Friday, October 18, 2019

New Currency Versus Old Currency

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The member for Wuli East has raised a question of old currency being used side by side with the new currency. He asked whether this could not lead to increase in inflation. No answer has been given that could be considered to be satisfactory.

The fact of the matter is that old currency notes should not be in circulation with new currency notes if the aim of the government is to totally replace old currency notes. The proper thing to have been done is to quantify the total sum of old currency notes in circulation by denomination and then print new currency notes that are equivalent to the value of the old currency notes that were in circulation. A date would then be set for those in possession of old currency notes to take them to be changed with new currency notes. So, by the end of the prescribed date the all old currency notes would have been mopped up. Only new currency notes would be in circulation.

Foroyaa would contact the Central Bank to find out the policy they have in place in preventing old currency notes from continuing to be used while new currency notes are also in circulation. Monies that should be destroyed should not come back into circulation to create excess liquidity that would lead to more money in circulation than the country has created in real wealth. This would definitely cause spiral inflation especially in landed property.

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