Anxiety Greets New Currency -As Citizens, Businesses fear rising prices, rate fluctuation

MONROVIA – There seems to be anxiety gripping the public in the wake of the announcement by the Central Bank of Liberia that a good amount of the planned printing and minting of the $48.734bn in different denominations of L$20, 50, 100, 500 and 1,000 bank notes and minted coins of L5 and 10 as mandated by the joint resolution of the national legislature of May 6, 2021 will be brought in and infused in the economy by the end of September, 2022, triggering fears that the measure may lead to inflation and affect the exchange rate level which has been stable for a long time now.   

The CBL this week announced that “Consistent with the May 6, 2021 Joint Resolution of the National Legislature authorizing the Central Bank of Liberia (CBL) to print and mint the new family of Liberian currency totaling L$48.734 billion, the CBL wishes to inform the Public that only L$5 and L$10 are being minted in coins. The delivery of the coins will begin in the 4th quarter of 2022 and be infused into the economy through the commercial banks”.

Giving the description of the new coins, the apex bank said they are smaller, much lighter and easier to carry than the previous coins in circulation, that they are round, nickel-plated steel, with the L$5 weighing 3.6 grams and the L$10 weighing 4.8 grams. “The L$5 has the image of President Edward James Roye, while the L$10 has the image of President Joseph Jenkins Roberts”, the bank said.

But as CBL commenced its sensitization program preparatory to the introduction of the currency, some citizens and owners of businesses have been raising concerns as it relates to the impact that will  be created with the introduction on the economy, mainly looking at what they see as an imminent emergence of inflation and the decline in the exchange value of the Liberian dollar. According to them, this may lead to the general rise in the price level of almost all goods and services in the country.

Their concerns were anchored on similar experience when immediately after the inauguration of the present administration, the exchange rate deteriorated seriously, fueling inflation and precipitating a lot of hardships in the country. The government’s reputation and ability to solve the prevailing economic problems at the time took the center stage of agitation, provoking a series of protests and even causing  the government to lose the Montserrado County senatorial by election in 2019.

A former Senior Staffer at the CBL who did not want his name to be mentioned in print said a year or two prior to the election of President George Manneh Weah, the Liberian market began experiencing inflation when aggregate demand for goods and services in the country’s economy rose more rapidly than its productive capacity. “One potential shock to the aggregate demand came from the Central Bank of Liberia under the former regime that rapidly increased the supply of money. The increase in money in the Liberian economy increased the demand for goods and services. Businesses could not significantly increase production and supply remained constant. Prices began to rise, resulting in inflation”, the seasoned financial expert told The Analyst.

Another financial expert, Jay Wehtee Wellington who corroborated the assertion of the financial expert said he fears that what happened in the first instance may also happen because there has not been much work done in the economy to absorb the massive infusion of more money in the system. He maintained that besides the ArcelorMittal which is the major concessionaire in the country, Liberia did not witness any known foreign direct investment over the year which means the money when infused will be floating in the hands of what he called non-productive actors in the country.

“When the money is not in the possession of those who produce goods and services but only in the hands of those who buy and consume, it is dangerous because there will be nothing to buy and consume since we don’t have producers of goods and services”, Wellington said. He said the ripple effects will be money floating around with nothing to purchase and will lead to rise in prices of basic commodities.

Bobmanuel Teah Joseph II who operated a bureau exchange business up to 2019 said the decision of the past government to print new currency without any compliance and due diligence and the inability of the incoming government under Weah to do proper audit of the former government can be attributed to the confusion that trailed the controversial missing L$16 bn that severely destabilized the economy at the time.

“The L$16bn issue no matter how people look at it today nearly crippled the economy at the time. The government was in a very confused state of being which was even compounded by the fact that the investigation conducted had it that the past government printed more money than required by the lawmaker and could not even account for how much was in circulation”, he said. He said he hopes that measures should be put in place to key tap on the money supply and regulate its circulation otherwise the effects will flow overboard and may affect the purchasing power of the ordinary citizens.

It can be recalled that In February 2021, the CBL requested the 54th Legislature to approve the printing of L$48.733 billion new banknotes to replace the current family of banknotes including an L$8 billion-plus mutilated Liberian dollars on the market. In a communication to the House, the CBL, through Executive Governor Tarlue informed the lawmakers that the money requested is needed to address the country’s current liquidity demands for three years (2021-2023) and restore confidence in the Liberian dollars.

“I have the honor to present my sincere compliments and herewith submit to you and the Honorable House of Representatives, Resolution No. BR-02/2021 of the Board of Governors of the CBL about a currency reform proposal for comprehensive replacement of the existing family of Liberian dollars banknotes in three years (2021-2023) for consideration and approval in compliance with Section 23 of the CBL Act. Based on the CBL forecast, the total projected amount of new banknotes to be printed isL$48.733,” Mr. Tarlue wrote in his communication.

The bank then outlined that L$35,769 billion will be printed in 2021 (at a cost of US$39.693 million); L$7.536 billion in 2022 (at the cost of US$3.630 million), and L$5.402 billion in 2023 (at a cost of US$2.199 million) to meet the current and medium-term currency demands.

The CBL request to print a new family of banknotes comes amid an acute shortage of local currency in the banks, forcing tellers to restrict daily withdrawal, something that continues to anger customers and sometimes leaving them stranded.

Leave A Reply

Your email address will not be published.