Governor Patray Unveils Action for Stabilizing Exchange Rate

The Executive Governor of the Central Bank of Liberia CBL), Nathaniel Patray, III who has announced a number of policy measures that are being implemented by the CBL to stabilize the exchange rate both in short and medium terms.
Speaking at MICAT regular press briefing yesterday, Governor noted that digitizing the Liberian economy and investing in the CBL Bill were two policy measures touted by the Bank as having the potential to mitigate the reduction in the value of the Liberian dollar and the rising inflation.
A prime reason for the depreciation in the value of the Liberian dollar, CBL Governor said, was the scarcity of the US dollar for use by the business community to import their goods.
The decline in the prices of Liberia’s major export earners means that Liberia does not generate enough foreign exchange to meet the demand for the United States dollar by major importers.
US dollars importers meet their demand for US dollar by spending increasing amounts of Liberian dollar to purchase US dollar, hence the instability and reduction in the value of the Liberian Dollar and the resultant inflationary pressures that it generates.
Governor Patray said in order to mitigate this downward trend in the value of the Liberian dollar in the short term (less than one year), the CBL Governor encourages Liberians invest in large numbers in the CBL Bill that the Bank recently introduced.
“Investing in the CBL Bill will enable CBL to implement effective monetary policies to control inflation, which is the primary reason for the establishment of the Central Bank,” the Executive Governor noted.
He added: “As at December 2018, 94% of the total Liberian banknotes in circulation was out of the banking system, making it difficult for CBL to exercise its key function of effecting monetary policy.”
Meanwhile, the CBL Governor and other members of the Technical Economic Management Team have resolved to embark on a vigorous marketing campaign so that Liberians will invest en-masse in the CBL Bill.
In addition to getting the bulk of Liberian dollars back into the banking system and curbing inflation, the scheme is meant to create a culture of savings among Liberians.

Digitizing the Economy
Another CBL monetary policy instrument designed to reduce inflation is, according to the CBL Governor, is for Liberia to make a transition from a cash-based economy to a digital economy.
The CBL Governor believes that when an increasing number of individuals and businesses use mobile money services and other digital financial services in undertaking their transactions they can save on transactions costs, which are normally passed on to the prices of their goods and services.
The CBL Governor believes that when both of these policies (the CBL Bill and digital financial services) are pursued and promoted together, they will have the potential of reversing the adverse exchange rate and bring inflation under control.
The Technical Economic Management Team, and the Central Bank of Liberia in particular, will now robustly embark on a massive awareness campaign to bring about an uptake in digital financial services and investment in the CBL Bill.

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