Sierra Leone has a currency of ‘Leones’. The last time it was measured was in 2006 and was said that it took 2,961.7 Leones to equal 1 US Dollar, an increase from 2005 (CIA The World Factbook).
The Leone is a good medium of exchange because its used to buy certain needed or wanted items. It’s also a good unit of account because, although the prices would look high to us, to the people of Sierra Leone they would represent a good way to measure the prices of different goods and services.
The Leones would not be a good store of account although because it would not hold its value when being saved rather than spent as shown by the increasing exchange and inflation rate of 11.7% which is up 22% from the previous year but on average raises about 6.7% each year.
The fiat money are bank notes given value by government decree and is the primary focus of the Central Bank of Sierra Leone rather than commodity money. The Bank of Sierra Leone is the central bank of Sierra Leone. “It issues the country's currency, known as the Leone and formulates and implements monetary policy, including foreign exchange” (CIA The World Factbook).
The inflation rate in Sierra Leone isn’t at a point where it only seems to effect the countries store of value. Consumer price inflation was pushed higher due to the pass-through effects of steady increases in natural resources in 2007 and 2008 (CIA- The World Factbook). I think as the country grows there will be a positive effect to the medium of exchange and unit of account in Sierra Leones money system. Sierra Leone’s money has been losing value ever since the 1980s. Its value is now based on the export earnings of the country but since it does not earn enough from foreign trade so the IMF and World Bank are constantly encouraging them to reduce government spending to maintain a balanced budget (CIA The World Factbook).
Overall, the country money system is at a state where they are able to achieve massive growth if they just implement the right policies. If the trend continues Sierra Leone could experience a decrease in their money’s store of value and unit of account but if acted upon Sierra Leone could achieve economic growth and overall well being.
Works Cited
CIA-The World Factbook. Africa: Sierra Leone. Central Intelligence Agency, 17 Feb. 2009. Web. 30 Nov. 2009.
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These are all very interesting facts about the currency of Sierra Leone. Why is the exchange rate between the USD and the Leone so high?. I would love to read more about the money's store of value and what actions would change this. Great post about the monetary system of Sierra Leone!
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