Business News of 2014-07-31

Reversing redenomination will be economic suicide – MP

Member of Parliament for Obuasi-West, Kwaku Kwarteng says any attempt to reverse redenomination of the country’s currency could have dire consequences on the economy.

Government spokespersons have blamed the current economic difficulties on the redenomination of the Ghana Cedi in 2007 during the administration of President John Agyekum Kufuor.

But Mr. Kwarteng, who was Government Spokesperson on Finance and Economy at the time describes the “suggestion that, until the redenomination, price changes came in small increments is deliberately false”.

“Indeed, it was after the redenomination that we were told our economy enjoyed a long and unprecedented period of single digit inflation,” the MP stated in a release, Wednesday.

The full statement is reproduced below:

REVERSING REDENOMINATION WILL BE ECONOMIC SUICIDE

In recent weeks, there have been suggestions by government spokespersons that the current problems of the economy, especially the rising inflation and the depreciation of the cedi, are traceable to the redenomination of the cedi by the Bank of Ghana in 2007, and that the Bank should consider re-introducing the zeroes back in our currency.

We urge the Bank of Ghana to ignore these suggestions. It has to be remembered that since the economy started showing signs of crisis, several explanations have been given by spokespersons of government and the ruling party. i. First, we were told that the fall of the cedi was being caused by the activities of dwarfs, and this was said with all seriousness.

ii. After some time, we were told that the fall of the cedi and the rising inflation could be coming from the many tall buildings and skyscrapers emerging in the country, especially in the national capital. iii. Then later, we were told that the fall of the cedi was coming from the work of satanic forces, and that the solution was to intensify prayers to arrest the cedi.

Ladies and gentlemen, this latest diagnosis that the problems of the economy are coming from the 2007 redenomination of the cedi falls into this category of economic explanations. It is coming from superstitious minds who have no scientific understanding of how the economy works.

The redenomination of the cedi in 2007 has served Ghana's economy so well. But for the redenomination, we would have needed polythene bags today to carry a GH¢100 (the equivalent of ¢1,000,000 at the time). Our currency had before the redenomination become so bulky that traders who carried GH¢5,000 (the equivalent of ¢50,000,000 at the time) had to hire taxi to carry that amount at the car booth.

Thanks to the 2007 redenomination, we can now easily conceal GH¢5,000 in our purses or in our breast pockets. Similarly, we do not have to write so many zeroes when recording amounts of money. This has been very good for records keeping and for communication.

In short, the redenomination has eased transacting business with the cedi. And throughout the world, redenomination remains the only solution to bulky currency or excessive zeroes in a currency.

The suggestion that, until the redenomination, price changes came in small increments is deliberately false. Indeed, it was after the redenomination that we were told our economy enjoyed a long and unprecedented period of single digit inflation, something which never happened before the redenomination.

Again, it was after this redenomination that we were told our economy enjoyed the highest economic growth in Ghana's history. So, how can we turn round and claim that the redenomination is the cause of our current economic problems?

The truth is that, Ghana's economy is on its knees because of economic mismanagement, excessive borrowing, excessive spending and corruption.

The Bank of Ghana is respectfully advised to ignore all suggestions that the redenomination is the cause of Ghana's economic woes. Any attempt to reverse it will make Ghana a laughing stock internationally. Even a partial reversal of it will be suicidal for our economy.

Kwaku Kwarteng

Former Gov’t Spokesperson (Finance & Economy)

Source: myjoyonline.com
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