3 February 2014

Liberia: Drop in USD Must Cause Drop in Prices

Photo: Liberia Government
Members of the Liberian cabinet (File Photo)


Monrovia — THE TREND OF the national economy regarding the delivery of goods and services remains unsatisfactory to the consuming public, even after the cosmetic drop of the rate of the American dollar to the Liberian dollar 1 to 80. Before the cosmetic drop, the US dollar generated an unprecedented strength, rising from one USD to 70 LD to one USD to 87 LD. This unprecedented hike of the United States dollar, which is also a legal tender in the country, grossly depreciated the Liberian dollar thereby claiming the concern of the National Legislature. The Liberian Senate accordingly made the issue a legislative agenda item that required clarity from the Minister of Finance Amara Konneh, the chief economic manager of the country.

THE BACKDROP AGAINST which the Senate summoned the finance minister regarded the security implication, which they felt rightly, was associated with the high rate of inflation in the country occasioned by the unparalleled drop in parity between the US dollar and the Liberian dollar. They feared that if nothing was done to remedy the situation quickly, public sentiments might run high against the government, leading to disorder.

UNFORTUNATELY, THE MINISTER'S appearance before the lawmakers to explain hindrances to the good performance of the economy did no good for the people; all it did was to draw the Central Bank of Liberia and the Finance Ministry into confrontation regarding understanding of the movement of monetary value. The Finance Minister was reported in the media as saying that the Central Bank of Liberia has infused L $8.0 bn into the economy to fight against one US $1.0 bn (a Liberia dollar equivalence of about 86 to 87 billion). But the Central Bank of Liberia reacted, saying that the Finance Minister's assertion to the Senate was out of misunderstanding of monetary movement.

ALTHOUGH THE SENATE'S attempt to obtain information and resolution commitment from the nation's top financial managers produced less than desirable results, we agreed with the Senate in its concern, and we support calls by some senators for action before this economic debacle degenerates into a crisis proportion. Our position supports the fact that the ordinary people bear the economic pinches accompanying this sky-rocketing rate of the United States dollar against its Liberian dollar counterpart, especially at this time when job insecurity and scarcity his highly visible and when even the take-home pay of the few employed people cannot take them home.

WE ESPECIALLY AGREE with Montserrado County Senator Joyce Musu Freeman-Sumo's blunt assertion that the decrease in the strength of the Liberian dollar against the US dollar was causing more harm for ordinary Liberians whose salaries are far below the belt. Certainly, the inflation caused by the high rate of the USD against the LD has rendered ordinary Liberians unable to buy even a 25 Kg bag of rice, which is presently sold at a little over L $2,000. There is likelihood, given the look of things, that that already astronomical price - by the standard of the vast unemployed majority - could go higher in cadence with the rising USD rate at the people's detriment. All we have said amounts to a notable fact that unless policymakers took concerted actions, the irking inflationary state of the economy could cause public protest or demonstration.

ANOTHER REASON FOR the ailing state of the economy is the simple economic theory of supply and demand. Inflation usually results when prices are high in the face of scarce resources. Even at that, the export market is not generating sufficient foreign exchange, making the US dollar to be scarce on the money market. Besides, there is the situation of capitol flight in the country, whereby most of the senior government officials have dual citizenship, using the scarce foreign exchange of this country to support their families abroad. Still yet, the local entrepreneurs engaging international or cross-border trades have to buy the United States dollars from street corners at exorbitant rates, thereby making the cost of basic goods and even services costly and unaffordable for the ordinary people. Another underside of the chase after US dollar is the flooding of the local market with substandard and often hazardous goods.

AS IF THIS is not sufficient headache for the nation, the Central Bank of Liberia has yet to address systematically the performance of the Liberian dollar against mainly the US dollar. The case in point is that rather than using basic economic interactions to stimulate drop in the US dollar rate, the bank ordered a L $7.0 appreciation of the Liberian dollar against the US dollar. Even that infinitesimal appreciation has yet to have any effect on prices of basic and threshold goods and services - including transport fares, petroleum products, and assorted imported goods - on the local market. This is why the Minister of Commerce needs to explain to the Liberian people why the market prices are not tumbling with drop in US dollar and rise in Liberian dollar. The people need this explanation or better, they need immediate drop in market prices in cadence with the CBL announcement, if that announcement must be relevant to the needs and aspirations of the struggling people of this nation.

WE BELIEVE THAT that economic interaction should be the basis for the stabilization of the economy; and we equally believe that such is of course obtainable through coordination and cooperation amongst relevant institutions responsible for the growth and impact of the economy on the standard of living of the consuming public. It is against this backdrop that we are appealing to the economic managers of the state to concert their efforts in cogently addressing the basic biting economic issues.

We prefer this approach to the making of cosmetic policies and statements that would impose further hardship on the people. We derive our call from the CBL's current approach to the present economy situation, which only enriches the business community at the expense of the masses. Simply put, let the decrease in the rate of the US dollar be reflected in the cost of basic goods and services.

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