When Zimbabwe demonitised in mid-2006 and introduced a new currency that cut a whole lot of zeros from the then collapsing Zimbabwe dollar, there was such hue and cry and mocking abroad, especially in the Western media. No such mocking or accusations of economic mismanagement by the government will accompany Ghana's introduction of a new currency in July 2007, which will perform essentially the same function for the current cedi as Zimbabwe's new dollar did for the old dollar.
Ghana will not call its exercise 'demonitisation', rather it is a 're-denomination'; but whatever name or term it comes with, the new currency, to be called 'Ghana cedi' (or GH cedi), will replace the current cedi which has been struggling against the world's major currencies since the Rawlings PNDC government bowed to IMF pressure and devalued it in April 1983.
The exchange rate in those halcyon days before the devaluation was C5 to [pounds sterling]1 and C2.75 to US$1. By mid-December 2006, 23 years after the fateful devaluation, the cedi was exchanging for C18,036 to [pounds sterling]1 and almost C10,000 to US$1.
You needed a supercomputer to calculate the percentage loss over 23 years and its impact on the economy, living conditions and general wellbeing. But don't tell the economic writers of the Western media or the economists at the IMF and World Bank. Ghana is doing fine!
But some people know better. One of them is Dr Paul Acquah, governor of the Bank of Ghana, who, on 26 November, announced the 're-denomination' exercise to come in July.
Explaining why Ghana needs a new currency, Dr Acquah said the deadweight burden of the current cedi (which is now calculated in millions) made doing business in Ghana an extremely difficult job for everybody, businesses and customers alike.
There are "high transaction costs at the cashiers, and general inconvenience and high risks involved in carrying loads of currency for transaction purposes," the governor said.
The current cedi comes in 1,000, 2,000, 5,000, 10,000 and 20,000 denominations (in notes) and 500, 200 and 100 in coins (called pesewas). These will be "re-denominated by setting 10,000 cedis to one new Ghana cedi". This means 1,000,000 cedis will be equivalent to 100 GH cedis; 500,000 cedis to 50 GH cedis; 200,000 cedis to 20 GH cedis; 100,000 cedis to 10 GH cedis; 5,000 cedis to 50 GH pesewas; 2,000 cedis to 20 GH pesewas; and 1,000 cedis to 10 GH pesewas. …