THE CURRENT EXCHANGE RATE DEPRECIATION IN LIBERIA: HERALDED TO LOSE CONFIDENCE GRADUALLY MORE THAN SIX MONTHS AGO. March 9, 2014 at 10:14pm Me To msherif2008@gmail Sep 6, 2013 The global economy might be on the verge of an upsurge in the price of oil given a potential US Strike on Syria which could have a potential spill-over to neighboring countries in the Middle-East according to some pundits. Amidst the speculation, it is very important to throw some lights on Syria as a Nation. Syria is very similar to Libya: both are not major oil producing countries neither a major transit point for the shipment of oil. Despite the line above, yet “The Arab Spring Crises” initially sparked a rise in the price of oil on the global market. Syria is bordered by Jordan, Turkey, Iraq, Turkey and Israel. By implication Syria has a direct link/ connection to Europe: Turkey. Modern Syria is built on the muscles of Russia which is a major power block in Europe. Syria is currently plunged into a major civil war which could escalate into a regional war based upon US Potential Strike according to some critics. Some critics similarly put the Iraqi crises into this basket but were disappointed. Against this backdrop, policy-makers are very concerned in Liberia to prevent a potential economic shock with regards to oil, commodities, and transport prices being hiked or an upward price. The concerns stem from “The Arab Spring” Experience which initially had a rise in the price of oil against speculative measures have become imminent in Liberia. Liberia major trade route for oil remains Nigeria, oil supply from this source is slightly above 80% of the oil produces flooding the Liberian Market. The route of the oil supply is Nigeria to the refinery in the Ivory Coast and onwards to Liberia at the major storage facility: The Liberia Petroleum Refining Company (L.P.R.C.). The rest of the oil produces originate from multiple sources that could not be directly linked to Syria rather indirectly. Considering the disclosure and given the gullibility of the Liberian Populists, a US Strike on Syria may directly have a negative impact on the Liberian Economy irrespective of an increase in the price of oil on the global market. Liberian Businesses dealing in the sales of oil will exploit the situation for the short run by deliberately hiking the price of oil domestically justified by an empty inflated excuse “US STRIKESSYRIA AND THE SUPPLY OF OIL DECREASE ON THE WORLD MARKET”. By implication the price of gasoline, fuel, and kerosene will increase. By extension, the larger Chunk of ENERGY, being provided by the Liberian Electricity Corporations is generated with gasoline and diesel to enable the wheels of the generators to propel and produce electricity in kilowatts. The unit per kilowatts of power will also have the potential to move upward in price. Power at household level with regards to those who use their private generators will become costly except alternative source of power like solar plates, renewable energies, etc. Commodities prices will increase as well as transportation fares and transports. The Liberian dollar will potentially depreciate given the fact that the Lebanese to a large extent control the Liberian Economy and the presence of Peace-keepers from one of Syria’s Neighbors, notably: Jordan. By implication, remittances and transfer-payment will increase and more Liberian Dollar will be chasing fewer US Dollar. Therefore, the outflow of the US Dollar will swell in the event wherein a potential US Strike on Syria escalates into a regional war. The pressure will increase than ever before to constantly and probably increase their (Lebanese and Jordanian) assistances to relatives in their native land given the ranging damages and victimization, etc. The Liberian Budgetary implementation might be constrained to make some adjustments within the National Budget against the costing of a barrel of oil, say $100.00. By implication, the citizenry might be denied or deprived from some developmental programs to offset the percentage increase in the price of oil. By extension, the price of automobile might increase just for the short run domestically. Tariff will also increase as fares, and the exchange rate increase in response to the abrupt economic imbalances in the domestic economy. To this end, Government will have to eventually increase her subsidies to cushion the effect of this economic shock. Prepared by: PECHEL L.SIMPSON POLICY ANALYST MACROFISCAL ANALYSIS UNIT MINISTRY OF FINANCE
Posted on: Mon, 10 Mar 2014 15:09:29 +0000
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