The Bank of Ghana (BoG) has said it will not ‘flood the market’ with the new higher cedi notes but will limit their quantity in circulation to only high-value transactions.
It said although it expected demand for the newly introduced GH¢100 and GH¢200 banknotes to peak in the first days due to people’s curiosity, that demand, through bank withdrawals, would only be met when a customer had money and was withdrawing same.
“You can only draw on them when you have money, and as for what denomination you want, you the customer decides,” the Head of Currency Management at the BoG, Mr John Gyamfi, said in an interview.
“So if you have, say, GH¢1 million with us and you are withdrawing GH¢500,000 of that money and you say ‘give me GH¢10 in this amount, and so and so in GH¢100 and GH¢200 notes,’ we will give you, and that is how these new notes will get out.
“But even with that, we don’t intend to flood the market with them,” he added.
The Currency Management Department is in charge of the design, printing and minting; forecast, distribution, processing and destruction of the country’s currency, the Ghana cedi.
New currency
The BoG, on November 29, added GH¢2 coin and GH¢100 and GH¢200 banknotes to the list of currency denominations in circulation.
It said the introduction of the higher denominations was to significantly reduce the deadweight burden and high transaction cost associated with making high-valued purchases in a cash-based economy such as Ghana’s.
Prior to their introduction, the GH¢20 and the GH¢50 notes were the highest denominations in the country.
On how much of the new notes the BoG intended to print, Mr Gyamfi said it would depend on outcomes of the bank’s forecast.
“We will make a forecast of the demand for currency; part of it to replace what we have destroyed and part based on swings in the economy.
“With Christmas and the cocoa season approaching, people will demand so much money and so we plan for all that. Again, you must always have a little room for contingency because an emergency can happen,” he added.
Operational procedure
Mr Gyamfi said the bank’s operational procedure demanded that limited amount of the new notes would be circulated.
The procedure required that banks did not withdraw less than 10,000 pieces of a particular denomination in a pack.
“However, 10,000 pieces of the new GH¢200 will be GH¢2 million and you have to first ask yourself if you have that money, and then you ask yourself again if you want all or two-thirds of the amount you are withdrawing in the higher value,” he said.
Mr Gyamfi said the weekly requirements of the banks also meant that they would spread their withdrawals from the central bank over the various denominations available.
On whether the new notes would be available at automated teller machines (ATMs), he said ‘we do not expect the banks themselves to put them on ATMs’.
Impact
Mr Gyamfi said the new notes would not impact the amount of money in supply as they were coming to complement and replace destroyed notes and not to add to money in existence.
“If we forecast that we need 20 pieces, we are only saying that of those 20 pieces, some will have to be in GH¢200 notes, GH¢100 notes and the rest and so you reduce the demand for the GH¢50 and GH¢20 notes,” he said.
Reacting to concerns that the introduction of the higher denominations would lead to inflation, he said those concerns were baseless, as banks and individuals could only withdraw from balances that they had.
“These new notes are not coming to increase money in our stock and you can only draw on them if you have money,” Mr Gyamfi said.
He denied rumours that the BoG was using the new notes to print new money, adding that the rules governing the currency market did not allow that to happen.
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