Political sketch
Formerly Cape Mesurado Colony. Founded 26 July 1847.
Liberia was originally intended to be a home for freed U.S. slaves. The American Colonization Society (founded in 1816) established a small colony at Cape Mesurado (Montserrado) in 1821-1822. In 1824 the colony was named Liberia, and its main settlement was named Monrovia in honor of U.S. president James Monroe. Joseph Jenkins Roberts, Liberia's first nonwhite governor, proclaimed Liberian independence on 26 July 1847, expanded the boundaries of the new country, and worked to end the illicit slave trade on Africa's western coast. Roberts became Liberia's first president. In the late 1800s and early 1900s, Liberia's military weakness forced it to cede land to the United Kingdom and France in border disputes. Liberia was saddled with foreign loans it could not pay. To obtain revenue, in 1926 Liberia granted 1 million acres (400,000 hectares) to the Firestone Tire and Rubber Company in 1926. Firestone established a rubber plantation and lent Liberia US$5 million in return. The loan further taxed the country, which later became embroiled in a League of Nations investigation of 1931 into charges of complicity in forced labor and slavery activities. The government resigned, and the new government negotiated arrangements with Firestone that improved Liberia's situation.
From the beginning Liberia had been dominated by descendants of U.S. slaves. A coup in 1980 ended that domination. The coup leader, former master sergeant Samuel K. Doe, was overthrown as the result of a rebellion in 1990 that became a bloody civil war. The war lasted until 1997 and destroyed what prosperity Liberia had. Liberia continues to be of doubtful stability politically. Liberia was involved in the civil war of the 1990s in Sierra Leone and was a willing conduit for illegally mined diamonds that financed rebel groups in Sierra Leone. Renewed fighting broke out in 2003. The president went into exile and a transitional government took over.
Wars since 1500
Liberian Civil War of 1989-1997; Sierra Leonean Civil War of 1991-1999 (some fighting of Liberia against Sierra Leone), Liberian Civil War of 2003.
Convertibility
Liberia had restrictions on the export of currency by 1930 (United States, Department of State, Papers Relating to the Foreign Relations of the United States, 1930, v. 3: 412). After the military coup of April 1980, the new government imposed capital controls ffrom 15 April-14 May 1980 (IMF ARER 1981: 261). On 22 November 1985, Liberia imposed a Liberian $1,000 limit on capital exports in the form of cash (IMF ARER 1986: 337). From this point onward, the Liberian dollar was no longer fully convertible into the US dollar.
Other
During Liberia's civil war of 1989-1997 the two opposing factions each issued its own currency. "J. J. Roberts" Liberian $5 notes, so called because they contained a portrait of Liberia's first president, circulated in Liberia before the civil war. In 1992, the National Bank of Liberia decided to print a new design of Liberian $5 notes because rebels had looted many J. J. Roberts notes from banks and other holders of currency. The new notes were called "Liberty" notes because they contained a picture of the Liberian national coat of arms. Liberty notes became worth less than J. J. Roberts notes, apparently because the printing of J. J. Roberts notes ceased while the printing of Liberty notes continued.
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1875-1898 (foreign currency bond debt); 1912 (foreign currency bond debt, budget crisis); 1914-1915 (foreign currency bond debt), 1917-1918 (foreign currency bond debt), 1919-23 (foreign currency bond debt), 1932-1935 (foreign currency bond debt, worldwide depression); 1981-present (foreign curerncy bank debt, oil and interest rate shocks).
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Seven banks with 60% of total assets were not operational in the period 1991-1995.
Frankel and Rose (1996) list of currency crashes: None (Liberia not listed), though the events of the civil war would qualify.
References
Primary sources:
--Laws and decrees:
--Publications of monetary authorities:
Central Bank of Liberia. Bulletin. 2000-present. Financial and Economic Bulletin. Monrovia: Central Bank of Liberia.
Central Bank of Liberia. Annual report. ?-present. (The central bank seems to have issued no annual reports.)
National Bank of Liberia. Annual report. 1975-1998? Annual Report (1974-1988); Annual Report of Operations (1989-1998?). Monrovia: National Bank of Liberia.
National Bank of Liberia. Bulletin. 1975-1998? Statistical Bulletin (1975-1988); Quarterly Statistical Bulletin (1989-1998?). Monrovia: National Bank of Liberia. (There was also a publication issued at least in 1984 called the NBL Review, but I have not seen it.)
--Web site of the current monetary authority (viewed 20 September 2005):
<http://www.cbl.org.lr>
--Other publications or Web sites:
IMF. International Monetary Fund. 1946-1971 (irregular). Schedule of Par Values. Washington: International Monetary Fund.
United States. 1953. Department of State. Foreign Relations of the United States: Diplomatic Papers. 1935. Volume I: General: The Near East and Africa. Washington: Government Printing Office.
Main secondary sources:
Anonsen, Carl. 1969? Money and Banking System in Liberia and the Case for a Central Bank. Monrovia: Republic of Liberia, Department of Planning and Economic Affairs.
BCEAO. 1966. Banque Centrale des États de l'Afrique de l'Ouest. Notes d'information et statistiques, issue "L'Afrique des monnaies," January 1966. Paris: Banque Centrale des États de l'Afrique de l'Ouest.
Boughton, James M. 2001. Silent Revolution: The International Monetary Fund, 1979-1989. Washington: International Monetary Fund.
Brown, George W[illiam]. 1941. The Economc History of Liberia. Washington: Associated Publishers.
Clower, Robert W., George Dalton, Mitchell Harwitz, and A[lan] A. Walters. 1966. Growth Without Development: An Economic Survey of Liberia. Evanston, Illinois: Northwestern University Press.
Huberich, Charles Henry. 1947. The Political and Legislative History of Liberia: A Documentary History of the Constitutions, Laws and Treaties of Liberia from the Earliest Settlements to the Establishment of the Republic, a Sketch of the Activities of the American Colonization Societies, a Commentary on the Constitution of the Republic and a Survey of the Political and Social Legislation from 1847 to 1944: With Appendices Containing the Laws of the Colony of Liberia, 1820-1839, and Acts of the Governor and Council, 1839-1847. New York: Central Book Company.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
McLaughlin, Russell U. 1966. Foreign Investment and Development in Liberia. New York: Praeger.
Roberts, Thomas D[uval], and others. 1972. Area Handbook for Liberia. Washington: Government Printing Office.
Sayeh, Antionette Monsio. 1985. "Monetary Dependence, Payments Disequilibria, and Fiscal Policy in a Small, Open, Low-Income Economy: Experiments with a Hybrid Model of Liberia." Unpublished Ph.D. dissertation, Fletcher School of Law and Diplomacy, Tufts University.
Monetary authorities: Liberia
| Dates | Type | Name | Source | Remarks |
| 1838
-about 1890 |
government issue | government of Liberia (headquarters Monrovia, Liberia) | American Colonization Society, Board of Managers (headquarters Washington, D.C., United States), resolution of 1 May 1834, reprinted in Haubrich (1947: 425-7) | The American Colonization Society, which sent freed former US slaves to Liberia, had notes printed in the United States and sent to Liberia in 1834, but they were not circulated until 1838. Notes were issued by both the Liberian government and the American Colonization Society, which at this stage were intertwined. The first coins were issued in 1833. |
| about 1890
-1904 |
coins only | used US silver dollars and other currencies | general histories | The Liberian government ceased issuing notes. |
| 1904
-1913? |
dollarization | US dollar (issued by United States Treasury [headquarters Washington, D.C., United States]) | Alibert 1983: 62 | The first bank was the Banque de l'Afrique Occidentale (headquarters Paris, France), in Monrovia, in 1904; its office remained open only a short time. In the United States, federally chartered banks also had the right of note issue in this period, but their notes rarely seemed to have circulated outside the United States. The second bank was the Bank of British West Africa (headquarters London, England), in Monrovia, by 1906; the bank closed this agency in 1930 (Richard Fry 1976: 2, 136). The second competing bank was the Deutsch-Liberia Bank (headquarters Monrovia, Liberia). It was established sometime before the First World War but failed in 1914 or 1915 because of the war (brown 1941: 173). The Banking Department of the United States Trading Company, a subsidiary of Firestone Plantation Company, opened in 1930. It became the Bank of Monrovia (headquarters Monrovia, Liberia) in 1935 (McLaughlin 1966: 81; Clower and others 1966: 152-4, say 1938). Firestone sold the bank to the First National City Bank of New York in 1955. The second competing bank was the Trus Company of |
| 1913?
-1935 |
dollarization (another type) | West African pound (issued by West African Currency Board [headquarters London, England]) | Brown (1941: 156) offers examples of the use of pounds | Liberia used the West African pound, the currency of neighboring Sierra Leone and other nearby British West African colonies. Brown (1941: 185) says that as of 1934 the government budget was "figured in [U.S.] dollars and paid in pounds." |
| 1935
-31 December 1943 |
dollarization (another type) | US dollar (issued by central bank U.S. Federal Reserve System [headquarters Washington, D.C., United States]) and West African pound (issued by West African Currency Board [headquarters London, England]) | Liberia, act of 1935, cited in National Bank of Liberia annual report 1974: 35 | Adopted the US dollar as the official currency part of still closer economic ties to the United States. Liberia also established a unit of account called the Liberian dollar, equal to the US dollar. On 3 November 1942, U.S. dollar notes and coins were made legal tender. West African Currency Board notes and coins continued to be widely used. |
| 1 January 1944
-14 July 1974 |
dollarization (another type) | US dollar (issued by central bank U.S. Federal Reserve System [headquarters Washington, D.C., United States]) | BCEAO (1966: 7) | Notes and coins of the West African Currency Board ceased to be legal tender. In 1952, Liberia passed legislation to establish a central bank, but never took steps to put the law into operation (National Bank of Liberia annual report 1974: 6). On 22 March 1956, the legislatures made Liberian coins (of which there were none at the time) legal tender also (BCEAO 1966: 7). Liberia joined the IMF on 28 March 1962. |
| 15 July 1974
-21 November 1985 |
central bank alongside dollarization | US dollar (issued by central bank U.S. Federal Reserve System [headquarters Washington, D.C., United States]) and Liberian dollar coins (issued by Liberian Treasury [headquarters Monrovia, Liberia]) | National Bank of Liberia Act, 27 May 1974, cited in National Bank of Liberia annual report 1974: 6 | The National Bank of Liberia (headquarters Monrovia, Liberia) began financial operations at the start of this period. Liberia, Financial Institutions Act, 18 June 1974 (cited in National Bank of Liberia annual report 1974: 6), gave the central bank powers to regulate financial institutions. The National Bank of Liberia Act originally provided for the central bank to issue only coins, not notes (National Bank of Liberia annual report 1974: 23). The highest denomination was initially Liberian $1, but on 12 April 1982 the central bank began issuing Liberian $5 coins, in the first major step toward a national currency having a full range of denominations (National Bank of Liberia annual report 1982: [page]). The central bank's first notes are dated 1989 and were presumably issued that year. |
| 22 November 1985
-present (2005) |
central bank | National Bank of Liberia / Central Bank of Liberia from October 1999 (headquarters for both Monrovia, Liberia) | National Bank of Liberia Act, 27 May 1974, cited in National Bank of Liberia annual report 1974: 6; Central Bank of Libera Act, 18 March 1999, reprinted in Central Bank of Liberia Web site, viewed 16 September 2005 | The imposition of a limit on capital exports in the form of cash approximately marks the beginning of full-fledged central banking, with a currency and exchange rate distinct from that of the US dollar. During the civil war of 1989-1997, the two major opposing factions used "J. J. Roberts" dollars and "Liberty" dollars. After the civil war, J. J. Roberts dollars were exchanged for Liberian dollars from February to August 1999. The US dollar continues to be accepted as legal tender. |
Exchange rate arrangements: Liberia
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1834
-about 1890 |
pegged?; Liberian $1 = US$1 | American Colonization Society, Board of Managers, report of 1 May 1834, reprinted in Huberich (1947, v. 1: 425-7) | It is unclear how rigorously Liberian paper money kept its value with the US dollar and Spanish silver dollars. The Liberian dollar was named after the US dollar, and was a decimal currency. Huberich (1947, v. 1: 549-50) implies that notes as well as coins began to circulate in 1834. | |
| about 1890
-1913? |
fixed; used US dollar | general histories | The Liberian government ceased issuing notes. The historical material I could locate was thin here. | |
| 1913?
-1935 |
fixed; used West African pound | Brown (1941: 156) offers examples of the use of pounds | Liberia used the West African pound, the currency of neighboring Sierra Leone and other nearby British West African colonies, which began to circulate in the colonies on 26 June 1913. Again, the historical material I could locate on Liberia was thin here. I infer the starting date from the history of the British West African colonies of the time. | |
| 1935
-12 March 1963 |
fixed; used US dollar (Liberian $1 = US$1: see Remarks) | Liberia, act of 1935, cited in National Bank of Liberia annual report 1974: 35 | Technically, from this period forward there was a unit of account called the Liberian dollar, equal to the US dollar, even though no Liberian coins or notes existed until 1974. | |
| 13 March 1963
-22 August 1971 |
fixed; used US dollar (Liberian $1 = US$1 = 0.88867g gold) | IMF ARER (1964: 306); IMF, 36th Schedule of Par Values, 24 June 1963: 15 | Liberia registered a gold parity with the IMF. | |
| 23 August 1971
-17 October 1973 |
fixed; used US dollar (Liberian $1 = US$1 = 0.88867g gold [nominally]) | IMF ARER (1972: 270) | Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Liberia did not follow the devaluation of the US dollar against gold on 18 December 1971, but neither did it revalue against the US dollar. | |
| 18 October 1973
-14 July 1974 |
fixed; used US dollar (Liberian $1 = US$1 = 0.73662g gold nominally) | IMF ARER (1974: 277) | Liberia did not follow the devaluation of the US dollar against gold on 13 February 1973, but neither did it revalue against the US dollar. It belatedly devalued its (inoperative) gold parity at the start of this period. | |
| 15 July 1974
-31 March 1978 |
pegged; Liberian $1 = US$1 (= 0.88867g gold nominally); alongside fixed, through use of US dollar notes | Liberia, National Bank of Liberia Act, 27 May 1974, cited in National Bank of Liberia annual report 1974: 6 | Liberia's central bank began operations, changing the exchange rate from fixed to pegged. Initially the central bank conducted book-entry transactions and issued coins but issued no paper money. | |
| 1 April 1978
-21 October 1985 |
pegged; Liberian $1 = US$1; alongside fixed, through use of US dollar notes | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") | The system of gold par values officially ended by agreement of IMF members. On 12 April 1982 the central bank issued Liberian $5 coins, in the first major step toward a national currency having a full range of denominations. The coins were issued on the second anniversary of the military coup that brought then-president Samuel Doe to power. Leading up to the presidential election of October 1985 the government increased its spending 22% over the previous year despite a fall in revenue (Boughton 2001: 776). The spending spree was the background to the exchange controls in the next period. | |
| 22 November 1985
-1994 |
pegged, Liberian $1 = US$1 | IMF ARER (1986: 337) | In practice, a managed
float, with extensive
periods of independent
floating. The Liberian
dollar began to
depreciate against the
US dollar by 1986
(IMF ARER 1987: 321
n. 1).
RR: Parallel market, multiple exchange rates to 29 October 1997. |
Imposed a Liberian $1,000 limit on capital exports in the form of cash. From this point onward, the Liberian dollar was no longer fully convertible into the US dollar and was in practice floating. From 17 July-18 August 1989, the Liberian $5 coin was withdrawn from circulation and replaced by a Liberian $5 note (IMF ARER 1990: 286). By 1989, foreign-exchange dealers other than banks were allowed to buy and sell currencies other than the US dollar at market-determined rates (IMF ARER 1990: 285 n. 1). The US dollar continued to be accepted as legal tender in this period, which included the start of a highly destructive civil war. |
| 1994
-29 October 1997 |
pegged, dual rate; official rate Liberian $1 = US$1 | IMF ARER (1995: 288) | In practice, managed
float, with extensive
periods of independent
or even clean floating.
RR: Parallel market premium in four digits from June 1995, when data begin. |
There was a parallel rate that applied to most transactions, including government spending. The US dollar continued to be accepted as legal tender. |
| 30 October 1997
-30 August 1998 |
pegged, dual rate; official rate Liberian $1 = US$1 (see Remarks) | IMF ARER (1998: 527) | In practice, a float.
RR: Parallel market premium in four digits to end of 1997, dropping to 20% in 1998. |
The parallel rate was applied for all transactions, although the official rate remained on the books. The government had eliminated the surrender requirement on 27 October 1997. The US dollar continued to be accepted as legal tender. |
| 31 August 1998
-February 1999 |
independent float | IMF ARER (1999: 505) | RR: Parallel market premium in single digits to low double digits until December 1998, when data end. De facto peg to US dollar. Devaluation of 3,925% in official rate, which is repegged until 30 August 1998. From 31 August 1998, de facto crawling peg to US dollar, but difficult to classify because of lack of inflation data since 1991; might be described as freely falling. | Abolished the long-inoperative official parity with the US dollar. The US dollar continued to be accepted as legal tender. |
| February 1999
-August 1999 |
Liberty and J. J. Roberts Liberian dollars, both independent float | IMF ARER (2000: 515) | RR: De facto crawling peg to US dollar, but difficult to classify because of lack of inflation data since 1991; might be described as freely falling. | The US dollar continued to be accepted as legal tender. |
| August 1999
-28 March 2000 |
Liberty Liberian dollar, independent float | IMF ARER (2000: 515) | RR: De facto crawling peg to US dollar, but difficult to classify because of lack of inflation data since 1991; might be described as freely falling. | After the civil war of 1989-1997, "J. J. Roberts" dollars printed 1988-1992 were exchanged at Liberty $2 = J. J. Roberts $1 from February to August 1999. See the "Other" section of the general remarks above for the story. The US dollar continued to be accepted as legal tender. |
| 29 March 2000
-present (2005) |
new Liberian dollar, independent float | IMF ARER (2001: 535) | RR: De facto crawling peg to US dollar to end of data in December 2001, but difficult to classify because of lack of inflation data since 1991; might be described as freely falling. | Introduced a new Liberian dollar to replace old notes dating from the Liberian civil war. The US dollar continued to be accepted as legal tender, and remained legal tender as of the end of 2004 (IMF ARER 2005: 546). |