The Minority in Parliament has discredited the Bank of
Ghana’s recent justification for the introduction of the new cedi
denominations.This comes on the back of a response the central bank gave to
former President John Mahama who questioned the rationale for the new
banknotes.
John Mahama had said the BoG did not go through the right
procedure to introduce the new banknotes and that the decision was flawed.
But the Bank of Ghana in a statement on Friday, January 3,
2020, said contrary to John Mahama’s claims, it indeed “went through standard
processes to introduce the new denominations with integrity as it is to be
expected.”
“The features of the new notes were unveiled at the launch.
This is to avoid counterfeiters and other challenges associated with the
issuance…Immediately after the launch, the Bank embarked on intensive public
education which is still ongoing to ensure the effective dissemination and use
of the new coin and banknotes,” the statement added.
The Minority, however, said the BoG’s opposition to John
Mahama’s comment was out of place as Mahama only reechoed the sentiments of
many Ghanaians.
The Minority’s response, issued by Cassiel Ato Forson, the
Member of Parliament for Ajumako Enyam Essiam constituency stressed that due to
the failure of the BoG to follow due procedure in introducing the denomination,
some institutions including banks are rejecting deposits of the denominations
because their systems are yet to be configured to validate the notes.
Ato Forson who is also the Ranking Member on Parliament’s
Finance Committee insisted that “the Former President has a legitimate
responsibility to comment on issues of national interest and only emphasized
the need for adequate sensitization and to always follow laid-down procedures
in introducing new currency notes in order to preserve confidence in such
notes.”
Read the Minority’s comment below:
The Former President’s comments only re-echoed the views of
many Ghanaians who have expressed concerns about the manner in which the new
higher denomination notes have been introduced. Indeed some of the banks are
even rejecting deposits using the new denominations because their systems are
yet to be reconfigured to validate the notes. Only last week, cashiers at Game,
a shopping centre also rejected payments from a customer using the ₵200-note.
The Former President has legitimate responsibility to
comment on issues of national interest and only emphasized the need for
adequate sensitization and to always follow laid-down procedure in introducing
new currency notes in order to preserve confidence in such notes.
Apart from the issues raised by the Former President, the
Minority in Parliament in a recent Press statement outlined several lapses and
substantive issues relating to the exercise. It was made clear for example that
if the purpose for introducing the notes was to exploit seigniorage revenues or
profit (seigniorage is the difference between the face value of money, and the
cost to produce it) to support government finance, then this purpose will be
defeated because it will result in high inflation. Already, the Bank of Ghana
incurs a high cost of monetary operations to maintain price stability and hence
no reason for the Bank to shoot itself in the foot.
The Minority also pointed out that Ghana’s exchange rate
regime is not a dollar-peg and hence wrong for the Bank of Ghana to state that
the higher value denominations will partially restore the dollar value of the
currency notes to levels in 2007. The Minority Statement further explained that
countries across the world were rather eliminating high value notes to prevent
these from fuelling illegal activities, and that simply increasing the currency
bound would not increase Ghana’s economic fortunes.
Unfortunately, last Friday’s reaction from the Bank of Ghana
still mentioned reasons such as deadweight burden in carrying large sums of
money. Deadweight issues arise following sustained periods of high inflation,
and with recent inflation reported to be coming down, one would rather expect
the deadweight burden to disappear without the need to introduce high-value
denominations.
It is true that central banks across the world do undertake
periodic reviews of the structure of existing currencies for various reasons.
That was why the exercise was begun in early 2016 with new designs (featuring
some of our national heroes) that have unfortunately been discarded by the
current administration. The plan for the new currency structure was to move the
coin/note boundary by a step such that the ₵1 note will be phased out and the
₵2 note would be the new boundary. The rest of the structure was maintained
because the ₵50 note does not circulate much in the non-urban areas in
particular.
Moreover, with the advances in payments systems across the
country as well as digital finance, coupled with the move toward promoting a
cash-lite society, there was no need to introduce a higher denomination beyond
the ₵50 note.
Thus the denomination structure comprising the ₵2-note,
₵5-note, ₵10-note, ₵20-note, and ₵50-note still aligns well with the needs of
Ghanaians who use it for their daily transactions. There is no need to add ₵100
and ₵200.
In 2016, a number of state-of-the-art security features were
introduced for the new designs and hence it is not true that the review of the
structure of the currency only started in 2017. Also, it cannot be true that
there is significant increase in the demand for higher denomination banknotes even
in the non-urban areas of the country.
The Minority is however happy to hear that the positive
legacies of Former President John Dramani Mahama continue to speak for
themselves everywhere. The Bank of Ghana’s new Cash Centre in Accra was built
under his guidance and specifically commissioned on December 2, 2015, by the
Former Vice President, His Excellency KB Amissah-Arthur. According to the Bank
of Ghana, the Cash Centre has continued to receive several commendations and
has become a model for peer economies that have visited the country to learn
from Ghana’s currency management system.
The Minority is particularly happy to hear that countries
such as Kenya, Sierra Leone, Liberia, Uganda, Nigeria, South Africa,
Seychelles, India, Mozambique and many more countries in Africa and Middle East
have visited last year to learn from the Cash Centre built during Prez John
Mahama tenure in office.
Regarding the context of the Eco currency which the
Government of Ghana has in a recent statement committed to join, the Bank of
Ghana and Government cannot be speaking different languages. Even if Ghana opts
to adopt the Eco after three (3) years or even more, the fact still remains
that the new higher denominations could have been shelved until the Eco is
introduced.
The Minority wishes to reiterate the point made by the
Minority leader that, the introduction of the higher value notes would be
thoroughly investigated by the next NDC government.
Cassiel Ato Forson MP,
AJUMAKO/ ENYAN/ ESSIAM AND RANKING MEMBER, FINANCE COMMITTEE
OF PARLIAMENT.
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