My Opinion on why Liberia should adopt or continue with a dual currency system.

1. ARGUMENT IN SUPPORTOF DUAL CURRENCY FOR THE LIBERIAN ECONOMY
PRECIOUSKERME GAYAN 0
ARGUMENT IN SUPPORT OF
DUAL CURRENCY FOR THE
LIBERIAN ECONOMY
Precious Kerme Gayan
September 1, 2015

2. ARGUMENT IN SUPPORTOF DUAL CURRENCY FOR THE LIBERIAN ECONOMY
PRECIOUSKERME GAYAN 1
ARGUMENT IN SUPPORT OF DUAL CURRENCY.
I am of the opinion that Liberia does not currently have the capacity,
financially as well as economically, to de- dollarize. Liberia’s economic and
monetary umbilical cords are tied to the U.S dollar, and have been this way
from the founding of the republic. It would be unwise at present to fully
dollarize or de-dollarize. However, there are policy and monetary steps that
should be taken by the Central bank and the government of Liberia to
strengthen the financial system and the Liberian economy.
The issue of dual currency in Liberia and the dominance of the U.S dollar in
Liberia need to be in the forefront of the financial and economic policy
debate moving forward. There is no denying that the U.S dollar has a de
facto status in the Liberian economy, but the issue of fully dollarizing puts
Liberia’s sovereignty at risk. Full dollarization wipes away control of
monetary and exchange rate policy from the dollarizing country and the
ability of the central bank to print banknotes ceases to exist and this, in turn,
limits the bank’s lender-of-last resort function. The country loses
seigniorage, abandons its national currency which is a symbol of
sovereignty and nationhood.

3. ARGUMENT IN SUPPORTOF DUAL CURRENCY FOR THE LIBERIAN ECONOMY
PRECIOUSKERME GAYAN 2
At the end of the day, the government of Liberia and the Central Bank will
have to get off the fence on this issue,and put in place the necessarypolicy
tools that will lead to a gradual process of de-dollarization. The IMF working
papers says it best. Once it has established a track record of economic and
political stability, Liberia could consider micro measures to encourage
lending in local currency and the purchase of local currency assets. The
legal tender status of the U.S. dollar could be withdrawn if that would not
weaken financial sector stability or cause capital flight. Effective
communication of a policy strategy that recognizes that de-dollarization is a
gradual market-driven process will increase the probability of achieving
sustained de-dollarization without adverse macroeconomic consequences.
First and foremost, the central bank needs to promote exchange-rate
stability and policies that will preserve the Liberian consumers’ purchasing
power. The Liberian government and the banking sector must encourage
the usage of the Liberian dollar for all transactions, big and small; and it
starts with the government of Liberia paying salaries in Liberian dollars
instead of U.S dollars. It is unacceptable that 80% of the currency in
circulation is outside of the banking system. Hence, it is imperative for our
banking sector, in conjunction with Central Bank, to find creative and
innovative ways to bring those individuals and businesses operating outside

4. ARGUMENT IN SUPPORTOF DUAL CURRENCY FOR THE LIBERIAN ECONOMY
PRECIOUSKERME GAYAN 3
of the formal sector into the formal financial sector. The government of
Liberia must begin to seriously explore ways to create a manufacturing
sector that can produce domestic substitutes to compete with high cost
foreign imports, as well as minimize the country’s dependence on imports.
The issue of dual currency Liberia is more than just dollar and cents; it is
about national pride and sovereignty.
To conclude, dual currency establishes a firm basis for a prudent financial
sector,which provides financial integration with developed nations,creating
the market for more efficiency and quality of services. The issue with dual
currency signals permanent commitment to curb inflation, fiscal
responsibilityand transparency. Liberia has enjoyed low inflation, growth in
fiscal responsibility and transparency, because of the dual currency policy
in the situation of chronic inflation, individuals use the US Dollar to protect
the real value of their income. If Liberia had not maintained her policy on
dual currency, the country would not have been able to pay some of its
massive international debt or finance the restoration of infrastructure
development.

5. ARGUMENT IN SUPPORTOF DUAL CURRENCY FOR THE LIBERIAN ECONOMY
PRECIOUSKERME GAYAN 4