By Tiawan Saye Gongloe
How do we explain the current situation in Liberia, where, unlike other Central Banks around the world that are tightening their monetary policies to reduce the money supply, our own Central Bank is both tightening policies and concurrently injecting more currency into the economy?
Liberia is faced with a critical policy decision that has significant implications for the everyday lives of its citizens. This decision involves the extensive printing of Liberian dollars in an economy that is already struggling with low production levels and an over-reliance on imported goods. Such a choice raises pressing concerns that extend beyond technical measures; it will likely have negative effects on the cost of basic necessities, such as rice and transportation, as well as the overall purchasing power of every Liberian worker’s salary.
Inflation may rise as an increase in the money supply could devalue the currency, leading to higher prices for essential goods. Moreover, families might find it increasingly difficult to stretch their budgets, resulting in greater financial pressures and potential hardships. The impact of these decisions will resonate across the nation, influencing daily life and the economic stability of households in Liberia for years to come.
Printing money without a corresponding increase in production does not equate to genuine economic development; rather, it functions as a concealed tax that disproportionately impacts the poor. When the money supply expands at a rate that exceeds the economy’s capacity to produce goods and services, the effects are predictable and detrimental. In this scenario, more currency competes for the same limited supply of essential items like food, fuel, and basic necessities, leading to a consistent rise in prices. This inflation makes everyday staples, such as a bag of rice, increasingly expensive. Additionally, transport fares escalate, making it harder for individuals to afford commuting costs. School fees become a struggling expense for families, and necessary medications may slip out of financial reach. For people living on fixed incomes or those earning modest wages, these economic shifts are not mere theoretical adjustments; they manifest significant and persistent hardships in their daily lives.
To illustrate this concept, let’s consider a simplified economic scenario. Imagine an economy that produces $10 million worth of goods, represented by 1 million pens priced at $10 each. In this case, the total money supply equals $10 million. If the government decides to double the money supply to $20 million without increasing the production of goods, we still have only 1 million pens available. With more money in circulation, individuals may feel wealthier, leading to increased demand for pens. As demand rises, manufacturers and retailers respond by raising prices. Consequently, each pen could sell for $20 instead of $10. Therefore, while the nominal value of the economy increases to $20 million, the actual quantity of goods remains fixed at 1 million pens. This scenario clearly demonstrates that printing more money results in inflated prices, while the availability of goods does not change.
The wealthy and financially stable are often able to navigate these economic fluctuations. They typically hold valuable assets such as real estate, stocks, or U.S. dollars, which can retain their value and act as a buffer against inflation. However, for the average Liberian—the schoolteacher working long hours, the nurse providing essential health services, the petty trader trying to make ends meet, the police, immigration, Drug enforcement and fire service officer as well as the civil servant with a modest salary—the financial dynamics are markedly different. These individuals earn and save in Liberian dollars, which are susceptible to rapid devaluation during inflationary periods. When prices go up at a rate higher than the income of these citizens of Liberia their purchasing power drops sharply. What may appear as a policy adjustment in the capital city of Monrovia translates into great suffering, hunger, and hardship in local communities throughout the country. This shows how the insidious growth of poverty can occur without any explicit new laws being passed, as everyday necessities become increasingly unaffordable for Liberians who are already struggling to survive.
The danger in Liberia is compounded by its economic structure. The country relies heavily on imports for many essentials, such as rice, fuel, medicine, and manufactured goods. When more Liberian dollars are put into circulation, the demand for U.S. dollars increases. This leads to a weaker exchange rate, making imports more expensive. Consequently, inflation rises. This creates a vicious cycle: a weaker currency drives up prices, and higher prices increases poverty.
When both the balance of trade and the balance of payments are negative—as has been the case for a long time—simply printing more local currency does not generate wealth. Instead, it increases scarcity and transforms an existing vulnerability into a significant economic strain. In such circumstances, creating money without corresponding production is not an economic rescue plan. It is a deliberate design to increase poverty ; it is harmful.
I present this analysis not only as a concerned citizen but also as someone who has had firsthand experience teaching basic principles of economics at the University of Liberia for nearly a decade during the 1980s. Even at that academic level, we underscored a fundamental principle of economics: an oversupply of money in an economy, especially one characterized by low productivity levels, inevitably leads to severe consequences, including inflation, currency depreciation, and economic hardship for a majority of the people. This is not an advanced theory ; it forms the very foundation of sound economic practice. Consequently, this brings forth a critical and pressing question: Are the economists currently advising the government providing genuine, professional, and technically astute counsel? Or are policy decisions being influenced by short-term political agendas that jeopardize the long-term economic stability of the nation?
Africa presents us with sobering lessons in this regard. Numerous countries have expanded their money supply in an attempt to stimulate growth without simultaneously strengthening their production capacities, and they have paid a heavy price for this oversight.
For instance, some time ago in Zimbabwe, the government resorted to excessive money printing in an effort to fund its spending initiatives, which led to catastrophic hyperinflation. This financial crisis wiped out savings for countless individuals and pushed millions of Zimbabweans into extreme poverty, a stark reminder of the dangers of mismanaged monetary policy.
Similarly, some time ago in Ghana, periods of fiscal expansion when coupled with external monetary pressures resulted in significant currency depreciation, further igniting rising living costs and forcing the population to undergo painful adjustments in their standard of living.
Nigeria offers another cautionary tale, having experienced repeated cycles of monetary expansion that failed to be matched by sufficient domestic production. This imbalance has led to a chronic weakening of the naira, driving inflation and heightening the economic struggles faced by ordinary citizens across the country. Such experiences are not mere historical accounts; they serve as urgent warnings about the repercussions of imprudent economic policies.
On the other hand, Africa also boast of a powerful success story that highlights what can be achieved through prudent governance and economic management. Botswana stands out as an exemple of discipline, integrity, and forward-thinking policies. Widely recognized as one of Africa’s least corrupt countries, Botswana has effectively managed its abundant natural resources—particularly diamonds—with strategic foresight and a long-term vision. Instead of merely exporting unprocessed resources, Botswana has focused on adding value to its raw wealth through thoughtful negotiations and investments in infrastructure and human capital. This approach has allowed the nation not only to create sustainable economic growth but also to significantly improve the quality of life for its citizens. By emphasizing the importance of responsible resource management and strategic planning, Botswana sets a benchmark that other African nations should emulate for lasting economic success and stability. The Liberian Government must learn from the Government of Botswana.
Botswana has established a commendable model for effective public sector management by maintaining a balanced salary structure across various roles. Unlike many nations, like Liberia, where the wage gap between top officials and essential public servants is very wide, Botswana has managed to keep the gap between the salaries of civil servants, teachers, law enforcement officers, and healthcare workers, and those of high-ranking government officials relatively narrow. This practice reflects a commitment to equity and shows that the country prioritizes the well-being of all its citizens over excessive consumption at the top echelons of power. Consequently, Botswana has consistently channeled resources into critical areas such as education, healthcare, food security, and infrastructure development, which are essential for long-term national growth.
The results of this strategic focus are unmistakable: Botswana has successfully moved up to middle-income status, a significant achievement when contrasted with Liberia, which remains one of the Twenty poorest countries not only in Africa but across the globe. It is crucial to note that Botswana did not rely on the easy route of printing more local currency to finance its development; instead, it achieved this remarkable transformation through discipline, increased production, value addition to its goods, and sound governance practices that foster economic stability and growth. How come a country that gained independence 119 years after Liberia’s independence is doing much better than Liberia? That is why when think about the way Liberia has been governed, I always as the question, “What kind of country is this?”
Liberia must pay close attention to these lessons, as well as to the warnings embedded within Botswana’s narrative. There exists only one reasonable justification for large-scale printing of Liberian dollars: the replacement of damaged or worn-out currency notes that are already in circulation. This form of monetary activity does not increase the overall money supply; it simply maintains the existing levels necessary to facilitate daily transactions. Any further expansion of the money supply should be intricately tied to genuine, measurable increases in domestic production—this includes growing more food to achieve self-sufficiency, enhancing local manufacturing capabilities to reduce reliance on imports, and creating more value within the nation’s economy across various sectors.
Importantly, it is necessary to confront a troubling truth: Liberia has been caught in a cycle of exporting its wealth in its rawest forms while importing poverty in return. For instance, we harvest our forests and export round logs, only to buy back elaborately crafted, expensive furniture from international markets. Similarly, we extract valuable minerals like gold and diamonds, ship them abroad unprocessed, and then import finished goods that have been manufactured elsewhere at significantly higher prices. We export rubber yet find ourselves purchasing sanitary gloves, tires and other products made out of natural rubber, instead. In these transactions, Liberia is surrendering its valuable resources, while only retaining a mere fraction of their economic worth. This reliance on exporting raw materials without sufficient value addition is not a sustainable economic strategy; it represents, in many ways, a form of economic surrender that must end.
If Liberia is truly serious about reducing poverty and improving the livelihoods of its citizens, it must significantly modify its current economic strategies. The first critical step is to halt the export of unprocessed round logs and instead invest in establishing a thriving domestic furniture industry. By doing so, Liberia will not only retain the value created from its timber resources but also create job opportunities for its citizens, increase government revenue, thereby strengthening the overall economy.
Additionally, Liberia must focus on adding value to its rich mineral wealth, particularly diamonds and gold. This can be achieved through local processing and certification, ensuring that these resources contribute more substantially to the national economy rather than merely leaving the country in raw forms. By retaining these processes domestically, Liberia can maximize revenue, foster local enterprise, and create high-paying jobs in the private sector. Moreover, significant investment in agriculture is crucial for achieving food security. By increasing the capacity to produce food domestically, Liberia can reduce import dependency, improve nutrition, and support local farmers.
When value is added locally across various sectors, it leads to job creation, rising incomes, and a strengthening of the national currency. This approach not only promotes individual and community prosperity but also fosters a robust economy that can withstand global market fluctuations.
True prosperity does not stem from simply increasing the money supply in circulation; it is rooted in enhancing our ability to produce and transform what we already possess. Increased production results in price stabilization, while a thriving industrial base leads to expanded employment opportunities. Improved export capabilities will ultimately strengthen the currency’s value in the global market. This comprehensive strategy is how genuine poverty alleviation can be achieved—not through the mere act of printing money but through the diligent creation of real economic value.
Liberia now finds itself at a crucial crossroads. One pathway is deceptively easy: print more money, spend freely, and make grand promises without backing them with real productivity. However, this approach could lead the nation into a cycle of inflation, a weakened currency, and a deepening of poverty among its citizens. The alternative path is undeniably more challenging but ultimately more rewarding: it requires producing more goods, processing resources within the country, and fostering an environment that cultivates genuine value creation. This path promises stability, builds public confidence, and promotes shared prosperity across the country.
This economic dilemma is not merely an abstract concept; it is a pressing issue that will have serious negative effects on the lives of every citizen in Liberia. The decisions made today will resonate in every household, shaping the future for generations.
A nation that resorts to printing money without enhancing production capabilities — especially in light of a negative balance of trade and payments — does not generate sustainable prosperity. Instead, it manufactures inflation, exacerbates hardship, and deepens the cycle of poverty.
Don’t fool the people, printing 79 billion Liberian dollars will not help the Liberian people; It will hurt them severely.
Government is a place to serve, not to steal! A better Liberia is possible.
