The Liberian currency, the Liberian dollar, has significantly depreciated in terms of value on the exchange market, trading as low as L$91 to US$1, one of the worst in the recent history of the country.
“The Speaker and his LPDP in collaboration with some elements of the Unity party have agreed and decided a need to print more money to fund their campaigns. We thought that by printing more money it will escalate the already depreciated Liberian dollars that has gone to the rate of LD$91 to US$1”- Representative Edward Forh, Congress for Democratic Change
Operating a dual currency regime with the United States and Liberian dollars as legal tenders, fluctuations in the exchange rate greatly affect the prices of basic commodities that are mostly sold in Liberian dollars but traders have to purchase in United States dollars on foreign markets.
To compensate for the loss in value in the Liberian dollars when exchanged to United States dollars, traders increase the prices of their commodities, leaving the consumers to feel the pinch.
While the Liberian dollars continues to depreciate against the United States dollars, the House of Representatives has endorsed President Ellen Johnson Sirleaf’s request to print additional bank notes.
The House voted Thursday in favor of the President Sirleaf’s request after the Committee on Banking and Currency chaired by Representative Julius Berrian (CDC-District #10, Montserrado County) submitted a report to plenary.
Making the report on Thursday, Representative Berrian said after several meetings and revisions with Central Bank officials, the joint committee members and other stakeholders, the Committee resolved to recommend to the plenary of the House of Representatives to allow the CBL print additional bank notes to replenish the Liberian dollars reserve.
A month ago President Ellen Johnson Sirleaf wrote the National Legislature, seeking permission for the Central Bank of Liberia to print additional bank notes.
The CBL under Dr. J. Mills Jones advanced similar request to the Honorable House of Representatives. The communications from the CBL and the President were transferred to relevant committees with a mandate to analyze the request and guide plenary in making informed decisions.
According to the committee report submitted by Chairman Berrian, there were a total of three meetings held to familiarize itself with the issue at hand. Additionally, the committee stated that it conducted series of hearings with relevant stakeholders including the management team of the CBL.
The committee report stated: “During the hearing with the Central Bank, the Committee established that the bank is justified for requesting this authorization. This, in the wisdom of the Joint Committee, will certainly strengthen the reserve position of the bank and capacitate it to respond to the economic needs and demands of government and the general public.”
“The committee also established that the last time the bank undertook similar action was approximately five years ago. It is common knowledge that printed notes
are subjected to factors that lead to reduction in their quantity and quality in the circulation. One of such factors is mutilation,” the committee further declared.
Dissenting Lawmaker thrown out
Representative Edward Forh (CDC-District # 11 Montserrado County) who spoke against the decision for the printing of additional bank notes was thrown out of session on the order of Speaker Alex Tyler.
Rep. Forh was accused of attempting to disrupt session after expressing strong view against the President’s request for the printing of new bank notes.
The Lawmaker claimed that he was ignored by the Speaker whenever he sought recognition to speak on the issue of printing new bank notes despite several attempts to have the Speaker recognize him to make an input on the discussion. Representative Forh had earlier resisted the order from the Speaker to leave session did leave after interventions from his colleagues.
He is accusing Speaker Tyler and people he described as elements from the ruling Unity Party of supporting the decision to print new bank notes to fund their campaigns.
Lawmaker Forh said: “The Speaker and his LPDP in collaboration with some elements of the Unity Party have agreed and decided a need to print more money to fund their campaigns. We thought that by printing more money, it will escalate the already depreciated Liberian Dollars that has gone to the rate of ninety-one to one US dollars”.
The Lawmaker continued: “If their argument that there is a shortage of Liberian dollars on the Liberian market than why is the Liberian dollars not appreciating against the US dollars because the US dollars has reduced according to the President annual message and the governor of the CBL and finance minister.”
Citing other reasons for his dissent, Representative Forh said: “Our foreign reserve activities have reduced, our iron ore trade has gone down, so we lost US dollars, our rubber trade has reduced so we lost US dollars. The logging industry is not too good; we lost US dollars, so there are fewer US dollars chasing the Liberian dollars.”
He accused Speaker Tyler of forming a political party in the House of Representatives. He said the new Party chairman, Representative Moses Kollie, chairs the committee on Ways Means and Finance of the House of Representatives.
He also claimed that the committee, without any reliance, says the vault of the Liberian dollars at the CBL is empty and wants to print the amount of fifty Million dollars without telling the people of Liberia the amount of mutilated banknotes that need to be replaced.
President Sirleaf, in a communication dated Thursday March 3, 2016, informed the Lawmakers that she received two letters from the Central Bank of Liberia advising that the economy may be seriously affected due to the lack of local currency to meet National needs.
According to President Sirleaf’s communication, the first letter dated December 23, 2015 was sent by the then Executive Governor and the second of such letter dated February 19, 2016 sent by the Acting Executive Governor Mr. Charles Sirleaf.
The President’s Communication stated: “While the decision needs to be made now to address this issue that impacts the economy, it is important to note that the printing of notes will require a period of some five months. The underlying reason for the delay that has led to the crisis has to do with the interpretation of Article 34 (d) of the constitution and the Act to Authorize the Establishment of Central Bank of Liberia as amended.”
The President also stated as conveyed by the letters from the CBL referred to above, the Central Bank of Liberia is of the opinion that by the article referred to above, the legislature has granted implicit approval to the CBL to issue local currency and believe that the legislature has registered a contrary view.
“These issues of interpretation should be resolved at an appropriate time, preferably sooner than later. Mr. President Pro-Tempore, I have advised the acting executive Governor to seek the opportunity to discuss this matter with you and with your committees as you will dictate. I hope that you can agree on the way forward to enable the CBL to move forward in a timely manner to conclude arrangements for printing of currency,” the President communication added.
At the time of the President’s letter she received criticisms from the public for seeking the consent of the National Legislature for the printing of more money in the wake of the limited time she now has in power, expressing fear that this move may cripple the already crisis prone economy.
The Liberian economy has been experiencing crisis since the country experienced the outbreak of the deadly Ebola virus during the entire 2014. After Ebola the country has not been able to overcome the shock from the consequences of the crisis and further compounded by decline in the prices of commodities in the extractive industry-rubber, iron ore, etc., the major source of income for Liberia, the economic situation has been deteriorating in 2016.
The President request is in keeping with article 34 (b) of the Liberian constitution.
“While the decision needs to be made now to address this issue that impacts the economy, it is important to note that the printing of notes will require a period of some five months. The underlying reason for the delay that has led to the crisis has to do with the interpretation of Article 34 (d) of the constitution and the Act to Authorize the Establishment of Central Bank of Liberia as amended”-President Ellen Johnson Sirleaf
Article 34 (b) of the constitution gives the legislature the power to levy taxes, duties, imports, exercise and other revenues, to borrow money, issue currency, mint coins, and to make appropriations for the fiscal governance of the Republic, subject to the following qualifications: which includes; all revenue bills, whether subsidies, charges, imports, duties or taxes, and other financial bills, shall originate in the House of Representatives, but the Senate may propose or concur with amendments as on other bills.”
“No other financial charge shall be established, fixed, laid or levied on any individual, community or locality under any pretext whatsoever except by the expressed consent of the individual, community or locality. In all such cases, a true and correct account of funds collected shall be made to the community or locality.
The Central Bank of Liberia (CBL) was established on October 18, 1999 by an Act of the National Legislature of the Republic of Liberia. It became functional in 2000 and succeeded the National Bank of Liberia (NBL). The principal objective of the CBL is to achieve and maintain price stability in the Liberian economy.