CBL Executive Governor J. Aloysius Tarlue
By Leroy M. Sonpon, III
At a cost of about US$21m
The Central Bank of Liberia has informed lawmakers that it needs L$27.5 billion to stabilize the cash flow in the country as L$22.5 billion is already out of the banking sector.
The money, the CBL said is indeed to respond to the blanket outlook of the downward trend of the economy and will buy up government debts, a move probably designed to keep borrow costs low.
Although the CBL Board of Governor has approved the printing of the L$27.5bn, it has not explained if the money will be the same legacy note or a new one.
“The issue of paucity of the Liberian dollars is a grave concern, and whether we need additional banknotes or we need new banknotes, the fact is we need money on the market to be infused into the economy in three years period,” said CBL Executive Governor J. Aloysius Tarlue.
The money, Governor Tarlue added, will be printed at a cost of US$21 million equivalent to about L$3.4 billion, while revealing that the recently printed L$4billion is part of L$25.3bn of which L$22.5bn is currently outside the bank.
Governor Tarlue added that the L$10 billion out the money in the banking sector is mutilated because it has lived its lifespan. Tarlue also blamed the coronavirus pandemic for the country’s present economic woes, but “stressed that the economic outlook can be redeemed certainly with printing of the new banknotes.”
CBL latest request came just few weeks after it shifted the blame on the Legislature for the country’s liquidity crunch, which has forced banks to ration daily cash-withdrawals.
In a release at the end of last year, the CBL defended its position and explained that situation could have been avoided if the Legislature had approved their request to print L$7 billion instead of L$4 billion to enable them to replace mutilated banknotes and at the same time meet the liquidity demand in the banking system.
“In its effort to pre-empt this seasonal pressure, the CBL in 2019 forecast L$7.5 billion based on its analysis but was authorized to print only L$4.0 billion. This amount which was brought into the country in July last year was inadequate to replace the current amount of mutilated banknotes and, at the same time, meet the liquidity demand in the banking system,” the CBL said in its press release.
However, Finance Minister Samuel Tweah shut down the CBL’s argument and said that the printing of more banknotes would not solve the crisis until public confidence is restore in the banks.
“Printing money is not the solution. So even when we print new money the problem cannot be solved,” Min. Tweah said when he appeared on the 50-50 talk show. “And the reason why it cannot be solved is the quantity of money that is not coming back but staying outside of the banks.”
Min. Tweah further said that printing new money will become better when public confidence in the banking sector is restored, which is intended to ensure that people trust their bank to save their money instead of holding it.
“Certain people will have to keep their money outside until confidence is restored. This way, they will start to bring it in since you can account for it,” Min. Tweah added.
But, this opinion is not shared by the Minister of State Nathaniel McGill, who is the Chief of Staff to President George Manneh Weah. For Min. McGill, in the absence of new banknotes, the liquidity crisis will not be solved, as bank will continue to ration daily cash-withdrawals. According to Min. McGill, the situation would be far worse, as Liberians will find it more difficult to access cash for business transactions.
“It [has] to do with the country and we [have] to change the money. It is purely a Legislative responsibility. If we do not have money in this country, they as lawmakers have power to authorize it,” Min. McGill said. “If they do not authorize it, we will not have the money. Then, the rotten money will be there. Eventually, we will not have Liberian dollars to use again because of the kind of Liberian dollars we have. By the time the money gets mutilated, you cannot find it”.
Meanwhile, the request from CBL comes as banks continue to experience experience scarcity of money leading people stand in queues for hours just to get cash.
For the past few months, there has been shortage of Liberian dollar, but the squeeze has intensified in the last few weeks forcing banks to turn away customers, as they simply do not have enough cash in their vaults due to limited supply of cash received from the CBL.
In remarks, the Deputy Governor for Operations, Nyemadi D. Pearson, buttressed the necessity for the money in the economy and added that the bank’s plan is to move into a cashless economy.
However, several lawmakers expressed their respective discontent including Rep. Edward Karfiah, Rep. Richard Koon, Rep. Robert Womba, Rep. Francis Dopoe, Rep. Moima Briggs-Mensah and Rep. Rustonlyn Dennis among others.
Most of the lawmakers believed that the printing of new money is not only the sole solution to illiquid the economy, but insisted that the CBL should give a role map or detailed explanations on further plans about tackling the avoidance of disappearances of the Liberian notes on the market.
Source Daily Observer.