Does replacing Ethiopian currency notes help arrest political instability?
As the rumor mill suggests, as a means to thwart political booby-traps, fueled by corruptionamassed money, as well as tackle economic hurdles, the government is due to replace its currency notes.
However, some scholars claim that issuing new Birr notes alone could not effect the sought-after solution. First the political dust has to settle down. Some even consider such possible action as a source of conflict. They argue design, feature and related changes might antagonize some groups.
Using the arguments on the extreme ends of the scale, The Ethiopian Herald had interviewed scholars and politicians. For the veteran economist Tekleberhan G e b r e m i c h a e l , replacing Birr notes is not a strange thing to Ethiopia. It had been practiced several times. In tandem with regime changes, Birr notes had been replaced. The trend had also been used as a means to stabilize the economy of the nation.
According to him, besides its economic significance, changing Birr notes play quite a role in pacifying the political turmoil seen rocking the nation time and again and here and there. It cannot be gainsaid that illegal circulation of money has a direct impact on the economy of the nation, for the circulation in turn disturbs the political stability of the country. There are corrupt individuals who hoard a great deal of money, not circulating in a legal manner within the bank system.
This is problematic for the political economy of the nation, he said. The change of Birr notes enables the government to monitor the transaction of illegal money. It will also slam doors on individuals who finance anti-peace elements, Tekleberhan added. “It as well helps slash down the soaring hard currency exchange rate following the rumor that the government is contemplating replacing the Birr notes.
You see the corrupt are willing to change their Birr into dollars at whatever rate as they are in a frantic bid to evade accountability,” he noted. He further noted “As the corrupt could not change their houseful of money as they wish, the decision could also help the government to curb the outflow of hard currency, the country badly needs.” For Unity for Democracy and Justice Party’s Chairperson, Tigiestu Awolu, “The change of Birr notes might have both positive and negative consequences.
I prefer to leave that for economists.” The country is not settled yet politically. Therefore, replacing the birr note will have its own adverse effect. “Replacing the birr note may entail change of design. This could leave a door ajar for another conflict. Based on our experience, we know that there are still diverse interests in the structure of the national flag.
For this reason, the change of birr note might have its own side effects on the politics of the nation.” Before taking that measure, reform and national consensus should come first. The replacement of the Birr notes will also have its own effect on border trade. We know from our experience that the replacement of Birr notes was one of the factors that pushed Ethiopia and Eritrea into war.
What is more, we have to see the geopolitical situation of the region. The replacement of Birr should take place in a stable political system. Following the measure another problem could crop up on the political economy of the nation. It might have advantages as some people see it fit. Yet, it is the political reform that should take the lead.
Mohamad Beshir, is Researcher at Policy Study &Research Institute Macro Economy Department. He said, currency change becomes obligatory when there is illegal overflow of money, not saved in the bank or held in the hands of individuals. As it is explained by higher government officials there are lots of money hoarded in private safe-box. Corruption is the other reason crippling the economy. Whenever corruption pokes its ugly face illegal money transaction will come down as no surprise.
This challenges the economy and creates an opportunity for anti-peace elements to sponsor violence. The current political instability in some parts of the country is a showcase of a huge financial backing of connivers. The weapon they use and the magnitude of the violence are palpable signs that illegal money transaction is the under current factor. The replacement of money could have a positive impact on the economy. It as well helps forestall political crisis. But all preconditions must be exhaustively examined and all precautionary measures have to be taken before replacing the money.
The costs of replacing the money, confidentiality and other related factors have to be considered. For no apparent reason there should not be any restriction when individuals try to replace their money. But there should be restriction during withdrawal. There should be a specific withdrawal amount. The other most important thing that begs for attention is the culture of saving. Remarkable achievement in the area of saving is actualizing.
But much has to be done to get back the money that is outside the banking system. From the experience of other countries it is possible to avert possible complaints on the change of features on the Birr notes to focus on size and color changes alone. Focus could also placed on the 50 and 100 birr notes.
The Ethiopian Herald, December 23/2018
BY LEULSEGED WORKU