The Bank of Ghana (BoG) has indicated that the introduction of new banknotes was the result of a well-thought out currency reform programme.
In a release issued recently, it averred: “Twelve years after the redenomination of the cedi, high inflation and depreciation of the currency have eroded, in real terms, the face value of the existing series of banknotes. The deadweight burden of carrying large sums of money for economic transactions was returning, with the phenomenon of carrying currency in plastic bags.
“As is the normal practice in all jurisdictions, central banks undertake periodic reviews of the structure of existing currencies. In fact international best practices require monetary authorities to review their currency regimes at intervals between five and 10 years to firstly ensure that demand for banknotes were well aligned with economic activity; address weaknesses and challenges noted in the management of notes and coins in circulation; assess the non-usage of a particular series to ensure efficiency in printing, and also address technological innovations that improved security features of the currencies.”
The central bank continued that furthermore, the denomination structure of the banknote should align well with the needs of the people who used it for their daily transactions.
The BoG said it began the process of a thorough review of the structure of the currency since 2017, including a note/coin boundary, acceptability and use of the individual currency series. The review exercise involved a nationwide survey with market operatives, businesses and international stakeholders as well as some empirical exercises.
“The outcome of the review process indicated a significant increase in the demand for higher denomination banknote. It also came out clearly that the existing high denominations of GH¢50 and GH¢20 accounted for about 70% of the value of currency stock compared to 27% at the time of redenomination. At the same time, the volume of banknotes had increased significantly, putting pressure on currency processing facilities, storage and logistics.
“A resetting of the denominational mix of the currencies improves the currency management and reduces costs. In line with the objective of efficiency and cost effectiveness, the BoG introduced a new two Ghana Cedis coin, GH¢100 and GH¢200 banknotes denominations into circulation to complement the existing series. This will ensure customer convenience, improve efficiency in high value transactions in cash, reduce cost of printing as well as enhance currency management processing, transporting, and storing banknotes to generate savings for the country, and address the significant shift in the coin/note boundary after the redenomination in 2007.”
It added that these were technical decisions taken by the central bank as part of its mandate.
The BoG would want to clarify that although the Government of Ghana is committed to do all it can to join the West African common currency arrangement, there are many unresolved issues regarding the common currency, which would take time to resolve. The BoG will be working with ECOWAS central banks to ensure that any currency arrangement will be viable and sustainable.