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Liberia’s $25m economy lifeline not in bank records




The US$25 million reportedly infused in the economy to curb the rise in the exchange rate of Liberia is not in bank records .
 
A FrontPage Africa Investigation has found that commercial banks have no record of receiving or transmitting portion of the money.
 
Most banking institutions speaking on condition fearing reprisals from the Central Bank of Liberia are expressing disappointment that they were not consulted by the Executive branch of government regarding disbursement of the money intended to inject flow of cash in the struggling financial market.
 
While the state of the economy is showing no impact from a move that was supposed to be a means of salvaging the situation, some observers say the extra Liberian dollars printed were switched with the US$25 million.
 
There are also unconfirmed reports that the government rationed the US$25 million to selected importers instead of using the commercial banks.
 
It is more than two months since the government of President George Weah promised to infused the US$25 million to “mop up excess liquidity” as a means of stabilizing the uncontrollable hike in the exchange rate.
 
President Weah on July 16 addressed the state of the economy and said: “The government will announce a series of monetary and fiscal measures that we believe should help reverse the decline in the value of the Liberian dollar…
 
``I am fully aware that we are faced with a very difficult macroeconomic situation in Liberia.  For many decades, we have incurred trade deficits because we import more than we export.”
 
Including the infusion of US$25 million, President Weah also mandated the Central Bank of Liberia to provide more effective supervision and regulation of money-changers or foreign exchange bureau, provide more robust oversight of banks, conduct a comprehensive review of regulations on the hoarding of both Liberian dollars and U.S. dollars outside the banking system, and provide incentives and safeguards to encourage the utilization of the banking system, including financial instruments.
 
The government claims it has since disbursed the money in the economy although details are elusive; while the CBL or the Presidency is yet give break down of how the money was disbursed.
 
Recently, a local research group raised a red flag over the reported infusion of the US$25 million in the economy, calling on the Legislature to exercise its oversight responsibility by recommending an investigation in the situation.
 
Center for Policy Action and Policy or CePAR is arguing that there has been no proper accounting that L$3.7 billion was mopped up over the period covering July 16, 2018 to September 22, 2018 as claimed by the government.
 
CePAR claims that the government did not use the Commercial Banks when the Liberian Dollars were ‘mopped’, alleging that the CBL exercised a direct mop up option through the use of lorries in acquiring the ‘Liberian Dollars’ from the market.
 
A direct mop up approach as adopted by the CBL in the use of the 25m United States Dollars, is susceptible to misuse and fraud, CePAR said.
 
The group is calling on the CBL to provide to the Legislature the “underlying analysis that found the use of foreign exchange outlets as an attractive outlet as opposed to commercial banks when it was financially prudent to do so through the commercial banks”.
 
Meanwhile, an experienced Liberian economist weighing-in on the situation says there are several risks when importers are directly used to mop up excess liquidity.
 
“When you talk about mop up, it means buying the Liberian dollars from the market. But I don’t know whether they used it to buy the Liberian dollar or they used it to help importers to lower the exchange rate,” says Prof David Farhat, Director of the University of Liberia’s Graduate School of Business Administration.
 
Prof Farhat, a former Finance Minister in the Samuel K. Doe government, says because the demand for hard currency often impact the exchange rate, it is advisable to target importers of certain essential commodities to help ease the demand for US dollars.
 
The former Minister of Finance who now runs an certified public accounting firm in Monrovia, suggests that there could “some risks” when the government opts to give hard currency directly to business people.
 
 “Maybe they [the business people] have some other plans for money; they could use the US dollars to remit to their principles – and it might not be used for import purpose which will leave no impact on the purpose of the mopping up,” he said, adding that “moping excess liquidity through the commercial banks will ensure that the intervention makes some impact”.
 
With little impact from the US$25 million on the economy and a laissez-faire oversight approach by the CBL; local forex bureaus are applying several unscrupulous methods to elude the CBL official rate, which is now at LD$155 to US$1.
 
When a FrontPage Africa reporter opted to exchange US dollars for LD at a bureau down town Monrovia as a means of determining the actual street rate, a vendor cunningly used the calculator to display the rate.
 
It is a sneaky means of showing the exchange rate to customers without falling in trouble – it’s a tactic many forex bureaus employ to dodge the CBL rate, FPA can confirm.