The Central Bank of Liberia (CBL) is fully aware of the current liquidity pressure in the banking system, particularly the limited supply of Liberian dollars. It is, however, worth noting that the pressure on the Liberian dollar this year is unusual and can be attributed to the increased demand for Liberian dollars overtime, which has been exacerbated by COVID-19.
In its effort to preempt this seasonal pressure, the CBL in 2019 forecast L$7.5 billion based on its analysis but was authorized to print only L$4.0 billion.
This amount which was brought into the country in July this year, was inadequate to replace the current amount of mutilated banknotes and at the same meet the liquidity demand in the banking system.
In spite of this constraint, the CBL has been strategically infusing the L$4.0 billion through the commercial banks with substantial amount already infused into circulation.
As additional measure, the CBL has been working with all key stakeholders, both in the private and public sectors, to mitigate the liquidity pressure. Specifically, the Bank is currently engaged with commercial banks and mobile money operators (MNOs) to promote the use of mobile money and other electronic forms of payment in addition to withdrawal of cash.
The CBL wants to re-assure the public that it is doing everything necessary to ensure the availability of both US and Liberian dollar liquidity for the festive season. The Bank has also put into place a Liquidity Monitoring Framework, including the establishment of an Internal Liquidity Management Team to respond to the prevailing liquidity challenge.
In order for the Bank to be able to exercise full monetary authority, it will need full autonomy over the printing of currency like most other central banks across the world.
The recent amendment of the CBL Act to give a three-year latitude to the Bank to print without frequent Legislative approvals is a positive step in the right direction.