Sierra Leone Re-Denominates Currency: What, Why, When, and How
President Julius Maada Bio announced, on July 1, 2022, that three zeros will be removed from banknotes. The central bank states the value of the notes remains unchanged.
10,000-leone note = 10-leone note
5,000-leone note = 5-leone note
2,000-leone note = 2-leone note
1,000-leone note = 1-leone note
Plus the addition of a 20-leone note which equals 20,000 old leones
Currency in Sierra Leone: Why Has It Inflated?
The inflation rate of leones continues to increase. In August 2021, the inflation rate was 11.63%; a year later, in August 2022, the inflation rate was 28.2%. As it continues to worsen, finger-pointing rears its head at every corner. However, this inflation is a multifaceted problem that is attributed to Sierra Leone’s history of conflicts, various forms of corruption, lack of infrastructure, and more. Sierra Leone has a new currency, but before this is discussed
Civil War
A civil war dominated all activities in Sierra Leone from 1991 to 2002. Any infrastructure previously built was completely destroyed throughout these 11 years including schools, churches, hospitals, shops, and houses. Entire villages were wiped out.
The civil war in Sierra Leone resulted in some 70,000 casualties and 2.6 million displaced Sierra Leoneans. After it was over, citizens found themselves set back decades of progress and on top of that, a lot of highly educated people fled the country. They continue to do so today if they have the money, unfortunately becoming the best path of life for those who can save up.
Government Corruption
When did Sierra Leone gain independence? 1961 marks this achievement, and since then, it has been either a one-party or military rule. The citizens are continually exploited and not provided with: health care, food, drinking water, or structurally sound housing.
Even when funds are dumped into Sierra Leone’s economy from donor nations or nonprofits, they have a hard time reaching the beneficiaries. Corruption isn’t just found at the top level of the food chain, it filters down through each level. The reasoning behind this corruption is beyond the scope of this article.
According to Transparency International, Sierra Leone scored 34/100 on the Corruption Perceptions Index (CPI). The lower the score, the more corrupt the country.
Infrastructure
The infrastructure in Sierra Leone makes it very difficult to transport anything or anyone. There is only one city in Sierra Leone named Freetown - and it is leaps and bounds ahead of the rest of the country in terms of infrastructure.
Remote villages are scattered across the landscape of Sierra Leone. These communities have no roads, bridges, cell towers, electricity, access to healthcare, and more. On top of that, even commuting to these villages can be quite dangerous; only skilled motorbike operators can safely travel. This lack of infrastructure leads to the rest of the country, outside Freetown, barely developing.
Lack of Education
Education is essential for development on a personal and societal level, but Sierra Leone doesn’t have a sufficient education system. There are not enough schools, and many of them are broken-down buildings that are not suitable for teaching. Additionally, teachers can go for long periods of time without receiving any payment from the government. This leads to the standard of education being diminished and many families not being able to afford to send their kids to school.
High Birth Rate
The average woman in Sierra Leone has five children in her life. Typically, in remote villages, people have nothing to do in their free time and do not have access to higher education. This combination leads to families having more and more children. The downside of this becomes apparent when it is too late. It can be impossible to provide for a larger family when the household income stays fixed.
Is Sierra Leone a Poor Country: Unsubstantial Income
In Tikonko, a village in Sierra Leone where Growing the Grassroots, an agricultural nonprofit, primarily works, villagers make an average of $1.25 USD per day. All household income is funneled straight into the essentials, mainly food, making any additional expenses out of the question. If a house repair or medicine is needed, those funds come directly out of food money. Extremely low wages combined with the lack of stable jobs available lead to a vicious cycle of poverty that is difficult to escape.
How Does This Affect Sierra Leoneans?
Understanding how this affects Sierra Leoneans' daily lives is important. There were certain goals in place that a redenomination hoped to achieve. What advantages exist here and how might this actually be a disadvantage to certain citizens? Let’s take a look at both sides of the coin.
Possible Benefits of the New Currency
One goal stated was to give citizens a psychological boost. As of 1/31/23, 1 USD equals 17,665 Leones in the old currency. A major gap like this causes people to lose hope in their economy. However, a “cosmetic” change like this isn’t a worthy solution to a very real problem and Sierra Leoneans can see that.
One real benefit is the fact that fewer bills are needed for big purchases. The addition of 20-leone notes halves the number of bills needed for big purchases which is a nice convenience for some.
Possible Downsides of the New Currency
As mentioned before, villages are scattered across Sierra Leone and are completely disconnected in terms of technology, communication, education, healthcare, and basic infrastructure. People living in remote villages do not have the ability to travel to a city with a bank. Therefore, they will lag behind the rest of the country in switching to the new notes and possibly be in a future situation where their only currency is unsatisfactory.
In general, banking in Sierra Leone is unorganized and full of delays. The future will show if those living in or near a city with a bank are able to efficiently exchange their old bills for new bills.
Conclusion
Growing the Grassroots pays its in-country staff in terms of USD, not Leones. Then, when inflation increases the cost of everything around them, they see that increase in their monthly wage too! If you have employees in a different country, especially one where dramatic inflation exists, this is a great way to ensure that your staff is able to keep up with their expenses rising in cost!
