When President Ellen Johnson Sirleaf first took office in 2006 following the October 2005 election, the exchange rate of the Liberian dollar to the US dollar was between L$55 and L$60 to US$1.
That was when Firestone was the only multinational company operating in Liberia. It was also the time when the National Transitional Government of Gyude Bryant had turned over a country whose coffers were emptied by warlords and politicians who wanted power. It was also when no mining company had come in to begin paying taxes and royalties to the Liberian government for operations and social development packages.
As the Sirleaf administration took over and concessions were signed, the US dollar began to rise against the Liberian dollar without Liberians being told why the skyrocketing rate. The rise was now L$60 to L$65 for US$1, and in less than a year was up to L$70 – L$72 despite the presence of multinational companies here. The rate fluctuated between L$70 and L$80 up to 2012, and later reached L$90 in 2013, to the surprise of Liberian people. By this time rubber, a key foreign exchange earner for Liberia, was struggling on the world market and exposing the negligence of a Liberian government who refused to ensure that companies in that sector added value to their export products. By this time ArcelorMittal and other multinational companies had begun operations and paying royalties and social development funds to the government every year; yet the rate was on the rise without a stabilizing plan proffered.
The first excuse government gave for the high rate of the US dollar against the Liberian was that the country was not producing its own staple food, rice, and as a result it was costing importers huge sums of money to get rice from China, Vietnam and India, with no emphasis on the high taxes levied on imported goods in US dollars. In another development, the Central Bank underscored an excuse that the country was not manufacturing finished products from its natural resources, and therefore could not attract much foreign exchange.
The fluctuation continued until late 2015, when it reached L$100 to US$1. This was when Ebola was subsiding and the economy badly affected from the 2014 outbreak. This health crisis again provided a tangible excuse for government for the skyrocketing rise of the US dollar, then rising from L$100 to L$109 in 2016, and from L$110 to where we are at L$118-20.
The excuses got more and confusing, so much so that even the Central Bank of Liberia is contradicting itself. A few years ago the CBL in the Daily Observer clarified its role in currency rate control. It stated that it was not responsible to control or regulate the exchange rate, but that the rate can be determined by what a country produces. Today, it is backing up and regulating the exchange rate for currency exchange bureaus; setting L$112 as a selling rate for the US dollar and at times seizing monies from vendors changing money on sidewalks.
Daily Observer’s June 28 Edition published a story titled, “US Rate Differs at Street Bureaus.” In this publication, experts provided opinions on the unfolding depreciating rate of the Liberian dollar to that of the US dollar. They cited low prices of exported commodities including rubber and iron ore, deficits, rising demands for imports, capital flight among others as factors for the depreciation of a country’s currency, which we cannot challenge.
But persistent excuses on the part of this government without solutions make people wonder if it is serious and concerned about the welfare of Liberians. Ghana, Sierra Leone and Guinea are countries much like Liberia in their economic structures; yet these countries have regulations and policies that stabilize their currencies.
Then, multinational companies and their withdrawal in 2014 because of Ebola also formed part of government’s excuses. But there are second and third class companies carrying on artisanal and medium scale mining and paying taxes. How is the government managing funds from these revenue sources to help its own citizens?
Opinions provided by experts are realistic in relation to any economic situation, but the government is using them to cover up its deliberate attempt to perpetuate poverty on the majority of citizens in this country. Capital flight, as stated in the opinions, serves as one key factor bringing about conflict of interest on the part of government officials. The majority of officials of our government have immediate family and other obligations abroad and are obliged to send money there to support those obligations. This situation brings about high demand for the US dollars.
Complementing this demand factor is harsh custom duties imposed on importers of foreign commodities to be solely paid in the United States dollars. In order to get the US dollars to pay taxes, importers and taxpayers have to buy them from money exchangers at prohibitive prices offered in the Liberian dollar that is surplus on the market. This situation was one of the reasons for which the Patriotic Entrepreneurs of Liberia (PATEL) led a nationwide strike on two occasions, but the Liberian government has remained consistent with its harsh tax policy and political maneuver to withhold the US dollar to finance its campaign.
Liberians will only believe the Sirleaf administration if it takes tangible steps to address this economic situation. But tying the problems to those long-time excuses will only expose more of the government’s hypocrisies and the uncompassionate attitudes of its officials.