4 March 2016

Liberia: Ellen Seeks Legislative Consent to Print More Bank Notes

Monrovia — 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.

With the country still facing the economic crisis, President Ellen Johnson Sirleaf is requesting the National Legislature to endorse the printing of new Liberian banknotes. In keeping with article 34 (b) of the Liberian constitution President Ellen Johnson Sirleaf has written members of the National Legislature requesting that body to invoke its constitutional powers to order the printing of new Liberian Bank notes.

"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;

In her communication to the legislature dated Thursday March 3, 2016 President Ellen Johnson Sirleaf informed the lawmakers that she has 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 communication, the first letters dated December 23, 2015 was sent by the then Executive Governor and now the second of such letters dated February 19, 2016 has been sent by the Acting Executive Governor Mr. Charles Sirleaf.

The President 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.

Liberia currently uses dual currencies-United States and Liberian dollars as legal tender. There have been arguments over the years for country to use a single currency but other economists continue to argue that the dual currency has some economic benefits.

The dollar (currency code LRD) has been the currency of Liberia since 1943. It was also the country's currency between 1847 and 1907. It is normally abbreviated with the dollar sign $, or alternatively L$ or LD$ to distinguish it from other dollar-denominated currencies. It is divided into 100 cents. The first Liberian dollar was issued in 1847. It was pegged to the US dollar at par and circulated alongside the US dollar until 1907, when Liberia adopted the British West African pound, which was pegged to sterling.

In 1847, copper 1 and 2 cents coins were issued and were the only Liberian coins until 1896, when a full coinage consisting of 1, 2, 10, 25 and 50 cents coins were introduced. The last issues were made in 1906. United States currency replaced the British West African pound in Liberia in 1935. Starting in 1937, Liberia issued its own coins which circulated alongside US currency.

The flight of suitcase-loads of USD paper in the economic collapse following the April 12, 1980 coup d'état created a currency shortage, which was only exacerbated when the government began minting $5 coins. Unfortunately the 7-sided coins were the same size and weight as the one-dollar coin; this similarity was frequently abused by traders.

In the late 1980s the coins were largely replaced with a newly designed $5 note modeled on the US greenback ("J. J. Roberts" notes). The design was modified during the 1990-2004 civil war to ostracize notes looted from the Central Bank of Liberia. This effectively created two currency zones -- the new "Liberty" notes were legal tender in government-held areas (primarily Monrovia), while the old notes were legal tender in non-government areas. Each was of course illegal in the other territory. Following the election of the Charles Taylor government in 1997 a new series of banknotes dated 1999 was introduced on March 29, 2000.

About the CBL

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 succeeds the National Bank of Liberia (NBL). The principal objective of the CBL is to achieve and maintain price stability in the Liberian economy. To this end, it seeks to preserve the purchasing power of the national currency; promote internal and external equilibrium in the national economy; encourage the mobilization of domestic and foreign savings and their efficient allocation for productive economic activities; facilitate the emergence of financial and capital markets that are capable of responding to the needs of the national economy, and foster monetary, credit and financial conditions conducive to orderly, balanced and sustained economic growth and development.


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