I have provided reflections on the conversations that I had with a friend, the non-economist, over the past few days and now I have decided to provide my own thoughts on what the next steps should be.
First, we have to print some money. There are no two ways about it. It is an imperative. We MUST increase the amount of Liberian Dollars in circulation, period.
The fact remains that the amount of currency in circulation is grossly inagequate to support an economy that is arguably about US$5 billion even though official statistics puts the GDP at US$3.4 billion.
I believe that the size of the informal sector makes the US$3.4 billion GDP to be severely understated and this why I am estimating that the true GDP is US$5 billion. The exact amount of currency to be printed will be based on the actual data that policy makers have in their possession. I am not privy to that number and the underlying justifications and assumptions.
However, from every data available in the public domain coupled with a general understanding of the economic situation, all indications point to a conclusion that unless we print additional currency, we might be heading for bigger economic woes.
I am not oblivious to the fact that there are explanations required about the previous printing of the L$16 billion currency. However, I am arguing that the lack of satisfactory explanation is no reason to argue that currencies should not be printed. What I believe policy makers should be more interested in is what mechanisms are being put in place to ensure that the “confusion” or whatever lapses there were, do not occur again. But to prevent the printing of currency will be equivalent to committing suicide. It will like proverbial “throwing the baby away with the bath water.”
Again, I m not arguing that printing of the currency will solve the problems. It is not a panacea! Printing of currency, while necessary, is not sufficient to deal with the economic problems we are faced with. However, there is no way we can solve the problems we have if we don’t print currency. Again, let me emphasise that printing will not solve the problems but not printing will amplify the problems.
For an estimated US$5 billion economy, we need the equivalence of approximately US$250 million (or L$50 billion) to support transactions within the economy.
However, printing L$50 billion alone will not be enough. I will encourage the introduction of various forms of currencies such as digital money (mobile money, mobile wallet, etc) and electronic payment systems. Additionally, the Central Bank will need to quickly implement a “payment switch” platform that will allow banks to talk to another seamlessly and support the movement of money from one account to another. This will enable folks to be able to move money from bank accounts to mobile wallets and it will also make it possible for businesses to accept various electronic payments directly into their bank accounts. If such platform exist, then the increased need for paper money will be severely diminished and we won’t be at this point anymore.
I am also aware that printing currency will bring about inflationary pressure and increase in exchange rates. The economists will have to devise mechanisms to handle these issues. However, I think opening up new sources of revenue or expanding existing sources of earning foreign exchange will be the necessary next step.
Now, to achieve anything will require doing some unorthodox things. By that I mean that some things that our traditional partners may not like. But if they really care about us, they won’t allow us to be in this situation, in the first place and so I guess we have to look out for ourselves.
I think we need to jump start logging in a big way especially as we approach the logging season (dry season). I believe that logging is the lowest hanging fruit in terms of raising big US$. I am not talking about selling fire extinguishers or license plates or work permits. I am talking about raising tens of millions of US$: exporting hundreds of cubic meters of logs. If not logging then what else?
We have iron ore and we have fish stock. It will take aleast 24 or 36 months to get any iron ore project off the ground; even Arcelor Mittal that is already in production.
On fisheries, we need to take some radical actions and forget about EU preconditions. Do we really have to sell fish to the EU market? There are about 513 million people in the EU. In China alone, there are about 1.4 billion people. So why the EU?
So I think we have choices before us but we have to bite the bullet and make them. However, we first need to start with authorizing the printing of currency while at the same time introducing the enabling policies and platforms to support alternative currencies or medium of exchange.
Once we have these in place then we have to move quickly for big revenue measures ;not those small ideas that add nothing.
There are also other things which we must do but I will talk about those later: national address system and national biometric identofication system. I have my thoughts…