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Sierra Leone Bussiness: BSL to go after Forex street traders

The issue of dollarization is said to be thorn in the economy and the Bank of Sierra Leone (BSL) and its Governor has issued a stern warning to people dealing in the informal sector to desist or the law will be used against them. Speaking during the Bankers Economic Forum recently bank Governor Kelfala Kallon noted “except in Liberia, there is no country where you see people trading the country’s currency in front of the Central Bank, as if it is peanuts.” The laws of the country he said are pretty specific, and that his predisposition to market determined interest rate, support that view. He promised the BSL will not interfere with people who are licensed to trade in foreign currency, which are the Commercial Banks and the Foreign Exchange Bureaus. “We know and we are empowered by the law, as these bureaus trade at their registered addresses, therefore we are going to be resolute in enforcing the law after giving a short period of time for all people on the streets who believe that they should be trading in foreign currency to have time to get the necessary licenses from BSL to set up their own foreign exchange bureau” he warned. He said that in foreign exchange market, dealing in forex includes buying or selling, “so therefor we will go after both buyers and sellers in order to get them off the street, we are not interfering with anybody’s livelihood, we just think that the law should be enforced” he presaged. Explaining further about the exchange rate policy, Governor Kallon said that he is all for free market, but that they at BSL are committed to a market determined exchange rate and that anybody who believes in free market has to understand that nobody should be given the opportunity to manipulate the market to their own private gains. He promised that, BSL will do everything to provide the environment for the market to determine the exchange rate, “we will be derelict in our duty if we allow huge volatility in the exchange rate just because some people want to speculate.” The policy of the BSL will be that, they will intervene in the market when they believe that there is huge volatility in the exchange rate and will negatively impact on macroeconomic stability, which is their major responsibility. Governor Kallon reaffirmed that the law states that in Sierra Leone, the Leone is the legal tender and every transaction should be denominated in Leones unless otherwise permitted by the authorities. When the government makes a currency the legal tender it essentially enters into a legal contract with the people, and as a result the BSL says they are committed to protecting the value of the currency exchange depreciation, and it is their goal to stabilize the exchange rate so that there will not be undue depreciation of the Leone. However, the Governor went on to say that their ability to do that is limited by the so called dollarization that the economy have seen, where people are even charging rent in dollars, “this extreme dollarization is creating extreme demand for dollars relative to the exchange rate and artificially forcing the Leone to depreciate” he said.

By Zainab Iyamide Joaque

Thursday December 03, 2018.

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