CBL Ready To Face Audit on $25m – Provides Cursory Account On Mopping Up Exercise

52

The nation is on fire and every government official, former and current, involved with the handling of printing banknotes or the absorbing of excess Liberian dollar banknotes is falling in line to stay out from the fury; courtesy of President George Manneh Weah who has finally mustered the courage to take the bull by the horn in a fresh anti-corruption war. The first batch of indictees are currently in their prison suits at the Monrovia Central Prison in Monrovia and President Weah’s dragnet is still raging all over the place in search of anyone carrying the slightest odor of the money scandal. As the L$16 billion saga has produced culprits, and dust of public uproar is subsiding on the saga, attention is shifted to the US$25 million and pressure is mounting for similar collateral actions. The Government agency in the throes of suspicion is the Central Bank of Liberia and the current administration’s Technical Economic Management Team (TEMT) which withdrew the money from the country’s reserve to mop up excess of Liberian banknotes from the local money market. With calls on President Weah to flex his muscles on the CBL following two investigative reports—one being an international report—which essentially found discrepancies in the mopping up exercise, the CBL has now broken silence with a two-page statement not that the CBL only provides a rough explanation on what it did with the money but also availing itself to forensic audit of either national or international auditors. The Analyst reports.

 

It seems despite damning reports by the Presidential Investigative Team (PIN) as well as USAID-hired Kroll Associates on the controversial US$25m used to clear excess local banknotes from the Liberian money market, the main target of the reports, the Central Bank of Liberia, is not backing down on the veracity of its handling of the money.

In July 2018, President George Weah announced that the money would be “infused” into the Liberian economy to “mop-up” excess LRD banknotes in an attempt to address the depreciation of the Liberian Dollar.

Both Kroll and the Liberian team are unanimous in their findings that untold discrepancies marred the mopping up exercise.

Kroll in particular reported that that The CBL did not provide Kroll with evidence that the Board of Governors had authorized the banknotes to be reintroduced back into circulation before the period of one year had elapsed.

According to the auditors, the approach taken by the CBL to implement the USD Mop-Up Exercise, whereby small teams of bank personnel directly purchased LRD banknotes from local businesses and foreign exchange bureaus in exchange for USD notes, created an enhanced level of risk. The risks included, i) potential misappropriation of banknotes, ii) potential opportunities for money laundering and iii) potential execution of transactions with illegal businesses. Consequently, there is a risk that significant funds were unaccounted for by the CBL, and Kroll therefore recommends that this matter merits further understanding.

 

CBL Issues Response

In a CBL statement of March 5, 2019 on the mopping up exercise, the Bank said it was ready to stand before any reputable auditing firm to defend how it handled the exercise.

The Bank said the strategy it adopted for the exercise was based on three reasons. First because more than 90 percent of the currency in the economy is outside the banking system, and that using the banking system would not have yielded the desired result. Secondly, according to the bank, they adopted the strategy because “the CBL experience shows that using the conventional foreign exchange auction by itself, through the commercial banks, has had limited impact on the exchange rate.

The third reason provided by the CBL was that “Economic research and empirical evidence show that foreign exchange auctions and market interventions (using commercial banks) by central banks have limited impact on exchange rate stability.

The Bank further said based on the approval of the TEMT, the CBL commenced the mobbing up exercise with the objectives to halt the depreciation of the Liberian dollar, reverse the depreciation, and stabilize the exchange rate.

According to the CBL, those objectives were met.

Bank said the mopping up exercise targeted three groups: major importers, small businesses and licensed foreign exchange bureaus.

The CBL said all information on the operations that include detailed information of names of the buyers, the types of businesses, their addresses, the transaction volumes and transactions rates were meticulously recorded and the information was provided in full to the TEMT and a detailed report submitted to the National Legislature.

The CBL further clarified that its operations which started July 17, 2018 ended October 20, 2018 and that US$15m was mopped up from outside of the banking system in exchange for L$2,303,363,898.

The Bank said US$2 million of the money was sold to a petroleum importer in exchange for L$313,141,800 through regular banking transaction to facilitate import that ensured a steady supply of fuel to the Liberian market and prevented economic disruption that a fuel shortage would have caused.

CBL therefore notes that US$17m used for the exercise was accounted for and the balance US$8 million is in the custody of the Bank.

The Bank admits that while it was mandated by the TEMT for the mopped up money to be sterilized for the period of one year, it however was authorized by the TEMT to release to commercial banks the sum of L$1.3b of the sterilized L$2,303,363,898 since there were public outcries during the Christmas Season that local banknotes were in short supply.

 

Ready to Face Audit

The Central Bank of Liberia indicated strongly that all its transactions during the mopping up exercise were reported and accounted for.

“In conclusion,” the Bank said in its press statement, “all monies herein mentioned are fully accounted for. The CBL avails itself to any further scrutiny either from the Government, external actors, or both.”

Comments are closed.