by Wonderr K. Freeman           Originally Published in February 2012

Couple of days ago, I was combing through my stack of local dailies, and noticed a recurring theme: streams of good news of the great work the Central Bank of Liberia (CBL) is doing. I came across headlines such as “CBL accounting policies sound”, “banking sector experiences growth, says CBL”,” Liberia foreign reserves swells” etc.. It seems, judging from the headlines, that all is well with the CBL, or is it? Well, when one nationally- acclaimed finance expert called for national conference on the CBL avowed Dual Currency Policy, the CBL authorities lashed out harshly against the “messenger” charging that those with no claim to [financial] expertise should not be commenting on issues they know nothing about. That, in fact, the Bank has not seen any [written] monetary policy prescriptions (on dual currency) contribution by these so-called experts. Of course this assertion by the CBL does not take into consideration publication by the likes of my humble self in the article titled: the Almighty US Dollar and the Dual Currency Policy, Liberia’s Porcupine Gut (Freeman, 2009), published the Frontpage and New Dawn local dailies. I suppose the article, which was well received by the public, never counted for much by the CBL authorities, as same was never written by a Harvard or Upenn grad or written by an associate colleague of the IMF or World Bank. And so on we go with the praise-singing and hailing of the emperor for such fabulous good looks, until some inconsequential kid from around the block blurts out the naked truth that the “emperor is naked”.

For some of us with keen interest in economic issues, we cannot help but wonder, if the Liberia monetary policy is so fantastically-managed, why does Liberian dollar (LRD) keep falling? Its been at least six years of genuine political stability, overwhelming presence of the international community (IFIs and INGOs), substantial foreign direct investment (FDI), but the LRD has never appreciated in six (1,2,3,4,5,6) years! In fact the LRD has lost at least a third of its value over the same period. Wow! I thought the CBL primary purpose is price stability through maintaining the purchasing power of the LRD (ref: CBL Act Part 3a)!!

The elites of the Government (all three branches), business, and NGOs are incapable of understanding the repercussions of a falling LRD. Chances are that the only time they make use of their LRD is when they stop their SUVs at roadside stalls to buy mangoes and bananas. Otherwise life is all good. All is well, as Liberia’s foreign reserves swells. But for the masses of our people, the CBL PR stunts are pretty meaningless as long as the LRD keeps sinking and prices keep rising. This whole PR stunt that growth in the real sector is being buttressed by CBL “strong monetary policy” is a charade. The local banks are still largely the preserve of the elites. With no venture funds for industry and innovation, it’s a vicious cycle of poverty, while the CBL blows its own trumpet. The relative economic growth in Liberia, over the years, can squarely be attributed to the relative peaceful political climate, fiscal conservatism, improved governance and accountability and private entrepreneurship. Monetary policy contribution to this growth has been and may continue to be weak. This gospel of spectacular economic performance (as CBL would want us believe) amidst a falling national currency is a reality true only for those sipping on CBL “cool aid”. One only needs to listen to the world news about the trajectory of the US Dollar and the Euro vis-à-vis the news emanating from China (i.e., the Chinese Yuan’s trajectory) and you will get the point – a strong currency is synonymous with strong economy. Very simple, very straightforward! No wonder the Nigerians (CBN) are now stocking a sizable portion of their foreign reserves in Chinese Yuan (as of September 2011), ostensibly banking on China increased economic clout and the inevitable appreciation of the Chinese Yuan. Liberia CBL apple-in-the-sky theory of monetary-policy-led economic boost amidst a falling national currency just cannot hold water!!!

Given the limited options for Liberia’s monetary policy, our Nation’s economic growth is being short-changed. Hence the call for a sovereign conference on this currency issue is well placed, even as the CBL tries to “shoot the messenger”. Many studies put the dollarization of the formal sector (USD in the Liberian banks) at a average high of 85% (see CBL annual report, monetary statistics 2005-2010), a monetary aggregate that the CBL can scarcely control. With such high degree of dollarization of the formal sector, it’s a mirage to think that the CBL is making any significant impact on economic growth by tinkering with the remaining 10-15%. Of course chances are high, that in such a developing country as ours, with a history of banking failures, that the “at-home banks” have always been suspected (and rightly so) of hoarding more money that the real banks. So much for the widely-heralded “rigorous” banking supervision by the CBL!  

The CBL Act (1999) specifically mandates it to maintain the purchasing power of the national currency. However, judging from the perpetual depreciation of the LRD, it seems that the only stability the LRD has seen (in 6recent years) is the stability of the gutters. As the table below shows, since 2005, the LRD has been in the gutters for as long as anyone can remember. And while the political and business elites don’t understand what this means in real terms, those who regularly lunch on L$100 or less a day and those who shop with LRD at the local market, understand fully the repercussions of a perpetually sinking Liberian dollar.

The blinking reality is that a national discourse on the CBL Dual Currency Policy is overdue. We may all play make-belief with CBL stunts and listens to the IMF lectures and bulletins.  They (the IMF teams) come here, wine and dine with their colleagues from Harvard and Wharthon, reminisced about their days at Britton Woods and tell us (the masses) that all is well. Well, we know fully well that all is not well and has never been for quite a while. Our sinking LRD cannot keep up with prices. It’s high time our national leaders get a reality check! Perhaps when they fully disembarks from their SUVs [and instead of the usual brief stops to buy mangoes and bananas with LRD}, take a real bus journey from Johnson street (downtown Monrovia) to the “Gorbachuv” market (the masses’ supermarket) and do some serious shopping with the LRD, then, and only then, will they understand why the call for a sovereign discourse on the Dual Currency Policy is most certainly now a national imperative