The Central Bank of Liberia (CBL) has blamed the depreciation of the Liberian Dollar by 7.1 percent against the US dollar mainly on account of declines in the prices of the country’s major commodity exports, rising import demand and deteriorating terms of trade. But President Ellen Johnson-Sirleaf said in addition to the reasons provided by the CBL, the departure of concession companies and widespread capital flights are contributing factors to the increase in depreciation of the Liberian Dollars.
“We have problem with Foreign Exchange because many of our iron ore companies closed down due to the drop in the price of global commodity. So, the US is not plenty like it used to be. Once you have small US Dollars with plenty people chasing it, it puts strain on the Liberian Dollars. Many people are transporting money through wires like Western Union and Money Gram to support their families abroad. Betting companies are also wiring the US Dollars,” the Liberian leader said during her regular Simple Liberian English chat with Torwon Sulonteh Brown of UNMIL Radio over the weekend.
President Johnson-Sirleaf indicated that the government’s economic management team is working to improve the situation in the shortest possible time.
She added that due to the lack of enough US Dollars in the country, the government has employed a new measure by paying some public servants salaries in Liberian Dollars.
As a consequence of the high exchange rate, Liberians who used to buy a 25kg bag of rice for L$1,600 or US$20 at the rate of L$80 are now buying the same bag of rice for L$1,880 or US$20.
Commenting on other national issues like the Global Witness report, the Liberian leader pointed out that the Taskforce headed by Cllr. J. Fonati Koffa was not set up solely to investigate the revelation contained in the Global Witness report against some top former and present government officials but that it was set up before the report was released. She added that insinuations in some quarters that she is the one being referred to as “Bigboy 1” in the report is farfetched and has no basis.
On the prospect of the Mount Coffee Hydro coming on as scheduled this December, President Johnson-Sirleaf said the project is well on course to come on as announced.
Speaking recently on the skyrocketing exchange rate, Professor Wilson Tarpeh said the situation is a direct result of what happens “when you apply symptomatic, fiscal solution to a deeply rooted, monetary policy problem.”
The former Finance Minister said the recent government policy to use more Liberian dollars in the discharge of its domestic obligations will cause a huge supply of the local currency without the compensating demand.
“Interestingly, the recipients of Liberian dollars cannot do very much with it in an economy where almost all goods and services are priced in USD. They cannot use it to pay bills, buy many essential commodities. Holders of the local dollars have to buy the USD at rates higher than what they received thereby imposing a tax on their spending,” Prof. Tarpeh maintained.
He maintained that an initial step to resolving this matter is to also price all goods and services in Liberian dollars in order for people to be able to use the Liberian dollars as widely as possible for all obligations without first converting it.
The University of Liberia Professor indicated that this extensive use of the local currency would potentially increase the demand for the local currency and perhaps allow the government to pursue appropriate macroeconomic adjustments as and when necessary, adding that there are many other parallel measures that can be unfastened to reduce the impact of this policy and lead to the pursuit of a comprehensive solution.