The United States government’s sponsored independent review of Liberia’s currency printing, money inflow and transactions show the Central Bank of Liberia planned, set the rules and executed the US$25million ‘mop-up’ exercise, which President Weah has intended to address the escalating depreciation of the Liberia dollars against the United States dollars.
The content of the report disapproves opposition politicians claims that the Minister of Finance and Development Planning Samuel Tweah is to blame for ‘discrepancies associated with the mop-up exercise.
According to the report prepared and presented by US based firm Kroll, bank staff presented to the CBL board a plan titled ‘Policy Response Matrix to Address the Exchange Rate Depreciation’ and the Board of Governors approved the policy actions with the following conditions:
“that the FX auctions be conducted periodically over the course of one year; that the L$ currency mopped be sterilized for a one-year period and that the CBL put in place monitoring measures to ensure the funds are used for the intended purposes.”
On July 17, 2018 the Finance Department, under the direction of the CBL Financial Stability Committee (formerly the ‘Money Management & Policy Review Team’) provided the CBL Banking Department with a memorandum authorized by Charles Sirleaf to commence the purchase of LRD banknotes, the report said.
“The memorandum authorized the purchase of LRD banknotes using the proceeds from a USD 25 million reserve fund “…throughout the week beginning today July 17, 2018, to Major importers, Small Liberian Business and FX Bureau through the foreign exchange auction No.509”.
The CBL Banking Department informed Kroll that USD banknotes were sold at predetermined exchange rates during the USD Mop-Up Exercise:
n USD 1 = LRD 155 for the period July 17, 2018 to August 6, 2018.
n USD 1 = LRD 152 for the period August 7, 2018 to October 26, 2018.
The FSC comprises the Executive Governor, the two Deputy Governors, and all Directors.
The CBL Banking Department told Kroll that the USD Mop-Up Exercise involved CBL representatives in six small teams undertaking the physical purchase of legacy banknotes from local businesses and foreign exchange bureaus from August 2018, with the seller being reimbursed for the value of legacy banknotes purchased with new USD banknotes. Kroll was advised that all banknotes, whether legacy or new banknotes, were accepted during the USD Mop-Up Exercise.
Independent physical cash verification count
The Report: The CBL provided Kroll with a spreadsheet titled ‘USD During Auction’ dated October 26, 2018 which set out the total purchases of legacy and new banknotes as part of the USD Mop-Up Exercise.
The spreadsheet stated that LRD 2,303,363,898 (USD 15.0 million)31 of the initial USD 20.0 million drawdown by the CBL had been used to purchase legacy and new banknotes.
Kroll was informed by the CBL that there was a broad concern that local businesses would seek to “hoard” legacy banknotes until the exchange rate recovered (as an example, the exchange rate was USD 1 = LRD 94 on March 30, 2017).
Kroll was also informed by the CBL that there were insufficient banknotes in the HQ Reserve Vault and Waterside Reserve Vault at the time of the USD Mop-Up Exercise to fulfil large withdrawal requests from commercial banks. The CBL Banking Department advised Kroll that in a practical sense, one of the aims of the USD Mop-Up Exercise was intended to enable the CBL to introduce sterilized LRD
On July 10, 2018 the CBL submitted a request to Travelex Global and Financial Services for a drawdown of USD 20.0 million from a bank account held with the Federal Reserve Bank of New York. The request was made prior to the announcement by President Weah on July 16, 2018. Based on the documentation provided, the USD banknotes were dispatched by air freight on July 11, 2018.
Absence of authorization for recircularization of sterilized LRD banknotes
The ‘Minutes of the 8th Call Meeting of the Board of Governors of the Central Bank of Liberia’ dated July 16, 2018 specifically stated that the “…L$ currency mopped up will be sterilized for a one-year period.”
As at December 7, 2018 sterilized banknotes totaling LRD 1,281,100,500 (USD 8,274,583) had been recirculated into the economy, within six months of being purchased by the CBL as part of the USD Mop-Up Exercise. Kroll was not provided with documentation to evidence that the EMT or the CBL Board of Governors had approved the recirculation of the sterilized banknotes within this time period.
Kroll recommends that further enquiries are undertaken to establish the current status and planned strategy for continuing the USD Mop-Up Exercise.
– Festus Poquie