THE DEPRECIATION OF THE LIBERIAN DOLLAR
FACTORS AND INTERVENTIONS
PRESENTED BY:
Hon. Milton A. Weeks
Executive Governor
Central Bank of Liberia
JULY 18, 2016
CONTENTS
 Snapshot – Liberia GDP Growth
 Main drivers of the Liberia Dollar depreciation
 Sub-Regional Outlook
 Central Bank of Liberia Interventions
 The Way Forward
LIBERIA REAL GDP GROWTH
14
12.7
12
10
8
Global Financial
and Food Crisis
8.2
8.2
8.7
Ebola
Virus
Disease
Outbreak
7.4
6
6.1
6
5.1
4.7
5.2
6.5
6.7
2020
2021
5.7
4
2.5
2
0.7
0
2006
2007
2008
2009
2010
2011
2012
2013
SOURCE: THE LIBERIAN AUTHORITY & THE INTERNATIONAL MONETARY FUND
2014
0
2015
2016
2017
2018
2019
FOUR KEY DRIVERS
monetary, structural & external
No surprises exist about the economic strain leading to depreciation
SLUMP IN GLOBAL PRIMARY COMMODITY PRICES
2011-2015
10.0
2.7
0.0
-10.0
-20.0
-17.5
-30.0
-40.0
-34.6
-50.0
-40.1
-60.0
-56.3
-58.6
-70.0
-66.1
-67.9
-80.0
Cocoa
SOURCE: INDEXMUNDI
Gold
Logs
Palm oil
Cotton
Crude Oil
Rubber
Iron Ore
ESPECIALLY KEY EXPORTS
6000.0
180.0
160.0
5000.0
140.0
4000.0
120.0
100.0
3000.0
80.0
2000.0
60.0
40.0
1000.0
20.0
0.0
0.0
2009
2010
2011
2012
2013
2014
2015
2016
2017
ACTUAL
2018
2019
PROJECTIONS
Rubber ($/MT)
Iron Ore($/MT)
2020
2021
EXTERNAL SECTOR ACCOUNT SUFFERS EXPORT PRICE DECLINE
2,500.00
1,996.57
2,000.00
1,500.00
1,687.16
1,443.10
1,293.86
1,000.00
555.49
500.00
441.03
276.99
189.24
0.00
2012
2013
2014
2015
-500.00
-738.37
-1,000.00
-1,500.00
-1,253.85
-1,555.54
-2,000.00
Import
Export
Trade Balance
-1,410.18
INCREASED GOV’T SPENDING IN L$
25
23.12
20
14.37
15
10
12.49
9.73
10.1
9.39
7.44
7.41
7.37
4.04
5
1.31
1.86
2011
2012
0
2013
2014
2015
end-Jun. 2016
-2.73
-5
-6.13
-10
-5.08
-7.87
-10.33
-15
-20
-13.73
Exp.
Revenue (L$)
Net Injection
Liberia Revenue, Expenditure and Net Injection (2011-end-June 2016) in Billions of Liberian Dollars
EFFECTS OF UNMIL DRAWDOWN
UNMIL a major domestic spender
Service sector, MSMEs affected
Lower US$ inflow, pressure on L$
EFFECTS OF UNMIL DRAWDOWN
In Millions of US Dollars
600.0
523.0
512.3
496.5
476.3
500.0
401.6
344.7
400.0
205.1
300.0
200.0
118.7
115.7
87.8
91.9
83.1
100.0
70.6
49.1
2010/11
2011/12
2012/13
UNMIL TOTAL BUDGET
Source: Central Bank of Liberia
2013/14
2014/15
2015/16
UNMIL BUDGET SPENT IN LIB
2016/17
INVESTORS’ UNCERTAINTY ABOUT 2017
ELECTIONS
Risk averse about political transitions
New private investment unlikely
Nearly all current projects on hold
VOLATILITY IN
THE SUB REGION
Liberia’s is not a unique case
Global
commodity
price decline a
key factor
across the
board
MAJOR WAMZ CURRENCIES WEAKEN
JULY 15, 2015-JULY 15, 2016
50.00
196.5--283.5
45.00
40.00
DEPRECIATION RATE
35.00
44.31
30.00
4,893.7--6,087.6
25.00
7,346.8--8,970.1
3.3---3.9
20.00
15.00
86.0---95.5
39.7---44.8
22.09
10.00
5.00
11.05
24.40
18.96
12.67
-
Dollar Lib
Dalasi
SOURCE: WWW.AMAO-WAMA.ORG/ACCUEIL.ASPX
Cedi
GNF
Leone
Naira
CBL INTERVENTIONS
Coordination & Regulation, FX Auctions & T-Bonds
Coordination & Regulation
 Increased MFDP/CBL/LRA collaboration on
Liquidity Management
 Robust monitoring & enforcement
FX AUCTIONS
US$14.5 Million 1st half of 2016
• US$5.0 Million in June alone
• Low FX purchases from GOL
• CBL policy on reserves accretion
US$5.0 million
less than same
period in 2015
FX AUCTIONS & T-BOND ISSUANCE
US$3.0 Million on July 6, 2016
• US$7.6 Million total demand
• US$4.6 Million oversubscription
• Mop up excess L$
T-Bond was issued on July 15, 2016
THE WAY FORWARD
Each branch of Government has a role to play in
economic diversity, liquidity and investor confidence
ECONOMIC STRUCTURE MUST CHANGE
 FX interventions alone unsustainable
 MFDP increase FX sales to CBL to smooth out volatility
 Advice relevant authority to prevent unlicensed FX
operations (stores, supermarkets)
 Enclave sector-led growth no longer viable
 Solution: diversification, value addition
THANK YOU!