In his latest social media post under the caption-Lunchtime: Liberian Dollar Shortage - a “fan belt effect” in monetary policy?as it relates to the ongoing debates about Liberia’s fragile economy, former Minister Kamara opined: When a “fan belt” malfunctions in a car, it affects the alternator, power steering pump, water pump, air conditioning compressor, air pump, etc. Likewise, the sudden increase in USD liquidity (initial constraint) could have affected the LD liquidity.”
According to him, the spillover effects to the rest of the Liberian economy is exacerbating other constraints such as in the lack of LD liquidity in the nine commercial banks.
Konneh, who served as Minister of Finance and Development Planning during the regime of former President Ellen Johnson-Sirleaf, asserted that this is the strangest phenomenon- ever to occur in recent Liberia economic history.
In response, the former top government official averred that policymakers seem to have one foot on the accelerator and one foot on the brake pedal of this economic car, exacerbating this “fan belt effect.”
“Soon I suspect they will begin to target key private sector players on suspicion of hoarding. The current fixation on printing new banknotes as the solution may appear viable to increase LD supply and consumer confidence, and accelerate growth. But such action will likely have a break-check effect as consumers continue losing confidence in the banks when they can’t access their money now, instigating further declines in the financial sector.”
But he advised that the current debate should focus less on the need to go after private business people and arbitrarily print new banknotes, and more on understanding the cause of this “fan belt effect.”
“What is at stake for restoring macroeconomic stability is not a disagreement between the ruling and opposition political parties about who’s fault it is, but the practical management of a post-conflict fragile economy whose population has nearly tripled since 1984 and in which productivity collapsed in 1995 and recovered by between 2006 and 2017,” he accentuated.
“What we need is not labels and cliches but more basic discussions - both in government and outside of it - of the sophisticated and technical questions involved in keeping such a fragile economy moving ahead. That discussion should begin with my last question for today: just how did all those LDs leave the nine commercial banks in less than two years? Where is Professor Wilson K. Tarpeh?” Konneh, among other things, added.
However, the Government of Liberia(GoL) via the Minister of the Ministry Information, Cultural Affairs and Tourism (MICAT), Lenn Eugene Nagbe, recently reassured Liberians that the government is exerting all efforts to ensure that the current economic situation is addressed.
"We do have an economic problem, the economy is under stress and we are almost at the point of recession. “We are not there yet, our rate if inflation is very high and all of these things have reached a point where salaries for civil servants have been delayed for couple of months," the government spokesperson noted.
However, during a local radio talk show ion recently, Minister Nagbe stated that the government is working with the International Monetary Fund (IMF) to enter an IMF support program that will help address some of the challenges the economy is faced with.
"The government has not hidden the fact that this is a tough situation but we have a problem that we are dealing with. We are taking the right steps to fix the problems that we have," the MICAT boss said.
Minister Nagbe indicated that it is only Liberians and the Government of Liberia that can develop Liberia, but pointed out that it has to be done in consonance with the development partners of the country.
According to Nagbe, the IMF support program is expected to be reviewed by the IMF Board of Directors on December 9, adding that the revision will subsequently allow Liberia to successfully enter the program.
"We are at the point now where the Board of Directors at the IMF will make a decision on the 9th of December about whether Liberia will be granted the privilege working with the government in this formal manner," Nagbe cited.
The MICAT boss indicated that the program is aligned with the National Agenda of the country which is the Pro-Poor Agenda for Prosperity and Development (PAPD).
Nagbe observed that the withdrawal of the UN mission from Liberia negatively contributed to the current state of the economy, stating: "UNMIL contributed US$300 million to our economy annually during their stay in Liberia.”
Among other things, he also highlighted the loss of Direct Budget support from some of the nation’s partners because of their decision to switch from grant based to concessional loans arrangement.See page for the full text former Minister Konneh’s article.