The value of the Sierra Leonean Leone depreciated in September 2021 against the US Dollar by 2.56%, according to Bank of Sierra Leone (BSL).
The mid exchange rate stood at $1=Le10,307.12 on August 31, 2021 and $1=Le10,570.98 on September 30, 2021, a depreciation in value that is difficult to analyze largely due to the country’s dominant informal economy.
The foreign exchange market is not developed enough to enable BSL to be effective in regulating the informal sector, especially when currency traders operating outside the legal framework wield enormous power in influencing the real exchange rate.
Moreover, the informal foreign exchange market is also largely cash-based like other sectors of the economy. The cash-based economy was highlighted in December 2020 when many individuals and businesses said that they could not cash their cheques at commercial banks, suggesting that the economy was, among other things, suffering from cash-hording.
One of BSL’s reasons to announce in August this year to redenominate the Leone, the local currency was to force cash hoarders to return their cash back to the banking system.
However, much efforts have been made by businesses, especially commercial banks, to develop digital payment systems such as bank transfers, mobile money and credit cards that have considerable potential to significantly reduce the cash-based economy.
ABJ/APA