the required resources to maximize productivity to the extent that it would create quantity and quality of jobs needed to boost the Liberian economy. From the evidence there is not much to suggest heightened economic activity in Liberia.

In 2015, for example an international organization used a sample of 2,000 plus businesses registered within Liberia in a survey to understand the economic activity in Liberia. Many of those businesses were located within Monsterrado County, 170 located in Nimba County, 130 within Bong County, 70 within Grand Bassa County, 14 within Grand Gedeh County 13 within Grand Cape Mount County, 1 in Gbarpolu County, etc.

Moreover, the recent 2017 report by the Central Bank of Liberia on loan portfolios of the commercial banks in Liberia shows that a little over 10% of the loan portfolio was allocated to manufacturing, while about seventy percent plus was allocated to trade and construction of houses.

A major problem however, is the excess amount of Liberian dollars in circulation and to address it, Governor Patray recommends that the “Central Bank of Liberia issues bonds in the amount of L$6 billion or US$40 million equivalent, to help mop up excess liquidity in the banking system and by extension ensure broad exchange rate stability.”

But the Governor surprisingly failed to state just how Liberia will repay the US$40 million debt since the source of the recently announced US$25 million to be used in stabilizing the economy has not been disclosed. Neither did he explain how Liberia will achieve what he called “…Balance of trade (to seek a reasonable overall balance with the rest of the world in international trade and financial transactions).”

Similarly the Governor did not explain how the GoL proposes to “bring about equitable distribution of income (that is to ensure that no group of Liberians faces stark poverty while others enjoy extreme luxury) nor did he explain how GoL proposes to “provide economic security (security for those who are for those who are ill, disabled, handicapped, laid off, aged, or unable to earn minimal level of income).”

Additionally, the Governor did not explain how the CBL proposes to achieve its goal to ensure economic stability by focusing on “concrete steps such as periodic intervention in the foreign exchange market through open market operations, that is, the sale or purchase of securities to withdraw or inject liquidity into the system.”

This newspaper has, on previous occasions, reported that members of the business community including commercial banks, were displaying strong reluctance to honor monetary transactions with the CBL because it has failed to honor its pledges or commitments. This was confirmed by the IMF report (18/172) of June 8, 2018.

Moreover, even if the business community were to have a change of heart, has Liberia developed its money market which should include the active trading of securities such as stocks, bonds, mortgage-backed securities, alternative investments, etc.? How many public corporations (local and, or foreign corporations) within the Liberian money market that are selling, buying securities or trading securities on the behalf of investors?

How will the CBL effectuate another monetary program that Mr. Patray indicated in his proposal? He proposed that the CBL offers “…special directive basically to instruct commercial banks, when necessary, to apply a certain percentage of their loan portfolio in certain sector of the economy (e.g., agricultural sector).”

The Daily Observer is however unsure whether the decision to be made, if ever, by investors to borrow money to invest in trade, manufacturing, real estate, etc. can be usurped by the commercial banks or the government of Liberia.

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