By Foday Moriba Conteh
Based on his expert opinion, one of Sierra Leone’s seasoned Economists, Prince Jacob Macauley, has come up with his views relating to the recent currency redenomination or appreciation by the Bank of Sierra Leone.
Prince Jacob Macauley commenced by arguing that officials of the Bank of Sierra Leone need to go back to school and study real financial economics and monetary theory instead of practicing what he has referred to as “Voodoo Economics”.
The Economist, who has a wealth of experience in the field of economics, continued by asking the rhetorical question: Why would any Central Bank arbitrarily appreciate the country’s legal tender or currency without appreciable assets to back up the currency or no exploitable resources or assets to be exported, from time to time, to improve the nation’s balance of payment and purchasing power?
The current value of the Leone, he said, is the true value of Sierra Leone’s GDP and GNP that underline the country’s purchasing power.
He maintained that knocking off zeros from the currency is considered to be arbitrary, saying such an action has the tendency of depreciating all assets value for all Sierra Leoneans. According to him, a house that is worth 100 million Leones today will worth 10 thousand more without any compensation to the home builder that bought building materials at the current prices without the zeros.
Giving an example, he said if someone has 1 billion Leones in the bank today it will worth 100 million Leones after removing the zeros from the country’s currency even though an individual had earned 1 billion at the current asset pricing.
Essentially, he furthered, the Bank of Sierra Leone is depreciating the real value of all assets, wages, goods and services by revaluing the currency without any parity pegging of the Leone to an international currency like the US Dollar, Euro or British pounds.
He added that since such pegging cannot be done because the country do not have an appreciable level of productivity of exportable resources to back the Leone, the Bank of Sierra Leone folks are doing such a tactical appreciation of the Leone to mask (put bandage on) the hyper- inflation in the country in order to qualify for the West African Monetary Zone current participation requirement.
Jacob Macauley additionally argued that Economics is a science not an art and officials at the Bank of Sierra Leone need to understand the impact of their policy decision on citizens and businesses in the country.
He said such a drastic arbitrary move requires a six months consultative public debate and transition to allow businesses to deplete current inventories and supplies already paid for or purchased at current high prices, allow employers to make adjustments for Labour wage rates and employees’ benefit differentials.
The Economist further stated how Sierra Leoneans will become poorer over night when this currency appreciation takes effect.
He said in hyper inflationary counties like ours, residents and businesses do not hold cash in the banks because inflation eats all returns on their cash money but instead prefer to buy tangible assets like land and/or build houses with their money because tangible assets hold their value and appreciate faster in value compared to inflation. Jacob Macauley concluded by stating that if the Government appreciates the inflated currency over night without any form of adjustments and/or compensation for lost value such will definitely impoverish residents and businesses.
