Dr Ernest Addison
The Bank of
Ghana (BoG) has indicated that the introduction of new denominations was the
result of a well-thought out currency reform programme.
In a
release issued recently, it averred: “Twelve years after the redenomination of
the cedi, high inflation and depreciation of the currency have eroded, in real
terms, the face value of the existing series of banknotes. The deadweight
burden of carrying large sums of money for economic transactions was returning,
with the phenomenon of carrying currency in plastic bags.
“As is the
normal practice in all jurisdictions, central banks undertake periodic reviews
of the structure of existing currencies. In fact international best practices
require monetary authorities to review their currency regimes at intervals
between five and 10 years to firstly ensure that demand for banknotes were well
aligned with economic activity; address weaknesses and challenges noted in the
management of notes and coins in circulation; assess the non-usage of a
particular series to ensure efficiency in printing, and also address
technological innovations that improved security features of the currencies.”
The central
bank continued that furthermore, the denomination structure of the banknote
should align well with the needs of the people who used it for their daily
transactions.
The BoG
said it began the process of a thorough review of the structure of the currency
since 2017, including a note/coin boundary, acceptability and use of the
individual currency series. The review exercise involved a nationwide survey
with market operatives, businesses and international stakeholders as well as
some empirical exercises.
“The
outcome of the review process indicated a significant increase in the demand
for higher denomination banknote. It also came out clearly that the existing
high denominations of GH¢50 and GH¢20 accounted for about 70% of the value of
currency stock compared to 27% at the time of redenomination. At the same time,
the volume of banknotes had increased significantly, putting pressure on
currency processing facilities, storage and logistics.
“A
resetting of the denominational mix of the currencies improves the currency
management and reduces costs. In line with the objective of efficiency and cost
effectiveness, the BoG introduced a new two Ghana Cedis coin, GH¢100 and GH¢200
banknotes denominations into circulation to complement the existing series.
This will ensure customer convenience, improve efficiency in high value transactions
in cash, reduce cost of printing as well as enhance currency management
processing, transporting, and storing banknotes to generate savings for the
country, and address the significant shift in the coin/note boundary after the
redenomination in 2007.”
It added
that these were technical decisions taken by the central bank as part of its
mandate.
The BoG would want to clarify that although the Government of Ghana is committed to do all it can to join the West African common currency arrangement, there are many unresolved issues regarding the common currency, which would take time to resolve. The BoG will be working with ECOWAS central banks to ensure that any currency arrangement will be viable and sustainable.
BY Samuel Boadi
