Sierra Leone to redenominate currency

Bank of Sierra Leone's announcement yesterday to redenominate the Leone, the local currency has given rise to enormous controversy among…

Bank of Sierra Leone’s announcement yesterday to redenominate the Leone, the local currency has given rise to enormous controversy among the general public.The Bank said it was going to redenominate the Leone by removing the three last zeros of the face value of Le1,000, Le2,000, Le5,000 and Le10,000 bank notes. Therefore, the face value of bank notes will become Le1, Le2, Le5 and Le10. Moreover, there will be a new Le20 bank note. There will also be coins with smaller face value.

The Bank Governor, Professor Kelfala M. Kallon said the new measures are aimed at increasing productivity, reducing transaction costs, discouraging hording and reducing risk of carrying large amount of cash. According to the Governor, productivity could be increased by providing incentive for Sierra Leoneans to think they are better off compared to before the redenomination, a feeling that might motivate them to work hard or produce more.

Secondly, the transaction costs is expected to go down when individuals and businesses spend less time and resources managing and transporting large volume of cash. Moreover, the redenomination might force cash hoarders to return their huge amount of cash back to the banking system. Risk of being robbed while coming from the bank carrying large amount of cash is also expected to be reduced by the redenomination.

However, some Sierra Leoneans say that they are confused and find it difficult to understand how redenomination is going to increase productivity. Others are worried about impacts on their standard of living or purchasing power and value of the Leone against the US Dollar.

Reversing the trend of the local currency’s chronic depreciation against the US Dollar has always been target the country is yet to meet, especially after productivity is badly affected by the 2014 Ebola outbreak and now the Coronavirus global pandemic. Some argue that printing Le20,000 bank notes works better than redenomination in reducing the volume of cash in Sierra Leone.

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