Banking Expert Raps On Ugly Effects Of Forced Dollarization
The President of the Bankers Association of Liberia, John Davis, has raised concerns about the forced dollarization of the Liberian economy that will further exacerbate the country’s liquidity crisis.
He said unless actions are taken to avert forced dollarization of the country’s economy, which is basically import oriented, the existent foreign correspondent bank relationship saga will worsen, thereby affecting the ability of local banks to adequately maintain offshore accounts.He defined forced de-dollarization as when a nation on the basis of political considerations, with no serious appreciation of economic implications, abruptly effects transactional and financial de-dollarization.
Davis also said de-dollarization is when a country officially or sometimes unofficially moves away either partially or completely from the use of the presumably more stable foreign currency (US Dollar) to its local currency as a more preferred medium of exchange for the conduct of fiscal and monetary policy.
The banker pointed out that government’s decision to dollarize its economy began in March 2017 when it introduced the forced de-decentralization through an Act of the National Legislature amending part V: section19 sub-sections 1 and 2 of the Act establishing the Central Bank of Liberia on March 18, 1999.
This amendment, he said, sought to declare the Liberian Dollar as the sole currency and legal tender, directing that prices for all transactions in Liberia shall be solely indicated in Liberian dollars and cents and that all financial reports and official purposes and disclosures in Liberian Dollar.
The Act, however, maintains the US Dollar as legal tender for the sole discharge of foreign, public and private obligations.
The Liberian banking expert made the statement at ceremonies marking this year’s Annual Assembly of the Liberia National Bar Association (LNBA) held at the Monrovia City Hall Thursday.
The assembly was held under the theme: “Investing in the rule of law; a sine qua non for socio-political, economic development and sustainable peace in Liberia”
Speaking on the sub-topic, “Economic and financial impact of de-dollarization,” Davis noted that most forced de-dollarization programs initiated globally have ended with bad economic experiences and virtual re-dollarization, citing the experiences of Mexico and