Le800 Billion In Limbo
Governor Kefala Kallon was warned by top Economists that his policy of re-denomination will be dead on arrival, but he refused to listen. He was hell bent on the re-denomination process, but today, he is talking about Le800 billion of the currency being taken out of the banks, allegedly hoarded, thereby creating scarcity of the Leone in the market.
In order to arrest this situation, Governor Kallon again introduced another failed policy, restriction of the amount of money a customer can withdraw. This restriction has invariably seen many customers stranded at the banks waiting to get their money. Since the banks are now rationing the amount of money customers can withdraw, the obvious last resort is that customers will see the banks as not a reliable place to keep their money and would be withdrawing their cash slowly until they take away what they have in the banks, creating cash shortage in the banks and rendering those institutions dormant.
What the Bank Governor failed to tell the nation was how much money was in circulation before the re-denomination, and how much money was printed. These questions were put to both the Bank Governor and the Minister of Finance when they faced Parliament, but they were unable to give specifics. Their failure to disclose the specifics has been seen by many as lack of knowledge about the quantum of money in circulation. It is therefore not surprising that the new currency has disappeared, as people are now going for the currency, especially after the governor had intimated that there will only be three months grace period for the old Leone to be legal tender.
What Governor Kallon failed to realize is that people keep their monies in the bank to get quick and easy access to them, and when it is becoming clearer by the day that they will not be able to do so, the obvious last resort is to try and get as much of their money out of the bank , which they will be able to readily use when needed. This new currency has not changed the inflation in the country, which seem to have gone berserk. It had only resulted in an exponential increase in the exchange rate of the dollar against the Leone. Whilst the Bank Governor is playing by the textbook, he has failed to see the reality on the ground.
Since Governor Kallon took up the mantle of leadership of the Central Bank, he has continually introduced failed policies, one after the other. He started with auction of the dollar, and did several auctions, all of which were counter-productive. The dollar soared. Then he introduced the printing of more Leone (on 3 such occasions). These disappeared barely two weeks after distribution in the market. Then came his pet project (re-denomination), which has proven to be a disaster than a solution to the economic woes of the country. Amidst all these actions, seasoned Economists have told him that his moves will be counter-productive, but he has failed to reason with them. In introducing the new currency, even Sylvia Blyden, who is not an Economist, told him that the move will require change of the name of the currency, but this ‘Textbook Economist’ refused to be cautioned.
Seasoned Economists warned the Bank Governor that the time was not ripe to do the re-denomination, especially as the Leone was unstable, and the economic situation dire. A renowned Economist Prince Jacob Macauley was on radio democracy questioning the wisdom behind the re-denomination. He went further to warn the governor that the new currency will be dead on arrival, but he did not listen. Today, we are in a fix and Governor Kallon is admitting that some Le800 billion has been taken away from the bank and the currency is in short supply.
Governor Kallon is on record talking about the amount of money Sierra Leoneans need for the week. How will he be able to tell the amount of cash people need per week, when the current economic situation dictates otherwise? What governor Kallon does not realize is that to make ends meet, people go into all sorts of businesses, which demand cash, as a result they will need money to go into such businesses. Thus, any inability to access cash from their accounts will obviously lead them to hoard cash for later use. They cannot afford to be told that they cannot get a bare Le10 million from their account, but will be given Le2 million.
As we go to press, the banks are simply paying out the old Leone notes to customers, albeit by installments.