Friday, August 18, 2017 07:53

Senate Still Concerned Over CBL Loan Scheme

Story by Alva M. Wolokolie
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The Senate Standing Committee on Banking and Currency, Judiciary, Claims and Petition has expressed more concern about the operation of the Central Bank of Liberia especially its disbursement of US$22.5 million micro loan scheme given out to the private sector.
Yesterday the committee invited financial experts from both the public and private sectors to provide information on the functions of the CBL in accordance with its Act and the organic law of the country.
At the public hearing held in the chambers of the Senate, former Finance Minister Prof. Wilson Tarpeh explained that all around the world, Central Banks are independent and the regulations are set by the lawmakers of that country. In Liberia, Prof. Tarpeh said some of the CBL objectives are to collect deposits for government, guide against inflation and to safe-guide national currency value among others.
Prof. Tarpeh narrated that CBL has a fundamental problem from the beginning of its establishment and if those problems must be solved, those responsible to make laws must revisit the Act that established the entity. He said the CBL has the money supply in the economy but does not have the control.
“How can you manage the monetary policy when you have 90% of monetary transaction not under your control; you don't have control over the money supply, so this is a fundamental problem. The key issue of this is that CBL manages money supply in the country but to manage it, the variables must be homogenous,” Prof. Tarpeh argued.
Touching on the reserves of the country, the University of Liberia Professor told the lawmakers and the audience that when an individual talks about reserves, he or she must unify the flow of money. He told the Senate committee that Section 5 of the CBL Act says all accounts and transactions of monetary activities must be done in Liberian dollars but the budget of Liberian currently before the Legislature is in United States dollars and not the Liberian dollars.
“You the lawmakers must decide now either to allow this or not. If this law of 1999 should be respected, you must take the full range of responsibility and to make this meaningful, you must review the dual currency issue,” Tarpeh added.
Expanding further on the micro-loan initiative of the CBL, the former Finance boss said the preferred approach to give the loan out is through financial institution but if the CBL has a constrain, it would be prudent to go back to those who made the law.
Prof. Tarpeh said CBL is there to ensure balance in growth but in the case of remarkable policy confusion, the bank can do what is best in its wisdom. “The CBL has taken a position to do what it believes is proper. What the bank is doing is a catalyst of a short term period and not a long term service,” Tarpeh asserted.
For his part, former Finance Minister, Mr. Byron Tarr explained that since the declaration of the United States dollars in 1944 by the late President Tubman which brought about the dual currency, 90%  of the economic transaction has not been under the control of the CBL.
He started his presentation by quoting the World Bank which labeled Liberia as one of the fastest growing economies in the world. He disclosed that out of the 10 fastest growing economies in the world, 6 of them are from Africa and Liberia is one of those among the 10th in the world according to IMF and World Bank report.
But on the contrary, he said growth is not measurable to welfare in the country's economy. He said if the country's reserve is not enough to pay for import, then the country would not be able to import its needs.  
“The domestic saving rate for all banks is negative; when you deposit, they give you 1%, when you borrow money, they say 17% interest rate,” Mr. Tarr stated.
Mr. Tarr called on the Senators to locate experts who would determine why it is that we pay so much to raise money and pay less when we deposit. Commenting on whether CBL has the authority to loan money to non financial institutions, the former Finance Minister said, as a consultant for World Bank, European Union (EU), Central Banks in all countries are independent and that instrument establishing them gives them power to exercise issues in their wisdom.
“I don't consider any limitation on the part of the CBL to borrow money unless there is violation in the document that you would like to point out,” Mr. Tarr said.
In his response to impact on the national reserve, Mr. Tarr told the audience that in his view, the provision for funding for the micro loan cannot impact the external reverse but can impact the internal reserve. He blasted that politics has shackled the economy development of the country and as such the lack of jobs has the impetus of crime growth which is a recipe of instability.
Uploaded: July 11, 2013