The Liberian People’s Party (LPP) want government ends the practice of reducing cash kept by commercial banks to strangulate the economy.
The Central Bank of Liberia (CBL), instead of instituting measures to increase cash reserves at commercial banks, it is offering attractive interest rate for commercial banks (CB) to lend money to the government.
LPP believed that commercial banks with limited cash will not be in the position to lend adequate loans to businesses and customers will withdraw portion of their deposits thus making depositors disenchanted while many others will continue to complain.
According to a statement issued in Monrovia, the opposition political party believed that past and present administrations with the shortage of cash, had underscored how global prices were affecting Liberia’s cash position.
In 2017, the government through the CBL stated that the country’s cash position was low because cash outflow remittances were higher than cash inflow remittances.
While in 2018, the government stated that vaults of commercial banks were empty because some elites were hoarding monies to undermine the present administration.
Soliciting cash, once again, from investors, the CBL is offering 20 percent as its monetary rate but unfortunately, the offer will not only reduce cash held at commercial banks, but will undermine Liberia’s stability.
With this, the party believed that businesses, the engine of economic growth, will not borrow adequate cash to expand and at the same time borrow money from banks; which will not be necessary since government had already saved US$44 million in 2020/21, 2021/22 and 2022/23 from cuts in spending on ‘Goods and Services.’
Giving additional cash to authorities who have not accounted for proceeds from previous sale of promissory notes might not encourage them to practice proper record keeping.
If the country depends on the expansion of businesses to grow, then government, whose total revenue now stands at US$523 million which is about 50 percent of Liberia’s real gross national product, should now reduce it spending and at the same time reduce cash deposited at commercial banks.
Commercial banks are searching for not only higher interest rates but also are looking for favorable payment conditions and that his how and why managers of commercial banks choose government promissory notes and reject promissory notes from businesses and individuals.
Moreover, money-lenders can use government’s promissory notes as collaterals for other financial arrangements. Government or its officials know that investors searching for profits will buy promissory notes that offer attractive interest rates.
LPP does not think the cut in spending and the decision to take money away from commercial banks are good for the country because is it not a prudent decision to cut US$44 million from buying goods and services and at the same time reduce cash held by commercial banks.
The party therefore called on the government to inject money into the economy, thereby, allowing employers (newspapers, local merchant, farmers, etc.) to buy goods and services such as paying employees.