New cedi notes can cause inflation – Economist cautions BoG

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Dr. Laud Mensah, an Economist has hinted that the introduction of the GH¢ 100, GH¢ 200 denomination notes by the Central Bank has the tendency to cause inflation in Ghana’s economy, ABC News has gathered.

Explaining the basis for his argument to Accra-based Citi FM, Dr. Laud Mensah said prices of goods of lower categories such as water will shoot up as a result of the development.

In the view of Dr. Mensah, who is also a lecturer at the University of Ghana Business School, the introduction of the new notes, in essence, will erode the gains made by the country in attaining relatively low inflation.

He argued that traders will capitalise on the convenience of the new notes and thus, charge relatively exorbitant prices.

“For me, I think it has the tendency of causing inflation because when you are pricing, you will look at the minimum and what is convenient to handle and at the end of the day, the lower categories of consumption like water and others will start shooting up. The inflation that we have been struggling for it to come down over the years, we will end up going up again,” Dr. Mensah noted in the interview, which was monitored by ABC News.

The Bank of Ghana has however, indicated that the introduction of the new denominations will not cause inflation. It said the new notes will only replace transactions done with the GH¢50 and GH¢20.

The BoG, while addressing some frequently asked questions on the development on its website, said it is committed to preserving the purchasing power of the currency.

“Higher denomination is introduced to only ease high transaction volumes. These notes will only replace some of the large cash transactions done with the existing GH¢50 and GH¢20 banknotes. Again, the value of a currency depends on what you can buy with it, rather than what the face value is. Bank of Ghana will remain committed to preserving the purchasing power of the currency,” Dr. Ernest Addison, Governor of BoG said.

Announcing the new denominations at a press conference in Accra Friday, Dr Addiso said the Central Bank went through a thorough thinking process before arriving at the decision.

He said the BoG consulted broadly and conducted a survey that indicated a demand for the higher denomination of banknotes.

 

Source: ABCNewsgh.com

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