The CBL is Responsible for Monetary Policy Not the MFDP

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The National Legislature, upon proclamation by President George Weah is recalled from recess to deliberate on urgent matters of national concern for immediate action. A laundry list of issues to be discussed has been released. It includes the deteriorating state of the economy, the rapidly depreciating Liberian dollar against the US dollar, road financing agreements, the infusion of US$25 million in the economy and the case of the missing billions.

Of critical concern are the infusion of US$25 million to mop up excess liquidity and the case of the missing billions. For all the naysayers, especially zealots who have argued that the case of the missing billions is merely hype created purposely to defame and denigrate the character of the George Weah led government, President Weah has made it clear that the yet unsolved case of the missing billions is, indeed, of critical national concern.

This position contrasts sharply with that of Finance Minister Tweah who, almost immediately in the wake of Information Minister Eugene Nagbe’s public declarations that money had indeed gone missing, retorted sharply, dismissing Minister Nagbe’s claims and calling on the public not to pay the Information Minister any heed. Against mounting public concern about the mater the Government of Liberia announced that it had sought the assistance of the United States government to dispatch a team of investigators to assist in the matter.

More than 6 weeks have since elapsed without any sign of a report on the current state of the investigation, aside from public speculations that the money did not disappear but had rather been stolen by public officials.  Adding more fuel to the speculations was CDC Chairman Mulbah Morlu who publicly declared that he had received reports of pickup trucks loaded with cash taking off from the CBL Waterside vault and headed to unknown destinations.

This is a matter which has confounded the public, which has found it difficult to accept that billions of Liberian dollar banknotes will simply disappear without trace. Reports of current officials buying luxurious cars and homes in Liberia, Ghana and elsewhere when these officials, just months ago were unemployed and virtually penniless, have not gone down well with the public, despite vigorous attempts by government officials to create new but false narratives about the whereabouts of the money.

Also on the laundry is the issue of the US$25 million which Finance Minister Tweah claims was infused in the economy to accommodate the mopping up of excess liquidity. But, having come under intense public pressure and scrutiny about how the money was infused, Finance Minister Tweah is reported to have declared that the money was used to buy excess cash directly from individuals identified as holding large amounts of Liberian dollar banknotes.

Maryland County Senator Gbleh-bo Brown has enjoined issues with the public and has called for the
Finance Minister to provide evidence of how this money was disbursed and to who in view of the fact that commercial banks have reportedly made it clear that they were not involved in the transactions. But there are heightened public concerns that the Finance Minister may just prove unable to produce such a detailed account as requested by Senator Brown.

But this newspaper is however troubled by the fact that from all available information, it is the Central Bank (CBL) and not the Minister or the Ministry of Finance that has the legal authority to regulate foreign exchange rates or even withdraw (mop up) banknotes of coins from circulation. The Central Bank of Liberia (CBL) was established on October 18, 1999 by an Act of the National Legislature of the Republic of Liberia. It became functional in 2000 and succeeds the National Bank of Liberia (NBL).

The principal objective of the CBL is to achieve and maintain price stability in the Liberian economy. Under Part 4 titled “Functions of the Bank” sub section 4 of the Act creating the Central Bank of Liberia, it states among other things that the CBL is to “act as fiscal agent for the Bank”. Further in Part VI Section 3 a., “the CBL shall have the power to issue rules and regulations governing foreign exchange transactions of individuals, non-financial enterprises, financial institutions and Government agencies and instrumentalities.”

Nowhere in the Act creating the CBL are there provisions authorizing the Minister of Finance to assume any function of the CBL. As a matter of fact, according to the Act, “licensed foreign exchange dealers, including bank-financial institutions may be required by the Central Bank to report periodically on their operations on a currency-by currency basis”.

Against this backdrop, it is clear that the Finance Minister was out of step by taking charge of effecting monetary policy which is solely the prerogative of the Central Bank. It is the Central Bank to which licensed foreign exchange dealers are required to report and definitely not the Ministry of Finance. The Minister should, as Maryland Senator Brown has indicated, provide documentary evidence on how the money was allegedly infused, granted that he even had the legal authority to do in the first place.

But as it turns out, the Finance Minister had no such authority to make this infusion. This newspaper recalls that it was indeed the Governor of the CBL, Nathaniel Patray who had initially declared that US$25 million was to be infused in the economy. And from all indications it should have been done through the commercial banks but for the Finance Minister to unilaterally declare that he acted as such as infusing the money through the commercial banks (which was the right thing to do) would have had no impact was completely out of his ballpark.

In the view of this newspaper, the Minister’s actions run contrary to the conduct of public policy and has grave implications for wholesome and effective public sector financial management. It is the CBL only that has such responsibility to regulate currency movement including the withdrawal of minted coins or mutilated banknotes.  Any act to the contrary is ultra vires and must be checked forthwith. It is the Central Bank of Liberia, not the Ministry of Finance (and Development Planning), which is responsible for monetary policy.

Authors

2 COMMENTS

  1. The legislature has oversight responsibility over all banking institutions. Similarly, the main function of the Centeral Bank is to implement monetary policies as eloquently explained in the aforementioned article. The idea that the Minister of Finance, Mr. Tweh carried out a major function of the Central Bank without the knowledge of the legislature, warrants an immediate investigation.Knowing how corrupt government officials have been for years in Liberia, there is a strong possibility that portion of the $25 million has been diverted to personal accounts at the highest level in government. I hope I am wrong.

  2. Thank you Daily Observer for the education on this one. You are 100% correct. I hope the necessary steps would be taken to ameliorate the situation.

    Thanks again for your punctual reporting!

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