Cashless society is an economic concept where financial transactions are executed in an electronic format rather than using banknote. Economies that are more cash intensive tend to grow slowly and miss out on significant financial benefits. Sweden is winning the race towards becoming the world’s first completely cashless society. More than 59% of consumer transactions in Sweden are completed through non-cash method, which is highest in the world now. On the other hand, the Bank of Ghana (BoG) on Friday, November 29, 2019, announced the introduction of the GH₵100 and GH₵200 notes which were expected to be in circulation afterwards.

Currency in circulation is an economic term that refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses. It is the amount of money that has been issued by monetary authorities minus currency that has been removed from an economy .

The question i’m seeking to ask is simple: What empirical evidence informed BoG to introduce the new and high denomination banknote and how many of these notes and coins needed to be printed to justify their solution. I am looking out for independent opinions from astute economists of our land to justify the need for these actions or otherwise.


BoG Official Statement Capturing the Reason for the introduction : High levels of inflation and currency depreciation in the past have eroded some of the gains from redenomination. The deadweight burden, reflected in high transaction cost has re-emerged. This set of higher denominations will address this increased transaction cost, especially in highvalued transactions in a cash based economy. Also, the structure of the banknotes denomination has changed resulting in a shift in demand for higher denominations (GH¢50 and GH¢20 account for about 70% of the total demand), reflecting the expansion in income and prices. Introduction of the higher value denominations in circulation are therefore necessary to ensure customer convenience, reduction in the costs of printing and other currency management processes.

WHAT BoG SHOULD BE DOING INSTEAD: It will be more prudent to choose a path of building a cashless society where only few percentage of transactions are cash. Many countries, especially the Europeans are now heading to a cashless society with countries like Norway where only 7% of transactions are cash and hence no need for them to be introducing high denomination bank notes. According to BoG justification of ensuring customer convenience, reduction in the costs of printing and other currency management processesas the resultant cause of their introduction of the high denomination banknotes, it is far better for them to rather continue enforcing the cashless agenda and discourage high banknotes. This make their justification a bit vague regarding the enormous benefit cashless transaction can give to the economy.

Would BoG later comes back to demonetize this high denomination in the near future? Demonetization has been used as a tool to stabilize a currency and fight inflation, to facilitate trade and access to markets, and to push informal economic activity into more transparency and away from black and gray markets.

POSSIBLE DEMONETIZATION Let me give you examples of countries that introduced high denomination banknotes and later came back demonetizing those high currencies as a result of its negative effect it had on their economy. First Example, India has recently done a demonetization of its high denomination currency to stem corruption and there are predictions that many other countries will follow with similar action. Second example is from our own brothers, Zimbabwe. The largest denomination bank note ever issued was the one hundred trillion dollar note by the Department Treasury for the Reserve Bank of Zimbabwe. When this economy collapsed this note was worth less than US $0.50. Wall Street Journal valued this note at only US$0.40 in June 2015.

In the whole world, the biggest notes in circulation are 500 euro in the EU, 500 lats in Lithuania ($1152 AU). In Canada $1000 ($1063 AU) but was withdrawn not too long ago and of course Singapore, with the $10000, almost $7850 AU, but used only in inter-bank transactions.

By: Justice Offei Journal