Wednesday, June 19, 2013 10:25
CBL Clarifies Foreign Exchange Reform Issue
The Central Bank of Liberia's(CBL) says its attention has been drawn to several unwarranted public reactions to the ongoing exercise of reforming the foreign exchange activities in the Country. According to the CBL, some have claimed that the exercise is intended or has the consequence of getting small Liberian dealers out of business, while others have claimed that the exercise is intended to get ride of street money changers because the CBL is holding such money exchangers responsible for the hike in the exchange rates.
The CBL said these claims are not only inaccurate, but misleading. To begin with the latter claim, the CBL, said as the monetary authority for the country, it fully understands the dynamics of exchange rate developments in the country, and the factors impacting the exchange rates.
“What the CBL has had problem with is people going about in a disorganized manner to quote rates that they cannot substantiate or support, which lead to misinformation and distortion in the foreign exchange market, thereby creating “artificial” depreciation in the Liberian dollar. This is not a fair market practice, and should not be tolerated,” the Central Bank said.
The CBL was clear when it stated that there are illegal operators (or money peddlers) along the streets who are trying to undermine the foreign exchange market by quoting artificial rates that are not consistent with the supply of Liberian dollars.
The CBL further made it clear that when a foreign exchange operator stands on the street offering higher rate (i.e. a depreciated rate against the Liberian dollar relative to the US dollar) implies that he has sufficient Liberian dollar to serve a client who seeks exchange of his/her US dollar for Liberian dollar.
However, the CBL said on numerous occasions, it tested those who were offering high rate just to find out that they couldn't support the high rate they were offering when some staff of the CBL requested Liberian dollar in exchange for US dollar.
Speaking to the reform exercise, the CBL said it is important for the public to understand that the it has the mandate to reform the financial sector to make it supportive to the economic development of the country.
“The Bank has made tremendous efforts in this regard with respect to the banking sector over the years. This exercise is being extended to the non-bank financial sector, which can play a very important role in the economic development process, if properly organized and structured,” the CBL statement issued yesterday said.
“It is against this background that the CBL over the last two and a half years has held a series of consultative meetings with foreign exchange dealers aimed at strengthening the activities of the foreign exchange business in the country, by bringing the foreign exchange operators into the mainstream financial system,” the bank said.
The CBL said the reform measures were based on consensus reached with a cross-section of foreign exchange operators, including the leadership of the Association of Foreign Exchange Bureaux of Liberia (AFEBL), and on research conducted by the CBL on other countries in the sub-region.
The CBL noted that, what is being required by the CBL is not different from what is obtaining in other countries that are admired, for example Ghana.
“It should also be understood that the reform exercise is consistent with the CBL's objective of supporting the development and growth of the private sector, particularly small and medium Liberian businesses, contrary to the view that the exercise is intended to get small Liberian dealers out of business,” the bank said.
The CBL said it has encouraged and recommended small dealers and operators to merge or consolidate their financial resources to create larger and sustainable foreign exchange bureaus and emphasize the need to modernize their operations to become like other countries in the sub-region; and assisted in reorganizing the Association of Foreign Exchange bureaus to ensure a broader representation of the operators.
The Central Bank also noted that it intends to give the money exchangers more benefits such as money transfer business and ensure that they engage in mobile Money transaction when the reform shall have taken place.
Moreover, the CBL said it has hosted a number of foreign operators to strengthen their capacity.
Meanwhile, registered Category A operators participate regularly in the foreign exchange auctions held by the CBL.
“Again it can be recalled that the CBL has undertaken a series of public awareness and sensitization initiatives in this effort over the last one year. While there are others who have been cooperating with the process, others have remained adamant to the process. There are many operators to whom the CBL has issued licenses, a number of whom are Liberians, contrary to the exertion by some people that the exercise is favoring a specific group of people,” the CBL said.
In conclusion, the CBL said it is open to consultations and suggestions in this reform exercise; but it should be noted that the Central Bank have to make progress in the interest of the greater good of the country.
In a related development, the CBL on Wednesday, July 25, 2012, held a meeting with the aggrieved illegal money changers to discuss the ways of how those interested in the business can be organized in keeping with the requirements and standards set by the Bank. The CBL said it has always encouraged such constructive dialogue.