CBL Justifies Govt Quest to Print New Banknotes

Source: Liberian Observer

The Central Bank of Liberia (CBL) has mounted a robust justification of its plan to print additional Liberian dollar banknotes, arguing that the move is a technical necessity driven by economic expansion, currency deterioration, and structural realities of a cash-based economy--not an inflationary policy shift.

The justification was laid out on Wednesday during a media engagement at the Bank's headquarters in Monrovia, where senior officials, led by P. Mah Kruah, Deputy Director for Research, provided detailed insights into the rationale, safeguards, and broader macroeconomic context of the proposed currency issuance.

The engagement comes at a critical moment, following a request by Joseph Nyuma Boakai for lawmakers to reconvene and deliberate on urgent national matters, including the country's currency situation.

At the core of the CBL's argument is what the bank described as a clear distinction--printing money does not automatically mean inflation--particularly when it is aligned with economic growth and transactional demand.

"The primary need is the replacement of worn-out and mutilated banknotes, as well as responding to an expanding economy," Kruah explained during a PowerPoint presentation.

Liberia, he emphasized, remains overwhelmingly cash dependent. Frequent handling, harsh environmental conditions, and limited digital penetration have accelerated the deterioration of banknotes, creating a persistent need for replacement.

But beyond replacement, the Bank is also responding to rising demand for cash, driven by expanding economic activity, notes mutilation and gradual de-dollarization efforts.

"If the economy is expanding and you don't increase money supply accordingly, you risk distorting economic activity," Mussah Kamara, Senior Technical Advisor to the Executive Governor, noted, warning of potential "overheating or under-monetization" of the economy.

CBL officials pointed to strong macroeconomic performance in recent years as a key driver behind the need for additional currency. According to the bank, the economy grew by approximately 5.1% in 2025, and growth is projected to exceed 5% again in 2026.

This growth trajectory reflects recovery and expansion across several sectors, including agriculture, mining and natural resources, services and trade, as well as telecommunication and digital finance.

Increased activity in rice production, agro-processing, and rural livelihoods has expanded cash transactions, particularly in rural economies where digital finance remains limited, while gold and other mineral activities--alongside the CBL's own gold purchase program--have increased liquidity needs and foreign exchange accumulation strategies.

Also, urban commerce, small businesses, and informal sector activities continue to dominate the economy, relying heavily on physical cash, while mobile money platforms are growing, they are still complementary--not substitutes--for cash transactions.

"The Liberian economy is growing, but it is growing in a structure that still depends heavily on physical currency," said Christopher Wallace, CBL Senior Director for Economic Policy.

One of the most revealing aspects of the CBL's presentation was its candid acknowledgment of the country's dual-track financial system--where digital innovation is advancing, but cash remains dominant.

Officials highlighted ongoing reforms, including the introduction of the Real-Time Instant Payment System (RIPS), aimed at integrating mobile money platforms and facilitating faster, cashless transactions.

However, they were clear-eyed about the limitations. "Even in advanced economies, there is no fully cashless system," Kamara explained. "Digital money and physical cash are complementary--not substitutes."

Challenges to a cashless transition in Liberia include low digital literacy in rural communities, technological barriers among older populations, cybersecurity risks, and limited infrastructure.

This reality reinforces the need for continued currency availability alongside digital expansion.

Perhaps the most contentious issue surrounding currency printing is inflation. But the CBL insists that risks remain manageable and limited under its proposed framework.

Kruah emphasized that currency issuance will be tied to GDP growth and transaction demand, liquidity will be controlled through Open Market Operations (OMO), and reserve requirements will be adjusted to prevent excess money supply.

"Printing currency does not automatically cause inflation," he stressed. "It becomes inflationary only when money supply grows faster than economic output."

The officials also noted that exchange rate stability and improved domestic supply chains would help contain any inflationary pressures.

The CBL's strong emphasis on transparency reflects lingering public sensitivities following past currency controversies.

Officials highlighted that the 2021-2024 currency printing exercise was conducted with extensive international oversight, including support from the International Monetary Fund (IMF), external audit and advisory firms, and U.S.-backed technical partners.

"We had external involvement at the level of the U.S. government," Kruah noted. "Standards were set, and we are maintaining those standards to ensure credibility and integrity."

For the upcoming 2026-2030 exercise, the CBL outlined multiple safeguards, legislative authorization and oversight, competitive procurement processes, independent audits and detailed reporting on printing, distribution, and destruction of notes.

The Bank also pledged proactive public communication, including radio programs and stakeholder engagement, to counter speculation and build trust.

Global Constraints and Urgency

In a less discussed but critical revelation, CBL officials warned of global supply constraints in currency printing. Due to increased global demand and shortages in key materials like specialized paper, even large economies are facing delays.

"We are a small economy--we are not at the front of the queue," Kamara admitted. "If we delay, we risk running out of currency."

The Bank estimates that new banknotes could take 12 to 24 months to be delivered, reinforcing the urgency of initiating the process now.

The CBL's proposal now intersects with national politics, as lawmakers are expected to review and approve the volume of banknotes to be printed between 2026 and 2030.

The Legislature's role is pivotal--not only in authorization but also in oversight, including monitoring procurement processes, reviewing currency stock reports, and holding hearings on compliance.

Officials acknowledged that final figures may evolve based on volume of mutilated notes returned, updated economic projections and sectoral growth trends.

Beyond immediate transactional needs, the proposed printing exercise also serves broader strategic goals such as strengthening Liberian dollar reserves, supporting the gold purchase program, enhancing foreign exchange buffers, and improving monetary policy flexibility.

The CBL officials also addressed concerns about the country's potential transition to the proposed ECOWAS single currency (ECO), noting that current currency levels would not negatively affect future integration.

Ultimately, the CBL's justification reflects a delicate balancing act--between ensuring sufficient liquidity, maintaining price stability, and building public confidence. The Bank's position is clear that in a growing, cash-dependent economy, failing to print adequate currency could be as damaging as printing too much.

"We are being proactive," Wallace noted. "Our responsibility is to ensure that the economy continues to function smoothly--without shortages, without panic, and without instability."

As the lawmakers prepare to deliberate, the debate will likely center not on whether to print--but how much, how transparently, and under what safeguards.