By Abubakarr Harding
One of Sierra Leone’s shrewd, seasoned and prolific Economists, Prince Jacob Macauley, prior to the introduction of the redenomination of the Leone, cautioned the Bank Governor and the Government that such a policy, if implemented, will be counter-productive, adding that the “new currency is dead on arrival”, mainly because the conditions for the redenomination of the Leone were not available. However, the Governor did not heed to his caution and today the Leone continues to plummet in value to the dollar with the redenomination boomeranging creating a situation where currently the Old and the New Leones are in circulation.
In an exclusive interview with this medium, Prince Macauley noted that one of the conditions that must exist for a redenomination of the currency to be effective is that there should be a low inflation rate, with the tendency of it decreasing. In other words, the inflation rate in the country must be low and there must be the possibility of it reducing further.
Macauley argued vehemently that one of the prevailing conditions during which the Bank Governor proposed the redenomination was such that there was high inflation, heavy taxation and failure of several economic policies to revamp the economy.
It must be recalled that the Bank Governor had, prior to the redenomination, embarked on the printing of the old notes some three time, auctioned the dollar some three time, placed ban on the amount of foreign exchange one could have in on one’s possession or the banks could give out etc. All those were signs, he pointed out at that time, to reaffirm that the economy was not growing and inflation was rising, and that as such it was not the best time for a redenomination of the Leone to take place.
The erudite Economist maintained how the Bank Governor failed to look at the determining factors that give values to a country’s currency which are the factors that influence the successful outcome of any currency redenomination and these must involve affordable prices of goods and services, living wages, salaries, pensions, debts, reasonable rents, low exchange rates and taxes. He furthered that in times of inflation the purchasing power of a country’s currency is weak reiterating that inflation adversely affects purchasing power and daily transactions. Macauley intimated that the Bank Governor failed to look at the challenges and impact on the Economy that the redenomination will cause.
Macauley maintained that it is not a surprise that the redenomination has faced difficulties, which has led people to go for the dollar, adding that as the value of the Leone continues to depreciate on a daily basis, many people are changing their Leones for dollar. He made mention of a scenario, where a customer has some Le200 million in his account when the dollar rate was at Leone 1,000,000 (one million); his account in dollars will be $20,000, but now, with the recent increase in the dollar to about Leone 2 million, the customer’s account will deteriorate to $10,000. This situation, Macauley argued that such will lead people to lose confidence in the Leone, hence the current rise in the rate of the dollar against the Leone.
