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Friday, October 30, 2020
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  1. Paysafe study shows COVID-19 fueling online shift, payment preferences
  2. How the pandemic is solidifying contactless payments
  3. MoneyGram’s Walk-In Business Hit By Coronavirus As Digital Transactions Surge
  4. Visa says contactless use surged amid COVID-19
  5. MoMo Interoperability Grows by Over 350% in the first quarter of 2020
  6. Russia’s VTB Bank launches international card-to-card transfers
  7. Ghana Launches Africa’s First Universal QR-Code to Drive E-Payments
  8. IKEA Dubai to Allow Customers To Pay For Goods With Their Time
  9. Alibaba Extends $3B Loans to Coronavirus-Affected Firms
  10. ECG Prepaid Payments Goes Digital With Mobile App
  11. Ghanaians Urged to Embrace e-Payment as a lifestyle in 2020
  12. Africa’s Quiet Cashless Payments Revolution
  13. Ghana’s Payment System Is Challenged-Kweku Adoboli
  14. Dangers Of Large Currency Denomination Notes
  15. Bank of Ghana Introduces Higher-Denomination Banknotes and Coins
  16. Fintechs and MoMo Operators to Acquire License by June 2020-BoG
  17. GCB Bank To Issue Electronic Money
  18. Digitization Key to Formalizing Ghana’s Economy
  19. Google to Offer Checking Account
  20. Mobilemoney Interoperability Crosses GH¢90 billion
  21. Ghana to Launch a Universal QR-Code For Payments
  22. AirtelTigo Appoints New CEO
  23. Wirecard Acquires Chinese Payments Group for €109m
  24. Apple Pay Tops Mobile Payment Apps
  25. Verve Cards Launched in Ghana
  26. Ransomware Hits Billtrust
  27. The Catholic Church Launches Digital Rosary
  28. Payments Systems and Services Bill Passed
  29. GTBank Launches Virtual Cards to Promote Online Shopping
  30. MTN Ghana: “More Taxes Would Injure The Mobile Money Sector
  31. PwC Unveils New Tool For Auditing Crypto Transactions
  32. Bitcoin on Track For Best Second Quarter Price Gain
  33. Mobile Money Operators to Face Minimum Capital Requirement-Bank of Ghana
  34. Facebook Moves Towards Payments and E-commerce
  35. BoG to Enforce Rules on Cash Declaration at Kotoka International Airport
  36. India Moves to Ban Cryptocurrencies
  37. Fintech: Redefining Payments in Africa
  38. Ghana’s Tax Filing To Go Digital
  39. MTN Deepens Financial Inclusion For Women In Ghana
  40. Apple Launches a New Credit Card
  41. IT Consortium Is ISO 27001:2013 certified
  42. 8 Services You Don’t Know Exist On MTN Mobile Money
  43. Second phase of mobile money interoperability launched
  44. African Banks Must Work With Fintech Startups

Our monetary authorities have just introduced the 100 and 200 cedis note at this stage in our economic history, especially, when older and more vibrant economies elsewhere maintain a comparatively, much more compact currency denomination profile.

The instrument of money serves universally as a store of value, a means of exchange and a unit of account. But the issue of currency denomination in each country is a factor of economic management in response to apparent domestic realities in the areas of liquidity, inflation and culture.

In generic terms, a country with an endemic liquidity problem (that is, unrestrained cash availability) will ultimately experience an uncomfortably high level of inflation, as productivity will inevitably lag sluggishly behind the propensity for monetary expansion. In other words, you will have too much money chasing too few goods and one would require larger sums of money to make dwindling purchases.

In those countries where the banking and savings culture are undeveloped, there is a greater propensity to hold substantial amounts of liquid cash to meet the day-to-day expenses as well as for business transactions.

The cash culture will be further encouraged where the people are suspicious of the security of the banking institutions for the custody of their hard earned cash (A clear case of Ghana’s Banking Sector Crises). The convenience of keeping larger sums of money under the bed at home and in personal safes as a result of the collapse of the banking sector has weaken the banking culture and adversely affected the development of savings culture in Ghana. This has reduced the level of savings and adversely affected the investment climate in the country, making Bank of Ghana lose control over the circulation of our local currency.

To arrest this situation, introduction of large denomination currency notes will be a significant feature in such economies. It is pretty obvious this government is hanged in the balance, they are currently facing a liquidity problem and the various options available is to raise bonds, increase taxes, borrow from the international market or play around the Cedi. They have virtually exhausted these options except the latter because our debt profile is getting bloated, the economic situation is worsening by day so any attempt to increase taxes would spell doom for them as elections are just around the corner.

This is the more reason why most economic predictors believe the inflation figures churned out by government in recent times are highly unrealistic and do not represent the true state of the economy. It is most likely the managers of our economy are introducing these large denomination currency notes to save them from the shame that awaits them in the coming few months.

In the UK, United States, China and most countries in the developed world where liquidity and inflation are properly managed in a developed banking culture, the largest currency denomination remains the 100-unit note and primary currency units continue to be relevant for consumer and business transactions. The obvious and major advantage of large currency denomination is the facilitation of carriage and movement of large sums of money.

The huge amount (not real value) of money required for day-to-day transactions in an economy such as ours can be consolidated in high-value notes and thus makes carriage on one’s person or the movement of large sums of cashless stressful. Bank of Ghana is yet to articulate any other advantage for the introduction of the 100 and 200 Ghana Cedi notes. If the above remains their major reason then what’s the purpose of the digitized and cashless economy drive being championed by the Head of Economic Management Team (Dr. Mahamudu Bawumia).This decision is more worrying when we observed the consequence of similar trends few years ago, where large denominations have wreaked havoc on the economy. The primary currency unit of coins (Pesewa) became irrelevant for settling transactions in Ghana in the last 20 years.

The currency denomination profile in Ghana at that time included 1,000, 2,000, 5000,10,000 and 20,000 old cedi notes; meanwhile, the cedi had depreciated from parity to a rate of $1 = 9,000 Cedi then. How did Ghana’s currency got to that sorry state of affairs such that the 20,000 cedi was just about $2? A path to inflation and poverty, which our own monetary authorities are obviously intent on treading? The answer is the failure to accept the relationship between a rapidly depreciating exchange value of a currency, the deception and massaging of various macroeconomic indicators and the lost of confidence in our banking sector led us here.

In other words, a rapidly depreciating currency will require higher denominations of currency to avoid the need to use a wheelbarrow to carry cash for such mundane activities as shopping for domestic grocery. Another observed scenario is, when larger denominations are introduced in Ghana the primary unit currencies ie the coins loses value, where is the 1, 5, and 10 pesewas now? They are virtually irrelevant and this same monetary authorities have done little to check this problem over the years, as we are moving to 100 and 200 cedi unit denominations and the introduction of the 2 cedi coin, I can predict that in the next few years the 50 pesewas and one cedi denominations will lose value to the point where they will be irrelevant.Again, in the next 5-10 years, if our monetary authorities continue to adopt the current framework of monetary policy there will be the need for larger and larger currency denominations and the Cedi in your pocket will give you less and less real value.

Sanusi Zankawah Kris
PhD Business Economics (candidate)

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