A senior Economist at the Institute of Economic Affairs (IEA), Dr. J. K Kwakye has described the redenomination of the cedi in 2007 as an “illusion”.
The erstwhile Kufuor administration carried out a cedi redenomination exercise in 2007.
Government, at the time said the purpose of the exercise was to address past episodes of high inflation rates and other economic challenges.
But delivering the IEA’s 2014 mid-year economic review of the country, Dr. Kwakye insisted the decision to redenominate Ghana’s currency was rather politically motivated.
He also attributed the decision to government’s intention to “create the impression that Ghana’s currency is of a very high value”
He was however quick to add that the government’s intent to make the cedi stronger at that time was an “illusion.”
“ That is an illusion. I thought that the best thing would have been to knock off just three zeros from the currency,” he said.
Dr. Kwakye said a country like the US has been able to save its currency from depreciating due to special mechanisms it has adopted over the years.
“If you go to the US, one cent which they introduced two hundred years ago is still in circulation…. Why doesn’t it go away? There are all kinds of mechanisms,” he explained.
The Economist is not the first to attribute Ghana’s economic challenges to the 2007 cedi redenomination.
Former President John Jerry John Rawlings, while delivering his address during the June 4 uprising at the Revolution Square last month attributed Ghana’s economic crises to the re-denomination exercise.
Falling short of calling for a re-visit to the state of the currency prior to 2007, Dr. Kwakye said the situation will make the cedi continue to depreciate against the dollar.
The IEA’s senior Economist also called for the cutting down of Ministries to help minimize government expenditure saying, “we had the Ministry of Transport and Ministry of Aviation. A country that does not even have one airplane has a Ministry of Aviation…”
Below is the audio version of Dr. Kwakye’s presentation
By: Marian Efe Ansah/citifmonline.com/Ghana