Historical Sketch

The abolitionist American Colonization Society was founded in 1816 with the goal of settling freed slaves in Africa. To this end, the colony of Cape Mesurado was founded in 1821 around present-day Monrovia, which was extended in 1824 to become the colony of Liberia. Subsequently, other colonies were founded with abolitionist objectives: New Georgia (1824, by the U.S. government), Edina and Bassa Cove (1832, by the New York & Pennsylvania Colonization Societies), Maryland-in-Africa (1834, by the Maryland State Colonization Society) and Mississippi-in-Africa (1835, by the Mississippi & Louisiana State Colonization Societies). In 1839, all colonies except Maryland were incorporated into Liberia and the territory attained independence in 1847. Maryland separately became independent in 1854 but merged with Liberia only three years later. The Republic of Liberia remained independent during the colonial conquest of Africa by the European powers in the 19th and 20th centuries.

Monetary History Overview

The Colonization Societies brought the US-American currency system to their possessions. The scarcity of coins triggered the issuance of local paper money. The independent Republic of Liberia continued the practice but did not formally pass any currency legislation. The Liberian Dollar hence rather emerged as national currency than being introduced. The government notes were initially backed by specie. However, in the mid-19th century paper money issuance proliferated, and the nominal parity with the US Dollar could not be maintained. As a result, British silver coins flew in from neighboring Sierra Leone, and in 1916 the Bank of British West Africa got mandated the role of a state bank. The Dollar accounting was not altered although the circulating money was predominantly British and British West African. In 1925, the Liberian government and the US based Firestone Company concluded an agreement on the establishment of rubber plantations. This brought Liberia back to the US-American economic sphere of influence. The Bank of British West Africa left in 1930 and was succeeded by the Bank of Monrovia, a Firestone subsidiary. Liberia passed its first currency law in 1935 which restored parity between the Liberian and US-American currencies and formalized the role of the Bank of Monrovia. Its implementation, however, could be effectuated only in mid-1943 when the circulation of Sterling denominated currency was finally terminated. No Liberian banknotes were issued, just subsidiary coinage to circulate alongside US paper money and coins. The Bank of Monrovia got dissolved in 1955 but had become defunct already during the 1940s. In July 1974, the National Bank of Liberia began operations as the country's first genuine central bank. Initially, it did not have the issuance privilege for paper money, which remained exclusively US-American. The outbreak of the civil war in 1980 brought the Liberian economy to a collapse and destroyed the state institutions such as the central bank. To fight the hoarding of US banknotes, the Liberian government first issued 5 Dollars coins, then paper money of the same denominations. Two different banknotes were produced by changing governments. Due to prolific issuance of one of the banknotes afterwards the two models were traded at different values. The economic and monetary situation remained in disarray until the end of the civil war and several years after. Beginning of 2000, the new Central Bank of Liberia began operations and revised the country's monetary policy. The Liberian Dollar was unpegged from the US currency and devalued by more than 97%. New banknotes were issued, and the wartime currencies were withdrawn. US banknotes have retained legal tender status. After the initial devaluation, the Dollar turned into a slow decline in value that continued until the mid-2010s, when the currency depreciation accelerated considerably.

Liberia joined the International Monetary Fund (IMF) on 28.03.1962.

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