Commentary
A Lesson for the Sierra Leone Government: The Key to Reducing the Cost of Living in Sierra Leone
By Mohamed A. Jalloh (USA)
Editor’s Note: This copyrighted article was originally published on the pioneering Sierra Leone Discussions group on Facebook on September 7, 2021.
As Sierra Leone’s Pres. Julius Bio verily stands on the verge of making history in our homeland as the first president in the last 42 years to do what every other president of Sierra Leone failed to do, I continue today to humbly help the government of Sierra Leone grasp a key concept that is crucial to cementing Mr. Bio’s legacy - if he implements that concept - as perhaps the greatest president in the history of post-independent Sierra Leone.
That crucial concept is understanding that the key to alleviating the needless poverty inflicted upon millions of innocent Sierra Leoneans by their own government over the past 42 years is a revaluation of the Leone - not its mere redenomination.
So, why - readers might reasonably ask - have I been writing most recently about this same topic for the past fortnight?
ANSWER: Because - despite our clear and easy-to-understand writings explaining that the most serious problem with the Leone is NOT that it needs “3 zeros removed” from it - the Sierra Leone government’s lead spokesman for its recent admirable effort to address the problem with the Leone, Dr. Kelfala Kallon, Governor of the Bank of Sierra Leone, unfortunately keeps on talking about “removing 3 zeros” from the Leone as the most serious problem with the Leone.
In fact, it is not - as most of our valued members have seen over the past two weeks.
Accordingly, in the interest of accuracy, and pursuant to our Sierra Leone Discussions forum’s patriotic mission of discussing and implementing ideas to advance Sierra Leone’s development and to uplift Sierra Leoneans, we are obliged to keep trying respectfully to elicit a nascent understanding from the Governor of the Bank of Sierra Leone that the most serious problem with the Leone is that its value needs to be restored so that it can stop being a source of exponentially increasing inflation that has made millions of Sierra Leoneans unable to afford the escalated cost of food, shelter, and other necessities of daily living.
Fortunately, the Governor of the Bank of Sierra Leone has stated that he is trying to “redenominate” the Leone as other countries have done. Ghana has been mentioned as one such country. So, since what happened in Ghana in 2007 was in fact a revaluation and not a mere redenomination, once we apprise Dr. Kelfala Kallon of that fact, hopefully that will suffice to avert the looming economic disaster overhanging Sierra Leone from Dr. Kelfala Kallon’s implementation of a redenomination of the Leone instead of the requisite revaluation.
So, how do we know that Ghana implemented a revaluation and not a redenomination?
The short answer: Because the Ghanaian currency increased in value when the New Cedi replaced the old cedi in July 2007 - and a redenomination NEVER changes the value (exchange rate) of the currency; it merely changes the denomination of the currency (hence the term, REdenomination.)
For the long answer, we go to the versatile archives of our pioneering SALONEDiscussion forum.
Specifically, we reach for the following excerpt dated August 24, 2014, which details how the 2007 revaluation of the Ghanaian currency increased its value from nearly 10,000 cedis = $1 to 0.93 cedis = $1 (to be exact, from ₵9,600 = $1 to ₵0.93 = $1) This made it necessary for Ghana to introduce lower denomination paper currency in order to implement the revaluation. Therefore, Ghana properly redenominated its paper currency in July 2007 to ₵1, ₵2, ₵5, ₵10, ₵20, ₵50, ₵100, and ₵200.
This fact may be the source of the confusion in Sierra Leone’s Bank Governor, Dr. Kelfala Kallon’s mind. Hopefully, a brief explanation will help him overcome his apparent confusion. The revaluation of the cedi in 2007 was the primary goal of the 2007 monetary policy change in Ghana - to increase the value of the cedi and thereby reduce the cost of imported goods for Ghanaians. That, in turn, will clearly reduce the cost of living.
Once the revaluation was implemented, $1 was now less than ₵1. Since, before the revaluation, $1 was equal to ₵9,600, even a blind man could see that after the revaluation when $1 was now equal to less than ₵1, there was a clear need to recognize the new reality that the cedi was now STRONGER than the dollar. Hence the heed arose to print new currency notes BECAUSE of the revaluation - since Ghanaians no longer needed a ₵10,000 note to obtain a dollar. Instead they needed slightly less than ₵1 to obtain $1. So, the Ghanaian government reasonably replaced the old ₵10,000 with new ₵1 notes. That’s the redenomination that happened in Ghana BECAUSE of the revaluation!
To put it another way, the only purpose of the redenomination was to implement the revaluation. If this sounds familiar to our readers it is because I wrote the following recently in explaining that the ONLY purpose of a redenomination is to implement the transactional element of a revaluation:
“To reiterate, merely ‘removing 3 zeros’ is not an economic policy.”
Therefore a redenomination has no discernible economic purpose except in one - and only one - circumstance: when the redenomination is part of a carefully planned and finely coordinated series of actions that together constitute the economic policy referred to as a currency revaluation.”
Source: “How a revaluation will reduce the cost of living in Sierra Leone”
http://www.thepatrioticvanguard.com/how-a-revaluation-will-reduce-the-cost-of-living-in-sierra-leone
I respectfully recommend that the government of Sierra Leone study my very lightly-edited post below which details how Ghana implemented in 2007 its currency’s revaluation - not a mere redenomination, as the Governor of the Bank of Sierra Leone erroneously alluded recently.
I do so in the hope that the Sierra Leone government would diligently study it in order to understand the difference between a revaluation and a redenomination. From that understanding, hopefully, the Sierra Leone government would thereby avoid mistaking a redenomination for a revaluation and thereby avoid making the current very bad economic situation infinitely worse for the millions of Sierra Leonean victims of their own government over the past 42 years
[BEGIN EXCERPT FROM THE SALONEDiscussion FORUM’S ARCHIVES DATED AUGUST 28, 2014]
37084 The (Unnecessary) Lesson the SL Govt. Must Now Learn from Ghana
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onemohm
Aug 28, 2014
[Redacted],
Thank you, my indefatigably patriotic, younger fellow alumnus of the great St. Edward’s Secondary School at May Park, Kingtom, Freetown, for your reply to my post yesterday. (Please don’t forget to attend our projected best-ever annual St. Edward’s Celebration weekend to be held this year in New Jersey on Sept. 19-21 to hear me officially narrate, as 2014 Grand Chief Patron, the previously unpublicized true story of St. Edward’s national record of academic excellence set in Sierra Leone in 1973 which has never been broken by any school in SL during the past 41 years!) Care to guess what that record is, [redacted], even though it was before your time at May Park? (Smile)
In regard to your question ("Are there any alternative theories to what Moh’m is proposing?"), the truth is that, indeed, there are alternative theories to what I am proposing. The problem is that those alternatives have been proposed in Sierra Leone throughout the past 35 years since 1979 by the very same culprits who had initiated our country’s worst ever economic catastrophe - the IMF and the World Bank.
Sadly, but predictably (Colonial Mentality at work), those plainly porous alternative theories were nevertheless dutifully implemented by the undoubtedly well-meaning but clueless succession of Sierra Leone governments since 1979 in a classic display of unremitting Colonial Mentality (Colonial Mentality is the belief held by an African that anyone and everything African are inherently inferior to anyone and everything non-African for no other reason than their racial differences.)
The result of implementing those alternative theories in Sierra Leone is plain for all to see in the ravaged Sierra Leone economy teeming with millions of needlessly impoverished Sierra Leoneans in a land that we love that used to be a relative paradise. That is, it was a relative paradise before the unconscionable IMF-instigated devaluation rendered the once-strong Sierra Leone currency virtually worthless in relation to the previously weaker U.S. dollar.
Which, of course, is why I have been tireless in urging successive Sierra Leone governments during the past 35 years to stop implementing the predictably inappropriate and demonstrably failed policies foisted on our country by the architects of its economic collapse: the IMF and the World Bank.
Alas, instead of at long last celebrating Sierra Leone’s emancipation from economic slavery at the hands of the architects of the impoverishment of millions of Sierra Leoneans over the past 35 years, I am left thus far with nothing but hope for the long overdue emergence of a leader who will save Sierra Leone and its long-suffering innocent people, using our ideas that some of my colleagues and I on the SALONEDiscussion Think Tank offered Sierra Leone’s then newly-elected President Ernest Koroma in 2007, but which remain unimplemented to date.
Interestingly, as you know, in the same year that we tried and failed to convince the Sierra Leone government to act upon our policy prescriptions - 2007 - Ghana used substantially the same ideas we had proposed to our own country, in vain, to propel its economy onto its current sustainable path to development while our country remains mired in progressively worsening self-inflicted poverty.
Finally, kindly permit me to point out for the benefit of some of our brothers like Dr. Herbert Mcleod, who urge us to "move on" (to a destination they have yet to specify) from a discussion of how to remedy the greatest economic catastrophe inflicted upon our country - the IMF-instigated devaluation of the Leone in 1979. They tell us to "move on" because, they declare, we shouldn’t discuss such matters after 30 years, as Herbert did here in reply to you earlier this morning: "After over 30 years?!?!! Tanzania, Gambia, Ghana, almost all of them devalued. They have all moved on. Should we remain stuck in the past?" [Herbert Mcleod, on SALONEDiscussion, 8/28/2014]
It may come as a surprise to our friend, Herbert, but the fact is that even after more than 30 years Ghana, for example, did NOT move on from discussing its own devaluation and how to reverse it.
On the contrary, Ghana continued such discussions for 40 years! Indeed, it was exactly 40 years after the devaluation of the Ghanaian cedi in 1967 that Ghana finally did in 2007, as noted above, what I had been advising successive Sierra Leone governments since 1979, in vain, to do in our own country, namely: reverse the harmful and totally inappropriate devaluation of the national currency. The result of Ghana’s action in the same year that the Sierra Leone government refused to heed the similar advice of my colleagues and I on the SALONEDiscussion Think Tank is exactly what we had predicted would happen in Sierra Leone:
The Ghanaian currency, the cedi, before the devaluation in 1967, was worth $1.08 (₵0.93 = $1). By comparison, in Sierra Leone before the devaluation in 1979, the Leone was worth $1.25). After the devaluation in Ghana, severe inflation predictably ensued and the cedi was pegged at ₵2.80 = $1.00. In Sierra Leone, after our own IMF-instigated devaluation in 1979 and high inflation predictably ensued, the Leone was pegged at Le2.50 = $1 in 1985, as those of our valued members here who remember the "two-tier" system would recall (the other rate for commercial transactions being Le5 = $1.)
By 2007, in Ghana, the exchange rate for the cedi to the dollar was ₵9,600 = $1. In 2007, in Sierra Leone, the exchange rate was about Le3,000 = $1. However, AFTER the Ghanaian cedi was revalued in 2007, the exchange rate in 2008 dropped (i.e., the cedi’s value increased) from ₵9,600 = $1 to ₵0.93 = $1!
In stark contrast, in 2008, after the Sierra Leone government REFUSED to implement our 2007 recommendation to revalue the Leone - the similar recommendation that Ghana’s government used to revalue its own currency in 2007 - the exchange rate for the Leone remained at about Le3,300 = $1.
Significantly, today, in 2014, 7 years after the Ghana government had acted upon a similar recommendation to revalue its currency as the one we had earlier proposed to our own Sierra Leone government to revalue the Leone - and which the Sierra Leone government refused to implement in 2007 - here are the current exchange rates for the two countries’ currencies:
2014 Currency Exchange Rates
1. Sierra Leone: Le4,300 = $1 (compared to Le3,300 = $1 in 2007)
2. Ghana: ₵2.35 = $1 (compared to ₵9,600 = $1 in 2007)
Hopefully, my patriotic friend, [redacted], you now can see why I must crave your indulgence in changing the subject line of this thread to "The (Unnecessary) Lesson the SL Govt. Must Now Learn from Ghana!"
Do you now also see why I have always maintained that the Sierra Leone government missed a golden opportunity to save our needlessly suffering people from poverty in 2007 when it inexplicably refused to implement our very sound recommendations, including the revaluation of the Leone, of which a similar proposal was implemented in Ghana in the same year that the Sierra Leone government decided not to do so in Sierra Leone?
As a result, today the Ghanaian currency’s exchange rate has exponentially become stronger, going from ₵9,600 = $1 in 2007 to ₵2.35 = $1 in 2014. Going the opposite way, SL’s currency, the Leone, has become even more worthless, going from Le3,300 = $1 in 2007, to Le4,300 = $1 in 2014.
In closing, just in case the Sierra Leone government is now willing to listen to us in 2014, following its refusal to listen to us in 2007, I hereby provide far below for the attention of all, including Sierra Leone’s ambassador to the USA, H.E. Bockari K. Stevens (who is copied on this thread), the link to the most important proposal in our 2007 compendium of proposed solutions to Sierra Leone’s perennial economic problems that we presented to Sierra Leone’s President Ernest B. Koroma in 2007 - the revaluation of the Leone.
The link below provides access to a January 2007 article titled "An Analysis of the DFID/EC Strategy for Sierra Leone" authored by my fellow SALONEDiscussion Think Tank colleague, Jonathan Rose and I that was published six months before Ghana implemented a similar version of our key proposal therein to revalue Sierra Leone’s currency, the Leone. The article contains three chapters: Chapter 1: The Revaluation of Sierra Leone’s Currency; Chapter 2: Is The Sierra Leonean Currency Overvalued?; and Chapter 3: Why Devaluation Would not Work in Sierra Leone.
http://www.thepatrioticvanguard.com/an-analysis-of-the-dfid-ec-strategy-for-sierra-leone
I remain hopeful for a different reception to our proposals from the Sierra Leone government in 2014 compared to 2007.
Sincerely,
Moh’m Jalloh
[END OF EXCERPT FROM THE SALONEDiscussion ARCHIVES DATED AUGUST 28, 2014]
Since I wrote the above-excerpted essay on our SALONEDiscussion forum on Yahoo groups 7 years ago, in 2014, predictably, the Leone has become, sadly, even more worthless, thereby impoverishing even more the already searingly impoverished people of Sierra Leone.
How much more worthless?
Today, in 2021, the Leone is worth far less: Le10,000 = $1.
To put in simpler terms: Between 2007 and 2014, while the Sierra Leone government of Pres. Ernest Koroma was figuratively twiddling its thumb instead of revaluing the Leone - as millions of his fellow Sierra Leoneans continued to needlessly suffer - their suffering became worse. That’s because the nominally more Leones in their pockets became even more worthless.
How so, readers might reasonably ask?
The answer is that because in 2007 a Sierra Leonean who in 1978 before the IMF-instigated devaluation needed only eighty Sierra Leone cents (Le 0.80) to obtain $1, now needed in 2007 Le3,300 to obtain the same $1.
Worse still, 7 years later - as Pres. Ernest Koroma refused and failed to implement the sorely-needed revaluation of the Leone, the Sierra Leonean now needed in 2014 not Le3,300 but Le4,300 to obtain the same $1!
(The economic opportunity cost of wasting time.)
Could it get worse after we renewed our call in 2014 for Pres. Koroma to act to save the people of SL from wholly avoidable continuing poverty - and Pres. Koroma unconscionably continued to refuse?
I will let the exchange rate speak for itself: Today, 7 years after Pres. Ernest Koroma had refused for the second time to revalue the Leone in 2014, the Sierra Leonean who needed a previously unheard of Le4,300 to obtain $1 in 2014 now needs more than double that amount to obtain the same $1 in 2021: Le10,000 to obtain the same $1!
That - for the long- and needlessly-suffering millions of innocent Sierra Leoneans - is the economic opportunity cost of CONTINUING to waste time which has been unconscionably inflicted upon them by their own government.
I will end as I similarly ended 7 years ago in 2014, as noted in the excerpt of my essay above:
I remain hopeful for a different reception to our proposals from the Sierra Leone government now in 2021 compared to 2014.
In closing, I am obliged to reiterate that it took the IMF and the World Bank 22 years - after the catastrophic devastation of the economies of many African countries I had predicted had come to pass during the 1980s and 1990s - to finally admit in 2001 that their ubiquitous one-size-fits-all devaluation policies in Africa (the foundation of their failed Structural Adjustment Program (SAP) in many African countries) had been a “mistake”. See, “World Bank admits mistakes in SAP implementation”
https://www.google.com/amp/s/www.modernghana.com/amp/news/14077/world-bank-admits-mistakes-in-sap-implementation.html
However, both the IMF and the World Bank continue to refuse and fail to compensate the hundreds of millions of African victims of their belatedly self-admitted “mistakes” against which I had clearly warned them in 1979.
About the author: Mohamed A. Jalloh, known to his many friends as Moh’m, is an experienced financial executive and a former official of the Government of the District of Columbia, USA, resident in the U.S. He first advised the Sierra Leone government against devaluing the Sierra Leone currency which was then stronger than the dollar 42 years ago. He did so, at great personal risk from the notoriously murderous Pres. Siaka Stevens of Sierra Leone, in an article, “Devaluation: A Rich Man’s Cure” published on April 11, 1979 in We Yone, then the leading newspaper in Sierra Leone. At that time, Mr. Jalloh had just become - less than a year earlier - the first Sierra Leonean to graduate from Fourah Bay College, University of Sierra Leone, with a B.Sc(Hons)Econ degree with joint honors in economics and accounting. See, “Mohamed Jalloh: A Life of Historic Firsts”
http://thepatrioticvanguard.com/Mohamed-Jalloh-A-Life-of-Historic
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