aripeskoe
(living in ghana)
28 June 2007
Money money money
On July 1, the government will introduce a new currency, sort of.
The currency now in use is called the Cedi, and it comes in various coins ranging in value from 50 to 500 and bills ranging from 1,000 to 20,000. Because of super-inflation of years past, the current exchange rate is about 9,300 cedis to the dollar. For potential foreign investors, this exchange rate apparently does not inspire confidence. What sort of economy would maintain a currency at an exchange rate of 10,000 to 1? Also, according to the government, its budget is now in the trillions, a number so large that computers (I've actually heard this argument) can not handle the calculations (I think what they're really saying is they have no idea how to use Microsoft Excel...Format-Cell-Use comma separator!!).
It is also a hassle to buy anything of value. For example, given that the most valuable bill is worth two dollars, one may need hundreds of bills to purchase, say, a refrigerator or a television. And when I go to an ATM, my $90 withdrawal (the max at any machine) may come out as forty or eighty bills. It's a bit much for my wallet.
So the government (technically the independent national bank) has decided to "re-denominate" the cedi by chopping off 4 zeroes. In other words, 10,000 cedis is now 1 Ghana Cedi. It insists, to the point of it becoming a national joke, that this is not a revaluation, but a re-denomination. Tons of money has been spent on public education campaigns to hammer home this point. The value is the same. The value is the same. The value is the same. Every Ghanaian has heard this slogan, but ask someone the difference between a redenomination and a revaluation and you'll get a blank stare.
(OK, I haven't actually asked a random person this question, but my sense is that the information awareness campaigns have overused the meaningless word re-denomination. The real message is, "don't worry, we're not stealing your money. Even though you had 10,000 cedis and now you have only 1, it's worth the same and we're not pocketing any of it.")
The "new" currency will come in bills worth 1, 5, 10, 20, and 50 Ghana Cedis. There will also be pesawas worth 1, 5, 10, 20, and 50 (100 pesawas = 1 Ghana Cedi). A Ghana Cedi will be worth a few cents more than a dollar. In theory, the old cedi and the new Ghana Cedi will exist together until the end of the year.
For the wealthy, which I imagine represent a tiny fraction of Ghanaians, it will be convenient to have a bill worth more than 2 dollars. This redenomination may also give potential investors more confidence in the country's prospects, and the government's computers won't be blowing quite as many vacuum tubes with the smaller numbers in the budget.
But most Ghanaians are not wealthy. In fact, they are poor farmers or small-time traders and are not regularly involved in transactions worth more than a few dollars. I don't have statistics to back this up, but I would guess that millions of people go weeks or even months without spending more than $5 in a single day. This group of the population is essentially being transferred to a coin-based economy.
People's daily needs, such as food, soap, and other commonly bought items usually cost less than a dollar, or one Ghana Cedi. These people have no need for a 5, 10, 20 or 50 Cedi bill, and, in fact, if they were to use one, the small-time rural traders they are buying from probably will not have change. There are only a few places in my town where I will even try using a 20,000 ($2) bill, so I won't even bother with a 5 Ghana Cedi ($5) bill. Paying for something in my town with 10 Ghana Cedis ($10) would be like buying a newspaper on the street with a $100 bill.
People like me live in both the wealthy, urban Ghana and the rural, poor Ghana. I use ATMs and occasionally travel to Accra and other places, but I also buy vegetables from the market in my town and fish from the 10 year old girl who walks by my house with a tray of it on her head. I'm part of Ghana's "middle class." We are totally screwed.
In my town, I'm in the same boat as the poor when it comes to the currency I can use. I will have to use coins and 1 Ghana Cedi bills. There just won't be change for anything larger. But when I go to the ATM to withdraw my Peace Corps money, I suspect it won't be spitting out 1's. So I will either have to wait 2 hours in line at the bank and ask for a giant stack of singles, thereby making the new currency no more convenient than the old, or somehow convert whatever the ATM gives me to a more usable form. The new, larger bills will not benefit me at all.
Also, I hate coins. I lose them, I can't keep them in my wallet, and they make noise when I walk. In the US I could collect them and bring them to a coin-counting machine at Commerce Bank. In Ghana I collected them guilt-free knowing that in total I probably had all of $6 idling in my room.
But now coins mean something. You'd be surprised how much Chinese manufactured soap you can buy with 50 pesawas (50 cents). Or with 50 pesawas I could buy 10 fresh oranges (although I could probably bargain for 12), or one really big delicious pineapple, or so many bananas that I won't poop for a week (although I suspect my banana lady is giving me a good deal because she thinks it will inspire me to take her to America).
The redenomination also has the potential to cause mass confusion, and I suspect that some people will try and capitalize on it by raising prices. Chopping off four zeroes is not so easy, especially when there are decimals involved. Using scientific notation makes the calculation a lot simpler, and I really think the government has missed an opportunity to teach the general population about exponents. But because this is about people's money, and what could be more important, I think people will get it pretty quickly...
¶ 2:35 PM