Central banks across the British Commonwealth, post-independence, focused on being the sole issuers of national currency. In Sri Lanka, Douglas Gunesekera, who crafted its monetary law, argued for a national institution responsible for issuing recognised money.
During the World Wars and Britain’s economic depression, Sri Lanka didn’t suffer from bombardment, yet it faced a cash shortage similar to Britain’s. Currency boards ensured that local money matched the British Pound.
In the commercial sector, the stock exchange serves as the leading financial entity, regulated by the Securities Council or Capital Markets Authority. Decades after independence, it became clear that a stronger, nationally focused approach was needed. Thus, consolidated funds were established to bring stock exchange benefits to the public. Dr Tan Pheng Theng implemented this vision for Singapore and Malaysia, with Mr Ng as Singapore’s prominent chairman. Notably, Tracy Cheng oversaw the Taiwan Stock Exchange, which eventually surpassed those of London, New York, and Tokyo combined.
However, the dynamics have shifted; East Africa’s nationalist institutions have lost their mission and are increasingly integrating into the global economy. With the rise of digital currencies and concepts like Stable Coin, the economic landscape has dramatically changed. Brouwer’s Law suggests that inferior money will drive out the superior, allowing local currency to overshadow assets like Swiss Francs and pure gold.
In East Africa, people often find themselves staring at electronic wallets, facing a new kind of anarchy that threatens national sovereignty. Digital transactions happen almost instantaneously, but logistical challenges remain. The emperor’s markets have expanded beyond physical goods to abstract concepts, creating a disconnect in traditional pricing structures.
For instance, the price of one gram of 24k gold fluctuates around $142, while rice costs about $3 for 5kg. The pricing system seems chaotic, with fast-moving digital money dominating.
When Keynes challenged classical economics, he introduced the idea of the marginal propensity to consume, suggesting that individuals manage spending differently based on their wealth. With increased liquidity, people may decide not to spend at all, entering what is known as a liquidity trap.
In today’s world, various forms of money complicate this even further. Young people on the streets of Nairobi, Kampala, and Dar es Salaam constantly evaluate which currency to keep and which to spend quickly.
The situation appears unstable, as the economic foundation seems to be crumbling.
Darin Gunesekera is a former adviser to the Capital Markets Authority and the Nairobi Stock Exchange, as well as the first Secretary General of the Colombo Stock Exchange and the Securities Council.
