Ecobank sees no respite for Liberian dollar as UN troops exit

July 22, 2014
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Liberia’s dollar, Africa’s second- worst performing currency, will weaken a further 7.5 percent by year-end as the withdrawal of United Nations troops and sliding exports cut inflows, according to Ecobank Transnational Plc.

The Liberian dollar fell 13.5 percent this year to trade at 92.50 per U.S. dollar through yesterday in the capital, Monrovia, yesterday. That’s the biggest drop among 24 African currencies tracked by Bloomberg after Ghana’s cedi this year. The dollar may weaken to 100 by year-end, Ecobank, the continent’s most geographically diverse lender, said.

“UN missions in Liberia are scaling down their operations and relocating to areas where there are conflicts because peace and stability in Liberia is gaining ground,” Nepce Nepe-Umehai, country treasurer of Ecobank Liberia, said by phone from Monrovia on July 18. “That is affecting inflows because the missions are getting less and less support from abroad.”

While companies including ArcelorMittal SA and OAO Severstal have started operations since the civil war ended in 2003, the International Monetary Fund is predicting a drop in mining output this year. The UN’s plans to more than halve the number of personnel in the West African rubber and iron-ore producer is increasing the pressure on currency, with fewer salaries adding to projections that the deficit on the current account is set to widen the most in six years.

The UN Security Council is cutting personnel by 4,200 to 3,750 between August 2012 and July 2015, the mission said on its website. When it started in September 2003, 15,000 military personnel were deployed. Some non-governmental organizations are also cutting back, the IMF said in a report published on its website July 11.

Dollar Support

Exports of iron ore fell 17 percent in May to 523,650 metric tons from the previous month and rubber shipments dropped 49 percent to 2,158 metric tons, the Central Bank of Liberia said in May. Calls made to numbers listed on the regulator’s website didn’t connect yesterday. The country’s currency traded unchanged at 92.50 per U.S. dollar by 7:55 a.m. in Monrovia.

The drop in exports is reducing the central bank’s ability to support the Liberian dollar at foreign-currency auctions as it seeks to bolster reserves. The shortfall on current account, the broadest measure of trade in goods and services, with the gap set to reach 47 percent in fiscal 2014 from 35 percent in 2013, the IMF said.

Remittances to workers in the nation of 4.3 million people fell 57 percent to $119 million in the first quarter from a year earlier, the central bank said in a bulletin on its website.

Slower Output

While the IMF projects the economy will grow faster than the sub-Saharan African average for a ninth straight year, the rate estimated for fiscal 2014 of 5.9 percent is slower than output of 8.7 percent the prior period.

Inflation will slow to 7 percent in 2014 from an average of 8.5 percent last year, President Ellen Johnson-Sirleaf said June 16. Price gains decelerated to 9.6 percent in May from 9.8 percent a month earlier, according to the bank.

“Companies and organizations that used to bring in funds are no longer bringing in the volumes they used to,” Nepe- Umehai said. “People who earn the currency now have to spend more to keep the same standard of living.”

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