Questions have abound about the seeming shortage of Liberian dollars on the market. Ordinary citizens, business owners and experts are concerned and wondering whether the limitation of supply of LD is a strategy being deployed by the Liberian government through the Central Bank of Liberia (CBL) to put undue pressure on the forex market which is a key player in the regulation of the exchange rate regime.
According to the CBL, it does not set the exchange rate as many thought the case is, but rather the rate is determined by market forces through businesses, forex bureaus and concessionaires.
From $200 dollars to $1 United States dollars, the rate is dramatically nosediving in an unstable position.
As of yesterday, the rate was $170 Liberian dollars to $1 USD in some communities, an indication of how fast the rate is dropping and the associated level of its unpredictability.
In simple term, if $5 USD was changed for $1000 at the previous rate, the same will give the changer less than a thousand dollars. At the current rate of $170, it is $850, which represents the difference of LD150.
The speedy drop in the rate began early last week following President Boakai’s announcement about the reduction in the prices of rice and flour on the market.
The trend of the drop did not only take only Liberians who are at the receiving end by surprise, but also reportedly shocked forex bureau operators.
A forex bureau operator in the Brewerville Community, who only wants to be called AB, told this paper that he was compared to close his business because of the instability in the exchange rate.
“We don’t understand the way the rate is dropping. It is new rate today, it is another the next day, and this is affecting us, too,” he told this paper when quizzed why he had been closed.
Asked whether he had an idea why Liberian dollars was in short in supply, he responded in the negative, saying “we also don’t understand, and those we often buy Liberian dollars from are not forthcoming.”
According to him, if this is an artificial scarcity just to put pressure on the exchange rate, then the government needs to do it in a more pensive manner in line with the market forces.
Other financial experts argued if the LD scarcity being experienced is a strategy to to drop the rate, there is also a possibility for it to climb again because “it will affect the economy if they are withholding the LD in such a manner.”
“This must be backed by economic factors, but not artificially done,” remarked an expert. “Every one is in support of the drop in the exchange rate once prices follow suit.”
Experts explained artificial scarcity is an intentional limitation of supply or availability of a product, service or resource, etc. to drive up prices by creating perceived value or exclusivity.
“It is also to increase demand, by making the product more desirable and also controlling market dynamics, in terms of influencing consumer behaviour or market trends,” this paper gathered.
What is more concerning is the fact that the reduction of prices of goods only affects rice and flour, while the prices of goods and other transportation remain the same.
A group of business women told this paper the reduction of the price of rice will have no effect if the rate is dropped beyond the current limit.
“If rice is sold at LD$2900, and the rate is at this level or below, it does not change anything,” stated a market woman.
According to her, if the limited supply of Liberian dollar is intentional, then the government has to ensure it affects every good on the market.
