Former President Ellen Johnson Sirleaf’s bad economic policies are responsible for the hyperinflation being experienced in the country, the Chairman of the ruling Coalition for Democratic Change has charged.
Mr. Mulbah Morlu said Wednesday during a live interview on statebrocaster ELBC that Johnson Sirleaf’s decision to print unspecified amount of new banknotes to finance government’s operations is main contributor to the escalating depreciation of the Liberian dollar against the United States dollars.
President George Weah and his economic management team are reevaluating those Sirleaf era decision to address the exchange rate instability and stabilize the domestic economy, Chairman Morlu said.
He urged Liberians to exercise patience as the President pursued measures that will revitalize the economy and create the needed jobs.
The Weah administration has attracted investors and international partners that have expressed willingness to invest in Liberia to boost trade and commerce, the ruling party Chairman claimed.
“We inherited a broken economy. This government has spent only five months in power but has achieved so many things that the past government did not in six years,” he said.
“We are prepared to build 10,000 modern homes to replace the mud ones that our rural people currently live in.”
Ex-President Sirleaf’s monetary policy seeking increase in the money supply via printing of new notes was often greeted with controversy.
One expert likened it to 19th century German dictator Adolph Hitler’s economic idea that favors the printing of more currency to finance government.
Johnson-Sirleaf in the closing years of her administration asked legislators to approve the printing of new banknotes to address the alleged shortage of the local currency and corresponding effects on the nation’s economy.
In her communication to the legislature dated Thursday March 3, 2016, Sirleaf informed the lawmakers that the request is urgent in rescuing the national economy.
Then Senate Chief Armah Jallah signalled an initial rejection to the President’s money printing plead with a condition that the Central Bank, Which is the original source of the request be audited.
At the time of the request, the Central Bank of Liberia official report was in contrast with Sirleaf’s claim that the Liberian Dollar was in short supply.
In its 2015 Annual Report, the Bank reported that there was more Liberian Dollar in circulation at end November 2015.
“Liberian Dollars in circulation at end November, 2015, stood at L$9,505.9million, reflecting a growth of 1.5 percent, from L$9,367.6 million at end December 2014,” the report said.
“The growth was on account of a 3.1 percept rise in currency outside banks, which offset a 12.2 percept decline in currency in banks.”
Some economists and financial pundits judging from this account, then argued against the printing of more local currency with view that it could exacerbate the inflationary scenario in the country.
Former Auditor General John Morlu in his 2013 Article “The five Factors Causing Inflation in Liberia called the printing of more banknotes as a bad policy that can only drive inflation.
He said “In today’s Liberia, the fact is that more Liberian dollar being push on the economy is bad monetary policy. Printing more and more money without the aggregate output level to support it is bad policy. Adolph Hitler printed a lot of money in Germany to finance his World War II and he got hyperinflation and Germans suffered.
In the 1980s, Mexico, Argentina, Brazil and so many poor countries could not pay their debts to multi-lateral institutions and their bilateral debts. They fooled themselves to think that the easiest way out was to just print more and more money and the result was their economies tanked due to skyrocketing inflation. In recent years, we have read Zimbabwe’s 100 Trillion Dollar Banknotes and the result has been a complete economic devastation and massive suffering of the people of Zimbabwe.”
Paying 20% of government employees’ USD salary in Liberian dollar and 25% inward remittances in the local currency was another policy instrument the Sirleaf’s administration used.
In a December 21, 2017 policy statement, recently reigned CBL Governor Milton weeks said the increase of public spending in Liberian dollar was a contributing factor to the decline of the local currency.
“As at end-November 2017, the average exchange rate between the Liberian and US dollars depreciated by 24.0 percent to L$123.57/US$1.00, from L$99.58/US1.00 recorded the same period a year ago,” he said.
“As I have mentioned, this level of depreciation was largely triggered by high demand for foreign exchange to service import payments and other ensuing factors including increased Liberian dollar expenditure by GoL and reduction in GoL US dollar expenditure as a result of low US dollar revenue receipts, among others.”
– Festus Poquie