By Varney K. Sirleaf
The Central Bank of Liberia (CBL) has intervened to remedy the problem of the high exchange rate on the Liberian market after a mounting pressure and public outcry. According to some of the ‘Money Ex-changers’ who were asked as to what was the cause of the abrupt decrease in the rate, some said that early yesterday morning agents of the Central Bank went around warning them that anyone found exchanging money for more than L$80 to US$1 dollar will be penalized.
Others said the CBL has been the root cause of the inflation in the exchange rate stating that the bank decided to auction them (money ex-changers) low rate, something which prompted them to directly buy money with high rate from the marketers instead of the Bank.
Several Forex Bureaus including the Alpha-Kollie Forex on the Jallah Town Road, Divine Forex, Joy Forex, and Amanda Forex all pointed accusing fingers at the Central Bank for the increment in the rate. “Today, some of us have become losers due to the abrupt decrease in the exchange rate,” one money exchanger who pled for anonymity said.
They ‘Money Exchangers’ complained that the abrupt decision taken by the Bank has caused a trickledown effect on them stating that they bought money with high rate the previous day which they are now forced to sell at lower rate.
Meanwhile, the CBL market buying and selling rates released yesterday, January 23, 2014 recorded L$80.00 to US$1 for the buying rate while L$81.00 to US$1 for the selling rate.
There were also mixed reactions from the public; some embracing the new development, while others are being very skeptical and analytical about the intervention of the Central Bank at this time. “Is this the rightful approach in solving this problem, by sending agents of the CBL on the streets to intimidate money exchangers to reduce the rate?” a citizen angrily asked.
Others suggested that government institutions that are responsible to regulate the economy, the Ministry of Finance and the Central Bank of Liberia should work together to find an economic solution to the problem, but should not be a political decision by abruptly announcing a decrease in the exchange rate.
Some market women also embraced the news but said that they hope that the decrease in the exchange rate should correlate with the reduction of prices on the market.
It can be recalled that the Minister of Finance, during his appearance before the plenary of the House of Representatives last Tuesday stated that some of the many reasons why Liberia was experiencing inflation on the exchange rate is because of the L$8.0 billion pumped into the Liberian economy, an information the Bank has refuted and terms it as the misunderstanding of facts and the lack of understanding of movements in monetary aggregates and their interpretation by the Minister.
The Bank clarified that as the monetary aggregates change over time and expand as reflected in the growth of GDP, money supply will expand to facilitate economic transaction which does not necessarily mean pumping excess Liberian dollars into the economy.
The bank further clarified that despite the explanations provided by the CBL regarding its stimulus initiatives, some commentators continue to misinform the public that such actions of the CBL have been the reason for an increase in Liberia-dollar liquidity, thus causing pressure on the exchange rate.
The CBL release stated that the sale of the US dollars by the bank through its auction program in 2013 also helped to reduce Liberian dollars on the market, meaning the sale of US$72 million to the foreign exchange market mopped-up the equivalent amount L$5.9 billion using the average exchange of L$81.8/US$1 at the end of December, 2013.
The statement concluded by stating that the bank remains open to suggestions from all Liberians in trying to address the multiple challenges relating to macroeconomic stability, inclusive economic growth and poverty reduction.