MONROVIA, Since the end of 2017, the Liberian Dollar (LD) has been free-falling like an empty barrel down a very steep hill. The quickened depreciation of the LD and weaknesses in Liberia’s economy were foreseen in an article I published on Globe Afrique back in January 2018, in which I listed the economy as a significant challenge facing the new administration.

My concerns were based on a review of the Central Bank of Liberia’s economic data and the rising strength of the United States (U.S.) economy. Today, the prediction is fast becoming reality since the LD is falling because of a high rate of money growth of Liberian dollars in circulation, failure of the Governor of the Central Bank of Liberia to meet five essential objectives of the central bank’s monetary policy, a strong U.S. dollar, and a week and unstable Liberian economy.

On Tuesday, July 3, 2018, the Liberian dollar was trading around LD$151, its lowest value in decades. That is a decline of nearly 50 percent against the U.S. dollar in roughly 7 months. The fall of the Liberian Dollar is a severe cause for concern since the Central Bank of Liberia lacks the resources to take a defensive position in the foreign exchange market to stop this freefall.

Liberian Dollars in Circulation

According to the 2017 Annual Report from the Central Bank of Liberia, narrow money supply (M1) at the end of November 2017 stood at L$52,207.9 million – a jump of nearly 15% compared to A similar period in 2016. Back then, former Governor Milton Weeks stated the increase in LD was due to the 2017 election, even though the government of Liberia received millions in financial support from the United Nations Development Program, the Swedish government, and other international development agencies.

Milton Weeks

During the same period, the former President of Liberia, Ellen Johnson-Sirleaf, set forth a mandate that all Government of Liberia employees should be paid in Liberian dollars. Whether it was insidious on the part of the previous administration or not – that mandate exacerbated the problem because the CBL indirectly released additional LD to the market.

In early 2017, the former CBL Governor, Milton Weeks, admitted that the Liberian economy was holding nearlyLD$13 billion dollars.  For an economy that depends heavily on imports, this means the high growth in money supply without a comparable increase in real output shows there were far too many Liberian Dollars chasing fewer goods. It is imperative upon the CBL to limit the quantity of money and credit.

There is a strong correlation between the amount of money in circulation and inflation. And it is a known fact that when inflation rises too high or, a currency loses its value for an extended period, the central bank is at fault. Why? Because the central bank has the Constitutional authority to print currency and control the availability of money and credit in the economy – this activity is what we refer to as monetary policy and can be found in the Act to Authorize the Establishment of the Central Bank of Liberia (source:

The U.S. Federal Reserve Board Chair Janet L. Yellen, stated, “A crucial responsibility of any central bank is to control inflation, the average rate of increases in the prices of a broad group of goods and services. Keeping inflation stable at a moderately low level is important because… inflation that is high, excessively low, or unstable imposes significant costs on households and businesses” (source:

It is quite simple, the Central Bank of Liberia should be blamed for Liberia’s current economic fiasco because the CBL failed in its pursuit of five specific objectives. Moreover, considering the former governor was a holdout from the previous administration one can’t help but wonder where his loyalty rests. The five specific goals include:

  1. Low and stable inflation – the primary job of the CBL is to maintain price stability. That means, keep inflation low and stable. Today, prices are all over the place and rising sharply.
  2. High, Stable Real Growth – the Central Bank of Liberia has a legal authority to adjust interest rates, a tool that could be used to stabilize the economy.
  3. A Stable Financial System – the CBL has the authority to regulate the financial sector. If people lose faith in Liberia’s financial institutions, that is, they are afraid to deposit money in banks for fear they will not be able to withdraw it when needed, then this fear could lead to a significant decline in the Liberian economy.
  4. Interest-Rate – it is well-known that interest-rate stability is a strategy central bank employs to achieve the ultimate goal of stabilizing an economy. Liberia is ranked amongst the highest African countries with double-digit interest rate.
  5. Stabilizing Exchange Rates – the value of Liberia’s currency affects the cost of imports to Liberia. The depreciation of the Liberian Dollar shows the CBL has failed miserably in its objective.

Additional pressure on the Liberian Dollar comes from the strength of the U.S. economy. Since January 2018, the U.S. dollar has been rising, and the U.S. economy has been gaining strength. To stabilize the U.S. economy (a central banks specific objective), the Federal Reserve bank hiked its benchmark short-term interest rate a quarter percentage point and suggested that there may be two additional rate hikes before the end of the year.

How do you solve the economic problems in Liberia?

To increase the value of the Liberian Dollar and stop the further depreciation of the currency, let’s take a look at the pros and cons of some fundamental strategies:

  • The current administration could pursue a policy of mandating an official exchange rate. However, this strategy will only make the problem worse as citizens turn to the black market.
  • The government could continue its policy of restricting how money is moved out of the country. Unfortunately, this restrictive policy of controlling how people move cash is shortsighted since people will still find a workaround.
  • Perhaps the Government of Liberia could enforce a ban on quasi-currency traders – this strategy will undoubtedly slow the depreciation of the LD, but it’s not a permanent fix. Additionally, the government lacks the resources to enforce such a policy for an extended period of time.
  • The most effective method is to buy-back Liberian dollars. Unfortunately, the Government of Liberia is broke and therefore unable to effectuate this strategy.

Based on the current situation, the Government of Liberia needs to attract a lot of foreign direct investment to help spark productivity in the private sector. They need to seek the help of competent economists, researchers and business people to help drive investments to Liberia. International development agencies have been in Liberia for decades, yet, the Liberian economy has been surpassed by countries that were once worse off then Liberia. The World Bank, IMF, and USAID do not solve problems.