The George Weah administration inherited a terrible economy, which amongst other things expressed itself in the galloping decline in the value of the Liberian Dollar against the United States Dollar. The exchange rate persistently depreciated causing rapid and sustained increase in the general cost of living underpinned by skyrocketing prices of essential commodities. Concord Times’ Lyndon Ponnie reports on how the nascent Liberian Government robustly intervened to halt a devastating situation in the country.
Deputy Minister for Fiscal Affairs at the Liberia Ministry of Finance and Development Planning, Mr. Samora Wollokolllie, told Concord Times in an exclusive interview recently that the devastating shocks in the economy of Liberia prompted the convening of both the Economic Management Team (EMT) chaired by the President of the country, and the Technical Economic Management Team (TEMT) chair by the Minister of Finance and Development Planning.
He disclosed that as part of efforts to resuscitate the economy, several meetings were held from which discussions arrived informed the decision by President George Weah to reduce tariffs on 2,500 commodities on the Liberian market so as to ease the financial constraints on the citizens.
Mr. Wolokollie indicated that the Coalition for Democratic Change (CDC) Government was able to analyze issues appertaining to the depreciation of the exchange rate, identified the causes, and proffered remedial measures.
He added that this analysis fed into President Weah’s decision to ask the CBL to infuse US$25 million of the country’s reserve to stabilize the exchange rate, and by extension the general price level.
According to Mr. Wolokollie, the Technical Economic Management Team (TEMT), chaired by the Minister of Finance and Development Planning again convened and formulated a strategy for immediate actions.
On July 17, 2018, he explained that the TEMT commenced the implementation of several policy measures which include short, medium and long-term measures, covering monetary and fiscal policies as well as policy measures by the Ministry of Commerce.
According to him the measures included stepping-up intervention in the foreign exchange market (i.e. FX auction or direct mopping exercise), sustaining monitoring and enforcement in the foreign exchange market, issuing various regulations, introductions of additional monetary policy instruments (i.e. Standing Deposit/Credit Facility SDF/SCF, issuance of CBL bills/notes), pricing and price regulation, and effecting payments by currency split, etc.
Mr. Wolokollie explained that as part of efforts to improve the balance sheet of the commercial banks in terms of the level of non-performing loans (NPLs) and promote confidence in the system, the Government, working with the commercial banks and the Central Bank of Liberia, reached a decision, which was approved by the Debt Management Committee (DMC) to pay-off all outstanding GoL direct and indirect obligations, the latter which he pointed out, was associated with pre-financing of various Government projects in the past.
The total obligations, according to the Mr. Wolokollie, amounted to US$65 million which he indicated will be paid through the issuance of a long-term Treasury bonds for a seven-year period in coupon payment.
Wolokolie stated that this arrangement will enable the banks to discount the instruments in international financial markets or to potential investors, which will boost liquidity in the domestic banking system.
In addition, he added that the arrangement will provide the Government the fiscal space to borrow from the domestic banking system, and by extension, facilitate the development of the domestic financial markets to support domestic resource mobilization for financing of important domestic projects.
He further disclosed that the Government has been able to work with petroleum importers in the recent past to address the looming petroleum shortage crisis and hike in petroleum prices.
It is worth noting, he said, that the TEMT has been meeting more frequently to assess and discuss the State of the Economy and respond to evolving issues critical to the economic stability.
Report on the Utilization and Impact of the US$25 million Foreign Exchange Intervention
Mr. Wolokollie disclosed that the Central Bank of Liberia, working with the TEMT intervened in the foreign exchange (FX) market through direct intervention with the total amount of US$15 Million from July 17-October 26, 2018 as part of the US$25 Million advanced to the Government of Liberia (GOL) from the Gross International Reserve (GIR).
According to the senior finance ministry official, since the commencement of the direct intervention strategy, the CBL mopped up a total amount of L$2,303,363,898.00, representing 59.4 percent of the L$3.88 billion of currency outside banks (COB) initially targeted. The United States Dollar equivalence of the amount mopped up as at October 26, 2018 is US$15 million, reflecting 60.0 percent of the US$25 million earmarked for the Intervention.
Deputy Minister Wolokollie indicated that US$2 million was sold through a special auction to Total Liberia Incorporated on October 30, 2018 at the previous day buying rate of L$156.5709/US$1.00 with a total Liberian Dollar of L$313,141,800.00 purchased. This according to him brings the total Liberian Dollars purchased from the interventions to L$2,616,505,698.00 which is equivalent to US$17 million.