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Liberia’s economy is stagnating under the impact of Covid-19. A contraction in growth and a banknote shortage have combined to undermine President George Weah’s “pro-poor” agenda as he marks his third year in office.
“The government is frustrating us day-by-day,” says Victoria Kamara, a customer of SIB Liberia bank on Broad Street in Monrovia, waiting for a fifth day in a row to try to withdraw money from her account. “We’re tired in Liberia, people are tired, maybe they want us to go and steal,” she adds
Queues outside banks in the capital are commonplace as a banknote shortage forces commercial banks to restrict cash withdrawals.
Kamara, waiting patiently under an awning in a line snaking towards the bank’s locked doors, describes how tellers refuse the withdrawal requested, suggesting a lower amount.
“We’ve come to get our salary,” says Ambroise Jahwley, another customer. “Each time we come they say no US [dollars], no LD [Liberian dollars]. Sometimes they give you half of your money, sometimes 50 dollars, sometimes 40 dollars.
“I’m very disappointed in the government and the bank because we’re not getting what we’re supposed to.”
Weah presides over a country of 4.8 million people with a predominantly cash-based economy. Banknote shortages hit consumers’ pockets.
Banks in Liberia commonly manage the supplies of cash in their vaults, especially ahead of heightened demand from customers at holiday periods.
Most banks will start to taper withdrawals and hold more deposits during summer to meet those demands, an executive from a pan-African bank told RFI in a briefing, without wanting to be named.
But this year is more severe and shortages of cash have continued. The banks are reliant on their supply from the central bank. For cash held in their vaults, they must slow loan-making activity to maintain some withdrawals for customers.
“Two seasons of the year – our independence (26 July) and Christmas – cause a big rush on banks,” says Dixon Seboe, a representative for Weah’s ruling Coalition for Democratic Change (CDC) party.
“But this situation shows that it has become more profound,” says Seboe, who chairs the house committee on banking and currency. “It did not just happen at Christmas, it started about three or four months ago.”
The US embassy in Monrovia put out an alert in December, warning travellers not to rely on getting cash from banks in Liberia, but to bring sufficient money when coming to the country.
Traders at Monrovia’s markets report lower sales and customers with no cash to spend, affecting demand for their products.
Isaac Doe, a clothes seller, does not directly blame Weah’s administration. “We are experiencing challenges in business, but I don’t want to say it could have some political or socio-economic motives,” the 28-year-old says.
Few customers mingle amongst the aisles of mannequins displaying outfits at the China market building where Doe works.
Vendors sell dresses and skirts in stalls, and seamstresses sit at sewing machines whirring away on the ground floor, altering clothes.
“We have mutilated money cycling in the entire economy right now,” says Doe, describing damaged and dirty banknotes, and problems trying to give customers change. “When you get to the bank, the bank is telling you, ‘We don’t have money.'”
Cynthia Lloyd, a trader in provisions, complains that part of the problem is that foreign aid organisations left the country, reducing overall demand.
“Those people are gone, out of Liberia, so we’re fighting all by ourselves,” Lloyd says, sitting at her stall on Mechlin Street in downtown Monrovia, selling eggs, milk, flour and sugar.
The UN mission in Liberia (UNMIL) left the country in March 2018, after helping the country recover from two civil wars and uphold a 2003 peace agreement.
The withdrawal of international staff certainly would have had an impact on the multiplier effect in the economy with less foreign currency being spent. But for trader Lloyd, a Weah supporter, money problems also tie into the shortages of cash.
“We’ve got a shortage of banknotes, because of the ratty money on the market. Some of the money isn’t good,” says Lloyd.
Are the banknotes really missing?
The banknote shortage traces its roots back to the apparent scandal emerging after Weah took office, with about $100m of new Liberian banknotes allegedly going missing.
Banknotes were printed by a Swedish company with the approval of former President Ellen Johnson Sirleaf’s administration. After Weah assumed office, reports emerged claiming large amounts of banknotes had gone missing after being shipped to Monrovia.
The government ordered an investigation by US consultancy firm Kroll Associates who carried out a forensic audit, concluding no banknotes were missing, but highlighting a series of inadequate controls at the central bank.
President Weah set up a special taskforce to handle the matter and the Liberian prosecutor charged Charles Sirleaf, Ellen Johnson Sirleaf’s son, a former central bank official, as well as four others, with money laundering.
Sirleaf was freed, but former Central Bank Governor Milton Weeks was found guilty of being unauthorised to print the banknotes. The questions centred around whether authorisation for printing money had been granted by the legislature.
Nevertheless, the criminal charges against Weeks were dropped and he was set free. The missing banknote saga was solved, according to the authorities.
The legal proceedings were seen as somewhat of a witch-hunt by some of those made publicly responsible for the affair.
“I don’t know what I’ve done to him, but I know he’s a complete idiot,” says David Fahart, a former finance minister who sat on the central bank’s board, referring to the prosecutor.
“You’ve got people in government who don’t know their left from their right,” he adds, describing how members of the central bank board were unjustifiably accused, and had nothing to do with authorisation to print banknotes. “I was indicted, made the man who was responsible.”
The Kroll report and court case concluded the affair, and as far as the government was concerned, no money was missing.
The affair did highlight chaotic checks and balances at the central bank, and some questions remain unanswered.
Further details on the so-called mop-up exercise, using US$20 million to buy Liberian dollars and put US dollars into circulation, are sparse. Some 189,000 dollars went unaccounted for, the Kroll report said.
The US government announced further technical assistance to the Liberian government in December 2019, hiring Kroll Associates to help the central bank “more effectively perform its core functions of managing the Liberian currency”.
Kroll’s goal would be helping the central bank “manage compliance” and “mitigate risks”, enhancing “institutional capability and internal controls relating to currency printing and management”, said a statement about the USAID-funded assistance.
Lack of faith in the banking system
The “16 billion saga”, as some Liberians refer to it, appears to be more about banknote supply, the quality of those “mutilated” denominations, the hoarding of cash and a mistrust in the banking system.
The life cycle of a typical good quality banknote is five years at best, but can be less in challenging tropical environments like Liberia, where the use of cash is high. Banking staff describe stacks of banknotes in vaults needing dehumidifiers to stop the bills from becoming mouldy.
The management of replacing damaged, dirty and overused banknotes was found lacking, the original “missing” cash was supposed to be part of that cyclic changeover of money circulating through the system.
The shortage of banknotes currently is not about a curious or suspicious link to the past missing banknotes saga, according to Liberia’s finance minister.
“Unfortunately, this excessive politicisation has affected monetary policy in such a way that money comes out of the banking sector and doesn’t go back in,” says Minister Samuel Tweah.
“I think the government wants to replace the entire stock of money and hit a monetary reset button,” Tweah added, explaining that Liberia’s legislature must discuss authorising the printing of more banknotes.
“There were no missing banknotes, and sometimes when people say, ‘We can’t find money in the bank,’ there is a connotation that then it’s missing. It’s actually not missing,” says Tweah. “The money that is out is owned by the users, the owners, Liberians who own the money.”
More broadly, Liberia’s economy was hit by the Covid-19 pandemic in 2020, with lockdown measures to control the spread of the virus bringing Monrovia to a standstill.
The economy contracted by 3 percent in 2020 with the coronavirus impact, according to a December 2020 review by the International Monetary Fund.
If the global economy rebounds, Liberia’s growth would be expected to reach 3.2 percent, although the IMF notes high “downside risks” to the outlook, with the country “fragile and vulnerable to shocks”.
“There has been a slight retrogression and in some places stagnation of growth,” says George Wisner, former head of the National Investment Commission under Sirleaf.
“We were already recovering from external shocks caused by the Ebola epidemic,” he says.
“On top of that we had the commodity price shock, because we trade in primary commodities, and then we also had the uncertainties around the United Nations peacekeepers withdrawal,” added Wisner, who teaches international development at the African Methodist Episcopal University.
Liberia’s top three exports are iron ore, gold and rubber, according to data from the International Trade Centre.
Tyre manufacturer Firestone announced redundancies for their long-standing Liberia operations – shedding 800 jobs in 2019, and as many in 2020.
Gold mining operations have been buoyed by the recent strength in the gold price, likewise iron ore has held strong prices over the past year.
Arcelor Mittal has a 25-year concession in Liberia and royalties paid to the government topped $22m in 2019. The steel maker takes advantage of rights for a railroad it developed to Buchanan port for exporting iron ore.
Discussions are underway between Arcelor Mittal and the government over additional use of the infrastructure to obtain and bring to port raw materials from another operator in neighbouring Guinea.
Arcelor Mittal also has a phase two expansion project on the cards, previously delayed by Ebola. This would increase production, and a feasibility study has already been carried out.
Banknotes drag on economy
Regardless of foreign investment in Liberia’s commodity trade, the main obstacle hampering the economy at the moment is a lack of banknotes, as witnessed on the streets of Monrovia.
“It’s a serious challenge that the government has been concerned about for the past two years,” says Finance Minister Tweah. “There’s been a lot of monetary challenges around money in Liberia.”
Fahart, previously on the board of the central bank when it last tried to print banknotes for circulation, agrees, the authorities must print some banknotes and boost confidence in the system.
“The problem lingers on now, at the point before I left, there was hardly any money in the bank,” he says. “People are nervous – so in that period of uncertainty people hold onto their cash, they keep it in their vaults or whatever – and then the money, it was mutilated.”