In the wake of ongoing debate over the printing of a new family of Liberian dollar banknotes, an expert has warned that the current economic situation has given a justifiable reason why the government should change the entire currency.
The Executive Director of the Liberian Microeconomic Policy Analysis Center (LIMPA) Mr. Del-Francis Wreh told senior media managers at a strategic media session on the state of the economy, the printing of the proposed Liberian banknotes and the state of the government's salary harmonization program organized by the Ministry of Finance and Development Planning on Monday December 9, that there are too much money outside the control of the banking sector and that is hurting the economy.
He said for government to exercise control over its monetary policy, it first needs to know how much money is in circulation. And in order to know the total amount in circulation, Mr. Wreh argues further that the government needs to change the existing banknotes and put in a framework that would demand that individuals exchange their money at the commercial banks through their accounts. He said this would force people who are keeping the money outside of the banking system to deposit same at the banks.
Currently there are shortages of Liberian banknotes within the commercial banks leaving banks to ration the little available cash. The situation has left depositors without access to their physical cash in the banks.
Mr. Wreh argues that most of the cash are currently in the hands of the Fulani and Lebanese merchants, while some big businesses have resorted to building their own vaults because of the decreasing confidence in the banking sector. He said all these practices are keeping the money outside the banking system.
He also lashed out at the country's foreign exchange transaction system, saying it is working at the disadvantage of the country because most of the Fulani merchants who are engage in the foreign exchange market do not keep their cash in the commercial banks. But rather outside the banking system from where they can later repatriate them to their country-a practice that is also contributing significantly to capital flights here.
He said cross border trade is also affecting the country's foreign reserve, because individuals needing United States Dollars in say Guinea could just buy the equivalent of that amount in good and cross into Liberia to sell in United States Dollar and take the cash out.
Liberia operates a dual currency regime therefore it is very easy for those traders to transact in the US Dollar and take it away.
To address these issues, Mr. Wreh said the government is considering a hybrid system, which is to print less quantity of money and promote digital transaction where there will be less cash available in circulation. He said the introduction of the hybrid system would pave the way for migration to a total digitalization of the economy.
It is against this backdrop that he thinks people should be encouraged to transact in mobile money, instead of cashing out the mobile money which would also decrease available cash at the mobile money centers.
Mobile money transaction is the easy available digital money app in Liberia at the moment.
Speaking earlier on the government salary harmonization program, he said the government has completed the salary harmonization process and that the deadline for full application and implementation is January 2020.
He said the new measure discourages the general allowance system and payroll piling through the now automated system. He said though the process is not 100 percent completed but as it stands it makes it difficult for any ministry or agency to add any employee without going through the rightful recruitment system.