The acting chairman of the Board of Governors and incoming Executive Governor of CBL, Nathaniel Patray, has revealed that Liberian dollar banknotes outside the banking system amount to about L$15,242,000,000 (fifteen billion, two hundred forty-two million Liberian dollars). He has also announced the introduction of licensing requirements for all foreign exchange bureaux.
Mr. Patray said as part of Government's economic stimulus initiative, all Foreign Exchange Bureaux in the country will have to obtain a license before operations. Currency in the vaults of commercial banks is only L$1.7 billion according to Governor Patray.
"The objective of the action plan or framework of this meeting is aimed at implementing every necessary and complementary policy that will help reduce the amount of currency outside the banking system and by extension to ensure broad exchange rate stability over a period of time," he said.
According to him, the increasing pressure on the Liberian dollar can be attributed to several direct and indirect factors, including but not limited to weak performance of the Liberian dollar and the extended sector of the economy, constraining the foreign exchange and supply to the economy. But, prior to yesterday's meeting with the CBL authorities and the Economic Management Team (EMT), there was an immediate drop in the exchange rate to US$1 to 100 in and around Monrovia.
Mr. Patray said the Liberian dollar has come under significant pressure, beginning last year and the situation has further deteriorated in recent time. He added, "the CBL continues to intervene in the foreign exchange market through the regular conduct of foreign exchange auctions, based on available foreign exchange," noting that, the main source of foreign exchange for the CBL now is the remittance proceeds."
He said statistics showed that at the end of June, this year total foreign exchange intervention by the CBL was US$26.9 million reflecting a net inflow of US$10.7 million excluding CBL operations and other expenditures; while the remittance split may not be directly contributing to the reserve build up, it is significantly helping to reduce the pressure on the reserve.
In other words, Mr. Patray said, without the remittance split, the reserve position would have significant falling compared with the current level. This, according to him, highlights the fact that suspending the remittance split at this time may expose the CBL to foreign exchange constraints, which will significantly affect the operations of the bank.
Therefore, it is recommended that the remittance policy remain in place but be complemented with other policy measures, such as foreign exchange intervention and stabilization in ensuring financial instruments such as notes, bonds, and standing deposit facilities remain viable in order to mitigate the negative impact associated with the injection of additional currency in circulation.
The reason, according to Patray is because the exchange rate pressure remains persistent if additional measures are not taken to reverse the trend. At the same time, said the government is committed to addressing the welfare of Liberians.
Finance and Development Planning Minister Samuel Tweah also stressed that government will be more robust in the implementation of policy regulations aimed at resuscitating the economy. "All we are asking you all is cooperation; once you cooperate with us we will also cooperate with you all because we want to make sure that this government succeeds and if this government must succeed than we all need to work together," Minister Tweah told the money exchangers.
As the money exchangers yesterday gathered at the CBL auditorium to listen to what the President Weah's EMT would say about the devaluation of the Liberian dollar against the United States currency, several of them informed the Daily Observer that instituting regulations such as registration among others are not sufficient to curb the instability of the exchange rate.
The money ex-changers added that recommendations they themselves made were downplayed as the CBL insisted on providing its own way forward. They said the new regulation should not only be restricted to them but should extend to other business people who are involved in money exchange.
Meanwhile, Police Inspector-General (IG), Patrick Sudue has said business people, mainly money exchangers, are responsible for the devaluation of the Liberian dollars to the United States dollars. However, he did not explain or justify his comment. IG Sudue however added that the police will enforce any regulations coming from the CBL and the Economic Management Team.