The Government of Liberia Thursday announced series of sweeping measures that officials say would rescue the ailing economy amidst increasing inflation here.
The current inflation rate is estimated at 25%, while the exchange rate between the Liberian dollar and the United States Dollar is at 172.5 LRD to 1USD on the black market.
The rate of unemployment has increased over time as many companies have either introduced staff reduction policy or have folded up. Liberia’s export is at a low, with the dropped in Rubber and Iron prices (two major export commodities) on the world market, its foreign exchange earnings are low thus negatively impacting the exchange rate.
Opening the 5hours press conference which was broadcast live on state radio, Finance Development Planning Minister Samuel Tweah flanked by several key members of the Government Economic Management Team said the measures will improve economic performance and boost growth.
As part of the measures, he said government plans to introduce policies that will boost agriculture, provide an investment friendly environment- suspend taxes on unused lands by concessions, remove bureaucratic bottlenecks that affect the importation of goods and services here, while at the same time reintroducing a 24 hour service at the Free Port of Monrovia.
Minister Tweah said programs that helped farmers in the past which saw the establishment of the now defunct Liberia Produce Marketing Company (LPMC) would be reintroduce to boost the cocoa sector and other agriculture produce. Mr. Tweah also disclosed government plans to re-open the Agriculture Corporative Development Bank which would provide micro loans to farmers.
He said the government of President George Weah sees agriculture as the main engine of growth and therefore much emphasis is being placed on the sector.
Giving an upbeat appraisal of the recent Spring Meeting of the IMF, Minister Tweah said currently, the Liberian Government is not under any IMF program since the last one ended in 2017.
He said part of the current economic challenges facing the country is the pressure for the repayment of principles on loans which were secured under the previous administration.
However, the minister noted that there are ongoing discussions on content and framework of a program which would enable Liberia to benefit from some of the IMF stimulus.
Mr. Tweah also disclosed an ongoing wage harmonization and broader governance and PFM reforms that would also help put the country’s economy on the right trajectory.
He further announced that this year’s budget submission would be delayed by a month due to Budget submission to be delayed by a month due to structural issues among them the wage harmonization exercise which cannot allow for April 31 timeline.
He said the aim of the wage harmonization exercise is to bring public expenditure closest to fiscal FY 2019 outturn as well as a revenue mobilization strategy.
On the Millennium Challenge Corporation (MCC), he said the MCC has reiterated its commitment to Liberia through the compact and understanding to place compact in the context of existing challenges, which includes government’s Commitment to meet Conditions Precedents to compact closure.
Part of the MCC’s package is the management of the Liberia’s Electricity Corporation (LEC). Mr. Tweah said the has met its obligations by paying off debts incurred under the previous administration and is putting in place measures that would stem off power theft, adding that the government plans to introduce legislation that will criminalize power theft.
Commenting on steps being taken to strengthen the tax regime and ensure that all taxable individuals and entities pay the rightful taxes own government, Liberia’s Tax Commission General Thomas Doe-Nah said the Liberia Revenue Authority has introduced several measures which will ensure compliance.
He said one of the areas of concern is real estate taxes, adding that the exercise would start with government officials before trickling down to the ordinary citizen.
Mr. Doe-Nah said duty free privileges given to state officials will now be monitored to ensure that those privileges are used for the intended purposes and not as another back channel to rube the state of needed revenue.
For his part Central Bank Executive Governor Nathaniel Patray III also announced a number of policy measures that are being implemented by the CBL to stabilize the exchange rate both in short and medium terms.
Digitizing the Liberian economy and investing in the CBL Bill were two policy measures touted by Governor Patray as having the potential to mitigate the reduction in the value of the Liberian dollar and the rising inflation.
A prime reason for the depreciation in the value of the Liberian dollar, CBL Governor said, is the scarcity of the US dollar for use by the business community to import their goods. The decline in the prices of Liberia’s major export earners, means that Liberia does not generate enough foreign exchange to meet the demand for the United States dollar by major importers. US dollars importers meet their demand for US dollar by spending increasing amounts of Liberian dollar to purchase US dollar, hence the instability and reduction in the value of the Liberian Dollar and the resultant inflationary pressures that it generates.
Additionally, to mitigate this downward trend in the value of the Liberian dollar in the short term (less than one year), the CBL Governor encourages Liberians invest in large numbers in the CBL Bill that the Bank recently introduced. Investing in the CBL Bill will enable CBL to implement effective monetary policies to control inflation, which is the primary reason for the establishment of the Central Bank. As at December 2018, 94% of the total Liberian banknotes in circulation was out of the banking system, making it difficult for CBL to exercise its key function of effecting monetary policy.
In view of this, the CBL Governor and other members of the Technical Economic Management Team have resolved to embark on a vigorous marketing campaign so that Liberians will invest en-masse in the CBL Bill. In addition to getting the bulk of Liberian dollars back into the banking system and curbing inflation, the scheme is meant to create a culture of savings among Liberians.
Another CBL monetary policy instrument designed to reduce inflation that the CBL Governor Nathaniel Patray highlighted during the MICAT Press Briefing was for Liberia to make a transition from a cash-based economy to a digital economy. The CBL Governor believes that when an increasing number of individuals and businesses use mobile money services and other digital financial services in undertaking their transactions they can save on transactions costs, which are normally passed on to the prices of their goods and services.
The CBL Governor believes that when both of these policies (the CBL Bill and digital financial services) are pursued and promoted together, they will have the potential of reversing the adverse exchange rate and bring inflation under control. The Technical Economic Management Team, and the Central Bank of Liberia in particular, will now robustly embark on a massive awareness campaign to bring about an uptake in digital financial services and investment in the CBL Bill.
He, however, attributed the country’s current economic nightmare to past regimes that mismanaged borrowed money and at the same time refused to pay debts.
But Mr. Patray who is the Co-chair on the EMT said when these new measures and policies are put into place, the country is bond to recover from its current economic meltdown. Though according to Mr. Tweah, these changes may not be felt until the next four to six months.By Othello B. Garblah