Slashing a few zeros off the cedi ...

..., avoiding more Qatar crises

In August, the Reserve Bank of Zimbabwe slashed the country's currency by three zeros as part of measures to fight inflation, corruption, speculation and the indiscipline that has gripped the economy. The RBZ Governor, Dr Gono gave depositors a 21-day deadline to change their money after which the old bearer cheques ceased to be legal tender.

A new set of 13 bearer cheques ranging from one cent to $100 000 are now in circulation.

This redomination is being done under the theme "Sunrise - A new beginning for Zimbabwe." But, how real is this sunrise? A toilet roll costs $230,000 — in American currency, about 70 cents. With the price of toilet paper soaring on such daily basis, it has become cheaper for those visiting the loo to opt for the use of Zimbabwe"s $500 bill, the smallest denomination in circulation. Figures released by the country’s Central Statistics Office this month show that Zimbabwe’s annual rate of inflation for the month of October gained 46.9 percentage points to close the month at 1,070.2 percent from the September rate of 1,023.3 percent. The country’s acting Statistical Office Director Moffat Nyoni said the change in the annual rate of inflation showed that goods were 11 times as expensive in October as they were at the same period last year. "A bundle of goods and services that cost 100 Zimbabwe dollars in October 2005 would on average cost 1,170 Zimbabwe dollars in October 2006," he explained. Yet, this is a country that feels a way to tackle the country’s economic trough is to slash three zeros off the currency. The slashing of the zeros constituted phase one of the currency reform programme.

A new currency would be introduced without prior warning in Zimbabwe’s next phase to replace the bearer cheques. Zimbabwe is slashing off zeros from the currency to tame hyper-inflation. With the country expecting, for the first time since 1971, to slide into single digit annual inflation at the end of this year, Ghana is expected to slash off four zeros from the cedi in 2007 to underline the increasing fact that the country has finally beaten back inflation and its concomittant currency depreciation.

According to the Investopaedia, redenomination is: 1.The process whereby a country’s currency is recalibrated due to significant inflation and currency devaluation. Certain currencies have been redenominated a number of times over the last century for various reasons. 2. The process of changing the currency value on a financial security. For example, the Bulgarian lev was redenominated due to inflation arising at the end of the Second World War. After the redenomination, one "new" lev was equal to 100 "old" levs. The lev was redenominated three times in the twentieth century.

The world is awash with several examples. In the 1990s, after the downfall of communism, the countries which used fixed and over-valued exchange rates were hit with high rates of inflation once liberalisation set in. Ghana’s experience had started a few years earlier. By 1993 in Romania, inflation was as high as 300 percent per year. By September 2003, one euro was exchanged for more than 40,000 lei. But, the Romanians had our experience of undertaking very biting reforms, the success of which started showing just a couple of years ago, The situation became gradually more stable, with one digit inflation in 2005. So on 1 July 2005, the lei was revalued at the rate of 10,000 "old" lei (ROL) for one "new" leu (RON).

According to the experts, the psychology of this was to bring the purchasing power of the leu back in line with those of other major Western currencies. The old ROL currency remains in circulation until January 1, 2007, but all accounts have been converted starting July 1, 2005.

Russia has also had a similar experience. The Russian stock market, like the Accra bourse in 2003/2004, was the world’s best-performing equity market in percentage gains in both 1996 and 1997. The Putin Government officially de-dollarized the economy, requiring that all legal payments be made in rubles. Similar to what Dr Paul Acquah did here last week, the ruble’s growing strength persuaded the Russian Government to announce in mid-1997 its intention, beginning January 1, 1998, to lop three zeros off the ruble. This redenominated the currency at a rate of one new ruble to one thousand old rubles.

The Statesman, this month began asking the experts questions on whether it was not yet time to slash a few zeros off the cedi - the results will be published soon. So, the news that the Bank of Ghana plans to slash a few zeros off the cedi comes in as wonderful news to our ears, especially for Qanawu who has made a similar argument right here.

The advantages are just too many to list. But the biggest of them all is psychological. It will allow Ghanaians to finally feel they are reaping the material benefits of macro-economic stability. This will be excellent news for the NPP and bad news for the NDC. Well, it will also mean that thousands of us will lose our status as millionaires. But, who cares! Qanawu can start using a wallet again.

Indeed, it will become cheaper to print cedis, since volumes will be lower. Transaction times at banks will be reduced. Thieves will suffer, since the prospect of spotting bulk cash from a distant will be reduced. The only business Qanawu can see suffering is those who deal in cash counting machines. The ATMs will be better patronised.

There will be initial problems, certainly. In Russia, to avoid the panic that took place during previous currency measures, the Government announced that both old and new rubles would circulate as legal tender during all of 1998 and that old rubles could be exchanged for new rubles through 2002. The first few days will be hell for shoppers and sellers alike as a new calculation habit has to be developed. But, it will be the icing on President Kufuor’s economic legacy of a cake.

The Zimbabwean decision can backfire, since inflation is still the number one enemy, the local currency can soon lose its value again, adding more zeros once again. But, the omen is far better here. This can be the psychological light at the end of the tunnel for Ghanaians that finally the country’s destiny is good, making everyone a more willing and optimistic participant. With the cedi now a tradeable currency on international markets, we better believe that Ghana has finally arrived.

LABOUR IS OUR BIGGEST EXPORT

YOU would have been forgiven for thinking commentators and reporters were more interested in blaming the Ministry of Manpower for facilitating the movement of the Ghanaian migrant labourers to Qatar, who are now complaining of non-payment of wages and a slash in the money promised them by the recruitment agency prior to their trip. With December 18 being the International Day of Migrants, this may be the opportunity for us as a country to initiate a policy for Ghanaian overseas workers.

The ILO estimates there are more than 42 million migrant workers worldwide. This does not include illegal migrants. But, the ILO also accepts that migrant work is a painless way of reducing unemployment statistics so Governments should be encouraged to do more to facilitate it. Also, the developing world, from China to the Gambia, is well aware of the considerable source of income that their migrant workers are bringing in. The UN estimated that migrant workers sent home $167 billion in 2005. India received $21.3 billion, China $21.7 billion, the Philippines $11.6 billion and Ghana some $1.6 billion, which may go up to $2 billion this year.

As economies around the world become more globalised, migration intensifies, with labour becoming the same as any commodity, similar to capital and goods. What we have to do in Ghana is, as argued in today’s editorial of The Statesman, to fashion out a national policy for this growing trade that has become the biggest single contributor to our GDP.

As pointed out in the editorial, beyond setting up a commission for Fillipino migrant workers, the Filipinos have also passed a law for that purpose: Republican Act No. 8042, Migrant Workers and Overseas Filipinos Act of 1995. It is basically an act to institute the policies of overseas employment and establish a higher standard of protection and promotion of the welfare of migrant workers, their families and overseas Filipinos in distress, and for other purposes.

Section 2 declares the policy as thus, inter alia: (a) In the pursuit of an independent foreign policy and while considering national sovereignty, territorial integrity, national interest and the right to self-determination paramount in its relations with other states, the State shall, at all times, uphold the dignity of its citizens whether in country or overseas, in general, and Filipino migrant workers, in particular.

(b) The State shall afford full protection to labor, local and overseas, organised and unorganised, and promote full employment and equality of employment opportunities for all. Towards this end, the State shall provide adequate and timely social, economic and legal services to Filipino migrant workers.

(c) While recognising the significant contribution of Filipino migrant workers to the national economy through their foreign exchange remittances, the State does not promote overseas employment as a means to sustain economic growth and achieve national development. The existence of the overseas employment programme rests solely on the assurance that the dignity and fundamental human rights and freedoms of the Filipino citizens shall not, at any time, be compromised or violated. The State, therefore, shall continuously create local employment opportunities and promote the equitable distribution of wealth and the benefits of development.

(f) The right of Filipino migrant workers and all overseas Filipinos to participate in the democratic decision-making processes of the State and to be represented in institutions relevant to overseas employment is recognised and guaranteed. Aware of the fact, through experience, that their emigrant workers fall prey to unscrupulous recruitment agencies, Section 3 of the Act defines what is illegal recruitment: For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting, contracting, transporting, utilising, hiring, procuring workers and includes referring, contact services, promising or advertising for employment abroad, whether for profit or not, when undertaken by a non-license or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines. Provided, that such non-license or non-holder, who, in any manner, offers or promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any persons, whether a non-licensee, non-holder, licensee or holder of authority.

The Government there even set the allowable fees (as prescribed by the Secretary of Labor and Employment) and it is criminal to charge more, "or to make a worker pay any amount greater than that actually received by him as a loan or advance."

It is an offence "To engage in the recruitment of placement of workers in jobs harmful to public health or morality or to the dignity of the Republic of the Philippines; to obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or by his duly authorised representative; to fail to submit reports on the status of employment, placement vacancies, remittances of foreign exchange earnings, separations from jobs, departures and such other matters or information as may be required by the Secretary of Labor and Employment;

(Also relevant for our current purposes is this offence: "To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the Department of Labor and Employment." It is also an offence for the agent "to withhold or deny travel documents from applicant workers before departure for monetary or financial considerations other than those authorised under the Labor Code and its implementing rules and regulations."

The penalties are also severe: (a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less than six (6) years and one (1) day but not more than twelve (12) years and a fine not less than two hundred thousand pesos (P200,000.00) nor more than five hundred thousand pesos (P500,000.00).

(b) The penalty of life imprisonment and a fine of not less than five hundred thousand pesos (P500,000.00) nor more than one million pesos (P1,000,000.00) shall be imposed if illegal recruitment constitutes economic sabotage as defined herein.

The Act says illegal recruitment when committed by a syndicate or on a large scale shall be considered as an offense involving economic sabotage. When over 80 percent of migrant workers from Asia to the Persian Gulf are through placement agencies, such as Rahman Consultancy or Rahman Ventures, it is important that we learn lessons from there.