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FLASHBACK: Only US$750,000 of over US$5m CBL June 2018 CBL FX auction went to commercial banks
By Frank Sainworla, Jr. fsainworla@yahoo.com
Liberia’s foreign exchange market is expected to be suspended today (Wednesday) up to the night time, as the Central Bank of Liberia (CBL) holds a general emergency meeting with all license and unlicensed foreign exchange business people.
An announcement from the CBL on Tuesday after President George Weah’s speech to the nation on the deepening economic crisis on Monday (July 17, 2018) warned that the Liberia National Police will be deployed to enforce the directive.
In his address to the nation, President Weah said: “It could well be said that we do not have the capability to exert effective control over our monetary policy since more than 90 percent of the money supply is held out of the banking system.”
As the Liberian leader was speaking the value of the Liberian dollar continued its dramatic depreciation against the US dollar, with the exchange rate reaching a high of 163 LD to one USD. This unprecedented rise has triggered uncontrollable inflation with hike in the prices of food and other basic commodities in the country, something the President admitted has increased the hardship on citizens.
So among other measures, President Weah announced the immediate infusion of US$25 million into the Liberian economy to help stabilize the exchange rate in the volatile money market.
President Weah addressing the nation on Monday at his Foreign Ministry office
“These measures will include, but not be limited to:
- An immediate infusion by the Central Bank of US$25 million into the economy to mop up the excess liquidity of Liberian dollars.
- A mandate to the Central Bank to provide more effective supervision and regulation of money changers or foreign exchange bureaus.
- A mandate to the Central Bank to provide more robust oversight of banks under its supervision.
- 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 President told the nation.
But how will infusion of the millions of US dollars will be done to ensure that the bulk of this money doesn’t end up outside of the country’s banking system? How far will this measure go in reducing the high exchange rate and then translating into the drop in the hike in prices of essential commodities?
A look at the CBL’s foreign exchange auction last month (June 2018) shows that the bulk of the over US$5 million infused did not go to the commercial banks.
According to the June 2018 CBL auction results, eight (8) commercial banks in the country received a total of only Seven Hundred and Fifty Thousand US Dollars (US$750,000.00). Why? Financial authorities can best explain.
The banks included Eco bank. Afriland First bank, Guaranty Trust Bank, GN Bank, International Bank (IB), Global Bank, United Bank for Africa (UBA) and Access Bank.
The rest of the over US$5 million went to other local businesses including Glory Resource Center and Golden Food Center.
In his address to the nation on Monday, President Weah said he was “fully aware” of the difficult microeconomic situation faced by the Liberian people.
But he noted that, “for many decades, we have incurred trade deficits because we import more than we export.”