CBL Governor Institute Measure To Reduced Foreign Exchange Rate
In the wake of the Liberian dollar witnessing double digit depreciation against the United States dollar, the Governor of the Central Bank of Liberia, Nathaniel R. Patray, III has outlined short to medium term policy measures aimed at managing the pressure on exchange rate and prices.These policy interventions which have been advanced to strengthe the Liberian economy include: Sustained monitoring and enforcement in the Foreign Exchange Management; issue of regulation on currency hoarding; Review of the Reserve Requirement Regulation for the United States dollar; Issue directive on withdrawal of US/LD over the counter at banks; Review and analysis of commercial banks’ placements/ cash holdings abroad and stringent monitoring and enforcement of the regulation on physical movement of cash and currency declaration.
Other policy intervention advanced by the CBL are: Review and strengthen the regulation on transfer of cash abroad; Export proceeds repatriation law; Revise the frame work for de-dollarization; Introduction of new banknotes and acquisition of gold to support the value of the Liberian dollar.
Governor Patray who is also the Co-Chair of the Technical Economic Management Team (TEMT) outlined the policy interventions in the Liberian economy in a presentation made on November 6, 2018 covering key areas such as the Global Economic Developments; Developments in the Liberian Economy and Policy interventions.
On the Global Economic Developments, the CBL Executive Governor looked at growth and inflation and Global commodity prices.
Global growth for 2018 to 2019, Governor Patray said, is projected to remain steady at 2017 level, at a less vigorous pace and less balanced as downsized risks increased while upside risk recede.
He said trade tension between China and the USA, triggered by recently announced trade measures, including tariffs imposition on US imports from China are among factors informing the current state of the Global economy.
Governor Patray further asserted that the world output growth is projected at 3.7 percent for both 2018 and 2019, same as 2017 underpinned by negative effects of approved or implemented trade measures, weaker outlook arising from country specific factors for some key emerging market and developing economies, tighter financial conditions, geopolitical tensions and higher oil import bills.
Touching on growth in Sub-Saharan Africa, the CBL boss said, it is expected to rise to 3.1 percent in 2018 and further strengthen in 2019 to 3.8 percent from 2.7 percent in 2017 supported by strengthening commodity prices, strengthening external demand, favorable condition across the region leading to recovery in agriculture output, ongoing infrastructural investment and investment in energy and roads.
Relying on data from the International Monetary Fund (IMF) staff estimates and the Liberian Authorities, Governor Patray presented and cursory but insightful analysis of the Real Sector and inflation flow of development in the Liberian economy.
In the Real Sector, Governor Patray look at Real Gross Domestic Product (Real GDP), Agriculture and fisheries, forestry, mining and panning manufacturing and services.
He said, Real GDP for 2017 is estimated at 2.5%; 2018 is estimated at 3.0% while 2019 is estimated at 4.5 % respectively.
On agriculture and fisheries the CBL boss said development in the Liberian economy for 2017 is estimated at 1.7, 2018 is estimated at 3.5 while 2019 is estimated at 3.8. In the area of forestry, 2017 is estimated at -8.0%, 2018 is estimated at -6.3% and 2019 6.0%.
Giving an incisive analysis of the mining and panning sector relative to development in the Liberian economy, Patray revealed that 2017 recorded 28.8 %, 2018 is estimated at 29.3% while 2019 is estimated at 13.1%.
In the manufacturing industry 2017 recorded 1.4%, 2018 estimate is put at 0.1 while 2019 is estimated at 3.2%, Patray said.
Closing in on the Real Sector Patray said 2017 recorded an estimate of 1.0%, 2018 estimate is -0.5% and 2019 is estimated at 3.0%.
Inflation, which of late has been a topical issue in discussion centering on the Liberian economy, Patray presented that the annual average of consumer prices for 2017 is recorded to be 12.4%, 2018 is estimated at 20.4% and 2019 is estimated at 24.% while the end of period consumer prices for 2017 is put at 13.9%, 2018 is estimated at 27.0 and 2019 is projected at 22.0%.
The CBL Executive Governor admitted that macroeconomic conditions in the Liberian economy deteriorated in the first three quarters of 2018, with heightened pressure on the exchange rate and inflation.
On economic growth and GDP growth previously projected at 3.2%, Patray divulged that it was slightly adjusted downward to 3.0%, underpinned by unfavorable terms of trade and weak domestic demand.
Patray further observed that the anticipated growth of 3.0% in 2018 and 4.5% in 2019 is largely driven by the mining and panning sector anchored on industrial gold production.
The CBL boss presentation was interspersed with graphical details on exchange rate variability, UNMIL drawdown and its attendant effects on foreign exchange inflows among others.