Statement by the Chairman of the convergence council of ministers and governors of central banks of the West African Monetary zone (WAMZ) HON. Samuel D. Tweah jr. MINISTER OF FINANCE and development planning, LIBERIA 45th Statutory (VIRTUAL) MEETING of the Convergence Council AUGUST 27, 2021 at 9:30AM
Representative of the President of the ECOWAS Commission
Governors of the Central Banks of the Member States of the WAMZ
Governor of BCEAO
Director-General of WAMI
Director-General of WAMA
Director-General of WAIFEM
Representatives of International Institutions
Distinguished Ladies and Gentlemen
- Honorable Ministers, Central Bank Governors, distinguished Ladies and Gentlemen, let me begin by thanking the former Chairman of Council, Hon. Jacob Jusu Saffa, former Minister for Finance of the Republic of Sierra Leone, for his role in steering the affairs of the WAMZ since February 2020. I also want to congratulate Hon Dennis Vandi, the new Minister of Finance of the Republic of Sierra Leone. We look forward to working with him on enhancing the aims of the WAMZ. I want to thank the Director-General and staff of WAMI for the strong support provided.
- On behalf of the Government and the people of the Republic of Liberia, under the able leadership of His Excellency, the President, Dr. George Manneh Weah, it is my pleasure to welcome you to the 45th Meeting (Virtual) of the Convergence Council of Ministers and Governors of Central Banks of WAMZ Member States.
- The President would have loved to host you all in-person meeting in Monrovia, but for the resurgence of the COVID-19 pandemic. We look forward to the next opportunity.
- The Mid-Year 2021 WAMZ Statutory Meetings have come at a time when the devastating impact of the COVID-19 pandemic have proved challenging for our various economies. Thanks to a combination of resilience, strong support from development partners and the international community and the sheer determination of Governments and policy makers to outlast the turbulence and trepidations we have recently faced, we are largely weathering the COVID-induced economic storm in the region.
- Distinguished Ladies and Gentlemen, the COVID-19 containment measures adopted by the Member States do have implications for overall macroeconomic management and for meeting the Convergence Criteria. The impact has been dire for several trade and regional integration programs as stated in the remarks of the President of the ECOWAS Commission. We see that COVID-19 is even impacting some of the convergence indicators. For example, IMF supported on-lending through central banks to sustain revenue during COVID-19 may cause countries to fail the Central bank financing criteria. We believe this should not be the case since this is not effectively central bank lending. Liberia has not received a dime from the Central Bank of Liberia since the last two fiscal years; this means we have not monetized our debt and this holds ramifications for exchange rate stability or inflation in a dual currency regime. I understand Governors of Central Banks of the WAMZ took on this issue in their meeting yesterday. We also have to view this in the context of the pending SDR reallocations approved by the Board of the IMF. These resources would be disbursed via Central Bank on-lending to Government, and would mean Central Bank financing under current definition or application vis-à-vis the Convergence Criteria. We should have revise this application immediately.
- The pandemic hit Liberia at a moment when the country was recovering from the pre-existing challenges of the withdrawal of United Nations Mission in Liberia (UNMIL), international commodity price shocks, among many other challenges. The marginal gains made in recent years at the economic front have been eroded by the pandemic, which somewhat retarded the momentum we began with at the onset of our IMF-supported program.
- As we speak, COVID-induced global supply chain complications may hold further implications for economies. This is coming despite serious improvements in vaccination delivery globally, which was projected to have a positive, stabilizing impact on supply chain, moving supply chain prices to their pre-COVID levels. This prediction has not materialized and such stability may happen well into the middle of next year, placing countries under some pressure to grapple with short term price vulnerabilities.
- While, the last two years have been challenging, Liberia has seen some strong signs of resilience and recovery; domestic revenue reached its highest nominal level since end of war in 2003; Government has stop the accumulation of arrears on account of deficit-financing and is living squarely on budgeted resources; all of these evidence our commitment to macroeconomic recovery and to meeting our Convergence Criteria.
- Across the spectrum of the WAMZ, real GDP growth dipped while inflationary pressures rose due to disruptions to global and local supply chains. Fiscal deficits widened as the domestic revenues shrank while expenditures surged. Most national currencies depreciated due to weak export performance and increased cost of importation. These and other factors underlined the Member States’ inability to sustain improved performance on the Convergence Criteria.
- Honourable Ministers and Governors of Central Banks, while we confront the challenges of the moment, I would like to urge us all to continue on the path of implementing prudent policy measures and adoption of economic diversification strategies to boost the resilience and competitiveness of our economies. By learning the lessons from the Ebola crisis, the Government of Liberia has put in place prompt and appropriate policy measures to meet humanitarian needs, secure livelihoods and protect lives.
- As part of the reform measures at the home front, the fiscal authorities took the difficult but necessary decision to cut the wage bill in all three branches of the government by 10 percent in the FY2019/20 budget, while still allowing the lowest-paid government employees to receive the minimum wage, raising the salary of more than 15,000 public sector workers. This and other fiscal measures substantially eliminated central bank financing of fiscal deficit. These measures contributed to easing inflation, restoring the real income of Liberians in the lower income quintile.
- On the monetary sector, reform efforts at the Central Bank of Liberia have focused on rebuilding confidence in the banking sector. In October last year, the National Legislature approved amendments to the Central Bank of Liberia (CBL) Act granting the Bank greater operational autonomy. With this enhanced amendment, the CBL is empowered to strengthen the financial supervisory and regulatory framework and, in turn, bolster the banking sector to support post-COVID recovery efforts.
- Complementing the homegrown policy responses to the COVID-19 pandemic, the Government of Liberia collaborated with development partners especially the World Bank, in implementing the COVID-19 Emergency Response Project in Liberia.
- The Project seeks to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness.
- Before I conclude, I am pleased to inform you that the Government’s decisive actions and reform efforts have begun to bear fruit. Consequently, green shoots of recovery are sprouting. Real growth is projected at 3.6 percent by the end of 2021, compared to a negative growth of 3.0 percent recorded in 2020, due to improvement in mining and panning, as well as agriculture and fisheries. Average inflation rate for second quarter of 2021 moderated to 8.6 percent, from 11.1 percent, in the first quarter, mainly driven by the broad stability of the Liberian dollar, increased inflows of remittances and the tight fiscal and monetary policy stance. Hence, inflation forecast for third quarter of 2021, is set at 8.5 percent, with a bandwidth of +/-2 percentage points.
- Going forward, Liberia remains determined to continue to implement structural, institutional and sectoral reforms to boost economic recovery. Work on improving the business climate and attracting investment and creating job are critical in the short to medium term and are ongoing. Enabling the agriculture sector to be the lynchpin of employment remains our focus. We will also sustain our efforts to diversify the economy and scale up spending on infrastructure and on human capital development.
- As Chairman of Council, I look forward to working with colleagues to further the aims of Convergence and monetary union. We look to work with our respective Heads of State to overcome obstacles we currently face on the road toward the monetary union via the ECO, since this has tremendous macroeconomic stabilizing ramifications for the sub-region.
- I thank you all for participating in this meeting; let us continue to save lives and livelihoods, and continue the work to diversify our economies in these challenging times.
- Thank you for your kind attention.