Acting Finance and Development Planning Minister, Dr. Samora Wolokolie has resounded that the Finance Ministry is keenly observing the trend of the exchange rate situation and is planning on introducing mitigating measures that would minimize any negative impact that may arise.
It can be recalled recently, members of the Liberian Senate invited Finance Minister Samuel Tweah to appear before that august body to provide more details in relation to the appreciation of the Liberian Dollars against the United States Dollars on the Liberian market; an invitation the Minister said that he could not honor due to his travel with President George Weah at the United Nations Climate Change Conference, COP26 in the City of Glasgow, Scotland.
But representing Minister Tweah before members of that august body during its regular Tuesday session, Dr. Wolokolie said except for external payments which are denominated in United States Dollars, all domestic payments are subjected to the 80/20 ratio – which is 80% USD and 20% Liberian Dollars.
He also stressed that obviously, as a dual currency economy, when one currency appreciates or depreciates against the other, there will be some fiscal impact that would require the robust intervention of the Ministry of Finance in collaboration with other actors of the Economic Management Team.
Dr. Wolokolie further indicated that in terms of fiscal management, the appreciation of the Liberian Dollar against the USD, howbeit, temporary for now, will not have any major impact on the collection of government revenue in the short term, adding that historical data over the last two years has shown that revenues are mostly collected in USD in the range of approsimately 16-20% in Liberian Dollars and 84 – 80% in USD.
“Mr. Pro Temp and Honorable Members of the Liberian Senate, the Ministry of Finance and Development Planning as the lead on fiscal matters in the country, has taken note of, and is fully cognizant of the appreciation of the Liberian Dollar against the US Dollar. As at the date of this hearing, the CBL published rate, the rate that is used for Government financial transactions, is 1 USD to $145 LRD representing a precipitous change during the period of the last two months when the rate was hovering at $1 USD to $170 LRD.
We at the Ministry of Finance and Development Planning are keenly observing the trend of the exchange rate situation and are planning on introducing mitigating measures that would minimize any negative impact that may result therefrom. For example, except for external payments which are denominated in USD, all domestic payments are subjected to the 80/20 ratio – which is 80% USD and 20% LRD.
In terms of fiscal management, the appreciation of the Liberian Dollar against the USD, howbeit, temporary for now, will not have any major impact on the collection of Government Revenue in the short term as historical data over the last two years has shown that revenues are mostly collected in USD in the range of approximately 16-20% in Liberian Dollars and 84 – 80% in USD.” Dr. Wolokolie stressed.
The acting Finance and Development Planning Minister further stressed that as indicated above, if the appreciation of the Liberian Dollar continues in the short term, say two to three months, the impact on both the revenue and expenditure side of the fiscal field would be less consequential. However, if the Liberian Dollar continues to appreciate against the USD in the long term, the Ministry of Finance and Development Planning, in collaboration with other members of the EMT, will have to introduce corrective fiscal measures to mainly protect the disposable income of those receiving salaries and other payments from the Government.
“Key among these measures would include the review of the ratio of currency split in terms of government payments, adherence to the exchange rate as published by the CBL, the pricing of goods and services in both LRD and USD using the CBL exchange rate, among others.
Honorable Pro temp and members of the Senate, the EMT is monitoring the situation and stands ready to take whatever remedial action that may be necessary to maintain confidence in the fiscal and monetary environments. In taking any of these actions, the Ministry of Finance in particular, and the EMT in general would do so in consultation with the National Legislature. Ours is to ensure micro-economic stability while at the same time ensuring that the overall wellbeing of the citizens and residents remains paramount.” He averred.
“Distinguished Senators, while at it, let me also inform you that the variables underpinning our fiscal environment remain strong and continue to get stronger.
The outlook and indicators for an economic rebound are promising. In the midst of Covid 19, our economy continues to be resilient. Our revenue collection continues to exceed targets, our environment continues to remain relatively stable – all thanks to all of us, including you the Legislators for pulling together and working collaboratively in the midst of the pandemic! This shows that when we collaborate more, interact more, respect each other more, we can do better as a country.” Dr. Wolokolie stressed.
He said over the past two budget periods, Liberians have witnessed unprecedented revenue collection, improved payment practices, stronger growth indicators and better micro economic environment, noting that the Ministry of Finance and Development Planning is also fully cognizant that it has got a lot more to do in terms of improving the economic space for our people, the people of Liberia, especially as it relates to job creation, but citizens can rest assured that the Ministry is fully committed to that, and working together, with the oversight responsibility of the Liberian Legislature, it will change the narrative for the better.
Meanwhile, the acting Finance and Development Planning Minister’s presentation was received and turned over to the Senate’s Committees on Commerce, Public Corporation and State Enterprise to report back to plenary in two weeks.
The decision was triggered from a motion made by Senator Emmanuel Nuquay of Margibi County.