LAST July, the Bank of Ghana began an exercise to re-denominate the cedi by re-setting the ¢10,000 to one new Ghana cedi (GH¢). The new one Ghana cedi is also equivalent to 100 Ghana pesewas (Gp).
Giving reasons for the decision, the Governor of the Bank of Ghana, Dr Paul Acquah, said the old note regime placed significant burden on the economy in terms of transaction costs, general inconvenience and the high risk of carrying loads of the currency.
The announcement of the re-denominaton exercise by the Governor of the central bank was, however, met with mixed feelings.
The apprehensions stemmed from the link between the re-denomination to the demonetisation exercise in 1979 by the Supreme Military Council (SMC) regime, which caused pain and hardships to those who lost huge sums of money because of the haphazard manner in which the programme was implemented.
Those who predicted doom of economic downturn as a result of the unprecedented decision by the central bank must have eaten humble pie by now, looking at the able manner in which the central bank has implemented the re-denomination strategy.
Perhaps, conscious of the skepticisms, the central bank went the extra mile to launch a public awareness and education programme on the re-denomination, whose parallel in our history could be the changeover from left-hand drive to right-hand drive in 1974.
The country’s economy has made strides as macroeconomic stability has taken root, but the benefits are limited, largely as a result of the dead-weight burden imposed by the old cedi notes. Now the economy is characterised by declining inflation, stable exchange rate, fiscal prudence and policy credibility.
It has also been argued in certain business circles that re-denomination per se does not impact positively on the economy, and that its main benefit is the reduction in the burden of carrying large sums of paper money around.
However, if re-denomination reduces high transaction costs, general inconveniences and the huge risk involved in carrying loads of currency for transaction purposes, increasing difficulties in maintaining book-keeping and statistical records, ensuring compatibility with data processing software and the strain on the payment system, particularly ATMS, then those who claim that there are no economic benefits to be derived from re-denomination at all must be economical with the hard facts.
Although re-denomination will not have direct impact on the economy, businesses and banks that handle huge sums of money will make gains on the time they spend counting money, and such gains could be applied to other productive activities.
Some countries also re-demonimate in order to improve their monetary sovereignty and Ghana’s re-denomination strategy could be said to be intended to correct the neglect of the cedi for the dollar and by extension restore some regard for the national currency once revered in the West African sub-region.
The Daily Graphic thinks that so far, the re-denomination strategy has been implemented well, despite a few challenges, and we hope that the central bank would handle the strategy in such a way that it will complement other macroeconomic efforts to redefine the country’s growth and development.
With less than 24 hours for the old cedi to cease to be legal tender, there is the likelihood of panic among the people. Few weeks ago, petty traders and trotro drivers refused to accept the old currency, although it was still legal tender. This is why the central bank must act quickly to stem this negative trend.
The Daily Graphic reminds the central bank that for the re-denomination exercise to be successful, it should be complemented with strict and disciplined fiscal policy measures and other broader objectives of economic development such as export promotion, job creation and favourable balance of payments.
If the strategy is complementary in scope, it could lead to other reform efforts aimed at improving the general standard of living of Ghanaians.
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