BoG explains the re-denomination of cedi

The Bank of Ghana (BoG) on Monday said the design and the features of the new notes and coins, which would replace the current cash in circulation, would soon be made known to the public.

Briefing the press in Accra, Mr Van Lare Dosoo, First Deputy Governor of the Bank, said there would be practical guidelines and a coherent education programme for the public before the switch to the new denomination.

He said the Ghana Cedi to be introduced in July 2007 would receive legislation from Parliament to validate it use. The Governor, Dr Paul Acquah last Saturday announced the re-denomination of the cedis by setting 10,000 cedis to one new Ghana Cedi (GH Cedi) which would also be equivalent to 100 Ghana Pesewas (Gp).

This means that 500,000 cedis would be equivalent to 50GH Cedis; 200,000 cedis would be equivalent to 20GH cedis; 100,000 cedis would be equivalent to and 10GH cedis; 5,000 cedis would be equivalent to 50Gp; 2,000 cedis would be equivalent to 20Gp and 1,000 cedis would be equivalent to 10Gp.

The series of the new set of notes would be 0ne GH Cedi, Five GH Cedis, 10 GH cedis, 20 GH cedis and 50 GH cedis whilst the coins take 1Gp, 5Gp, 10Gp, 20Gp, 50Gp.

Both the old and new cedi bank notes and coins would be in physical circulation for a period of six months after which the old notes and coins would only be exchanged at the Bank of Ghana and any commercial or rural bank. After the period, the old notes would not be legal tender but could be exchanged at the banks for the new currency.

The external value of both the old and new currencies would be the same as the purchasing power would not change because the cedi would not be devalued or re-valued. Explaining the rationale further to journalists at the press briefing, Dr Ernest Addison, Head of Research, BoG, said experience elsewhere had shown that re-denomination of a currency by dropping zeros in the relative prices of domestic price relation led to significant efficiency gains in the context of strong economic fundamentals and macroeconomic stability.

This, he said, was the situation characterizing Ghana’s economy today hence the major policy decision. He said the growth environment of the economy was strong and positive, with all the underlining conditions such as inflation, interest rates, money supply and exchange rates showing good expectation of policy credibility.

Dr Addison said the benefits the new notes and coins would bring to the economy were incalculable. He said it would reduce the cost and overall risk of carrying large sums of notes, inject efficiency in the payment system, in particular the use of Automated Teller Machines (ATMs), and simplify accounting records.

Dr Addison said it would also reintroduce the culture of using coins in Ghana, promote tourism expenditures, make significant gains in cost of bank notes production and facilitate the introduction of the use of vendor machines and car parking meters. Dwelling on the implementation process, Ms Catherine Ashieley of the Issues Depart of the BoG, said 49 countries world wide had successful gone through the process of re-denomination.

She said research analysis had shown that within the first three months of introduction, about 75 per cent to 80 per cent of the old currency was likely to be withdrawn from circulation since most people would like to switch to the new denomination as early as possible.GNA