Skepticism about Cedi Redenomination

The motivation to write on the cedi redenomination is the apparent evidence of the ill-preparedness on the part of whoever is initiating this change. Hence, there is need to query about whether it is necessary and at what time frame; thus why at such short notice? The right of Ghanaians to know the cost involved its acceptability and the overall beneficiary of the policy if it is implemented.

There is ample evidence from international finance and policy making documents of about fifty countries that I have studied, showed that throughout the past four decades redenomination has failed in a lot of countries.

It has become so because it has been used as often as new governments were elected into office or legitimise a bad one. It is therefore, clearly becoming a tool of retaliation and bad governance even in Africa.

This problem is visible when redenomination conceived at will, planned badly and there appears to be a rush in its implementation. The ritualised use of redenomination is what has compromised the independence of Central Banks in any such country. This is why the justification of the first use of redenomination should be extremely compelling.

In most true democracies, confidence in a currency apart from being psychological and mainly economic also depends on who is head of, and what the Central Bank does. Including a simple thing like how often changes are made to the position of the governor of a Central Bank among others.

All these decisions affect the currency and the stock market. The Governor of the Central Bank in Ghana, no doubt is a skilled economist judging from awards he has received over the years, overseas experience and past job with a worldwide financial institution.

There is also, is the frequency of issuance of new currency and the fear of rampant redenomination in developing and transition countries. This is why good thought has to go into using this tool the first time as in the case of Ghana. There should be laws that will regulate its first use and the conditions for subsequent uses.

There are a few eye-openers to the current redenomination plan if it ever takes place. Things like consulting all stakeholders, allowing ample time as well as the timing, forecast the impact on dependable sectors of the economy, on sustainability of debts/debt servicing and investment.

It is good to predict the effect on businesses, private sector, small and medium-scaled enterprises (SMEs), imports/exports. Therefore, extreme care should be taken of bewildering control or infiltration of the economy by narcotics and laundered money.

A major concern should be what redenomination will do to the over-riding question of salaries/wages of the many public sector workers. And most importantly the exercise should not be perceived to overly reward a small sector of the economy be it politicians, a few individuals, government and especially banks, that have failed industry.

Views expressed by the author(s) do not necessarily reflect those of GhanaHomePage.