Why a country drops zeros from its money: Ghana's 2007 redenomination and its costs

A redenomination changes the digits printed on the money. It does not change what the money buys. On 1 July 2007 Ghana restated its currency at ten thousand old cedis to one Ghana cedi, divided into one hundred Ghana pesewas, and for the six months that followed the old notes and the new ones were both legal tender at the same time.

Key Takeaways

• A redenomination divides every price, wage, balance and debt by the same ratio, so nobody gains or loses.
• Ghana removed four zeros with effect from 1 July 2007: ten thousand old cedis became one Ghana cedi.
• Old and new money circulated together until the end of December 2007, and prices had to be shown in both from 1 May 2007.
• The legal mechanism is a call-in notice in the Gazette of at least three months, after which the old money stops being legal tender.
• The cost lands on accounting systems, cash machines, coin supply and public understanding, not on the value of the currency.

What does a redenomination actually change?

Only the size of the numbers. The Bank of Ghana described the 2007 exercise as removing four zeros, so that a ten thousand cedi note was made equivalent to a new one Ghana cedi note.

Because the same ratio is applied to everything at once, the arithmetic cancels out. Your wage, your rent, your bank balance and your loan all shrink by the same factor on the same day. What you could buy on 30 June you could still buy on 1 July.

The paperwork is handled by a general rule rather than by rewriting documents one at a time. The Bank's technical guidelines state that all references to the cedi in contracts, business transactions, exchange instruments, payment arrangements and court decisions are to be treated as references to the Ghana cedi and Ghana pesewa. A lease signed in 2005 did not need to be reissued. It simply read in the new unit.

A redenomination does not slow inflation, add reserves or change the monetary framework. It removes handling cost. If prices keep climbing quickly the zeros return, which is why some countries have had to do it more than once.

Why did Ghana do it when it was not in a crisis?

This is the part that makes Ghana a useful example. The exercise was not an emergency measure taken while a currency collapsed. Reviewing Ghana in its 2007 Article IV consultation, published as Country Report No. 07/210 in June 2007, the International Monetary Fund recorded that monetary policy had reduced inflation to below 10 per cent by March 2007. The redenomination followed the improvement rather than trying to substitute for it.

The reasons the Bank gave were operational. Its own post-exercise review lists them: a reduction in transaction costs and in the overall risk of carrying large volumes of notes, simplified accounting records, the return of a coin-using habit, lower transaction volumes and times, the practicality of vending machines and parking meters, and greater efficiency in payment and banknote processing systems.

Read as a list, those are complaints about handling money rather than about the value of money. Long numbers slow tills, fill ledgers, wear out counting machines and make cash machines dispense thick bundles for small sums. None of that is fixed by monetary policy. All of it is fixed by shorter numbers.

The order of events matters. A redenomination carried out after inflation has been brought down is a tidying exercise that holds. One carried out during a collapse is undone by the next year of price rises.

How can two currencies be legal tender at the same time?

By publishing the window in advance and telling every party what to do inside it.

The Bank of Ghana's technical guidelines set a six-month transition period running from 1 July 2007 to the end of December 2007, during which the old cedi and pesewa and the Ghana cedi and Ghana pesewa were in concurrent circulation. That is dual circulation: two units of account, both good for payment, one being withdrawn.

The guidelines then fill in the detail that makes such a period workable, and most of that detail is a calendar.

Two of those rows carry most of the design. Dual display let the public see the pairing before it had to use it, and paying out only in the new money drained the old notes out instead of swapping them in one rush.

Ending the window is a separate legal act. Section 41(4) of the Bank of Ghana Act 2002 allows the Bank, on not less than three months notice in the Gazette, to call in any of its currency notes and coins at face value. On the expiry of that notice the notes and coins named cease to be legal tender. So the old money did not simply fade out. It was called in, and a published deadline retired it.

What does the rounding rule do to prices?

This is where a redenomination stops being purely arithmetic, and it is the honest weak point of the exercise.

Ghana's guidelines set a half-pesewa rule. In translating prices from the old cedi, amounts below half a Ghana pesewa were disregarded, and amounts at or above half a Ghana pesewa were rounded up to one pesewa. The Bank noted that prices at the time were generally already rounded to the nearest hundred old cedis, the equivalent of one pesewa, and expected the effect on the price level to be small.

The public did not read it that way. In the Bank's own survey of 894 consumers, carried out roughly two years later, 59.1 per cent said the exercise had contributed to price increases, against 32.7 per cent who said the general rise in prices had nothing to do with it. The reason respondents gave most often was rounding up, because of the difficulty of finding change, followed by a shortage of coins.

That is the tension in any redenomination. The rule can be neutral in design and still be experienced as a price rise at the counter, particularly for small everyday purchases where a single unit of the new smallest coin is a large share of the price.

What does the exercise cost, and who pays it?

Not the holder of the currency. The bill is operational, and it is spread across the banking system, retailers, software and the education campaign.

Ghana's own follow-up survey gives both sides of that ledger. Of twenty banks that responded, sixteen said the exercise had simplified their accounting records. Of the sixteen operating cash machines, thirteen said efficiency had improved very much. On transaction time, 94.7 per cent reported a reduction; on transaction cost, 89.5 per cent did, with savings named in cash handling, labour, logistics, time and machine repairs. Of eighteen banks answering on staff time, 88.89 per cent reported a fall in the average hours spent handling cash each day.

The costs show up in the same document. Two banks reported spending more on note processing, because counting machines had to be changed more often to detect counterfeits. Banks reported coins piling up in vaults where the public did not use them. Of the consumers surveyed, 68.7 per cent said they had understood the exercise before it began, which is another way of saying that 31.3 per cent did not, despite posters, billboards and radio and television campaigns.

So the real budget lines are these: printing and minting a full new series including coins, adapting every cash machine and accounting system before a fixed date, running an education campaign long enough that most people follow it, and staffing a months-long window in which every counter deals in two currencies at once.

How to read a redenomination when you meet one

Four questions settle almost all of it.

What is the ratio, and is it a plain power of ten? Ghana's was ten thousand to one.

When does the new money start, and when does the old money stop being legal tender? Those are two dates, and the gap between them is the dual-circulation period.

What is the rounding rule, and how large is the smallest new coin next to everyday prices? That is where a neutral conversion can still be felt as a price rise.

And what was inflation doing before the change? A redenomination alongside falling inflation is a clean-up. One announced instead of a stabilisation has usually been a prelude to doing it again.

Where to look next

The AUD to GHS page carries the live reference rate for the pair, along with a short block on what kind of money the Ghana cedi is. For what has to be in place before a currency can be used or moved outside its own borders, what has to exist for a currency to cross a border sets out the requirements.

Sources

• Bank of Ghana, Post Re-denomination Survey of Banks, Consumers and Retailers, May 2009 - the removal of four zeros and the ten thousand to one equivalence, the stated objectives of the exercise, and every bank and consumer survey figure quoted here
• Bank of Ghana, Technical Guidelines on the Re-denomination of the Cedi - copy hosted by ModernGhana; the effective date of 1 July 2007, the six-month concurrent circulation period, every changeover date and rule listed above, the half-pesewa rounding rule, and the treatment of references to the cedi in contracts and court decisions
• Bank of Ghana Act 2002 (Act 612), Parliament of Ghana repository - Section 41(4) on calling in notes and coins at face value on not less than three months notice in the Gazette, and the loss of legal tender status when that notice expires
• International Monetary Fund, Ghana: 2007 Article IV Consultation, Country Report No. 07/210, June 2007 - the finding that monetary policy had reduced inflation to below 10 per cent by March 2007

General information about currency redenomination. Not financial advice, and not a recommendation of any product or institution. Reviewed by the Tradergy editorial team, September 2026.