SBP to issue new currency notes without disruptive switchover

KARACHI: The State Bank of Pakistan (SBP) Monday said that it would be introducing new currency notes provisioning security features at par with international standards while avoiding any disruptive switchover.

In a statement, SBP Governor Jameel Ahmad said: "The new notes will be printed with an international security feature. The notes will have new serial numbers, designs, and high-security features."

Commenting on the timeline of the issuance of new currency notes, the central bank's governor revealed that the framework for their design had already started adding that he hopes the process to culminate by March.

"However, we will not change the notes like India," Ahmad noted, a move that had sent shockwaves across one of the world’s most populous nations when it demonetised in 2016.

When India demonetised a few years back, there was massive social unrest, and its quarterly GDP took a one-time hit, but since then it has continued to grow at high single-digit levels while payments have largely shifted to the digital medium. A consequence of this is muted inflation and mid-single-digit interest rates that spur economic growth.

Sources familiar with the matter told Geo News that the central bank is considering the move due to complaints about fake currency notes in circulation.

Khurram Schehzad, CEO of the Alpha Beta Core financial advisory firm, said it would be premature to assess the SBP's decision at this moment, but termed the introduction of currency notes with new security features as a "positive development".

Commenting on the narrative that the introduction of new currency notes would address the issue of black money, Schehzad underscored that this couldn't be achieved as long as measures are taken to "cancel out" or at least reduce the amount of higher denomination currency notes in circulation.

Stressing the need to assess the cash hoarded by the people, the financial expert underscored that the public, amid increased inflation, prefers to convert the cash into other forms such as property, cars, gold and foreign currencies.

It needs to be assessed on what basis the higher denomination currency notes such as Rs5,000 is discontinued, he said. Such moves have not met notable success in India and other countries which have gone through demonetisation, the expert added.

"It is to be seen how the central bank moves forward, whether it's discontinuing the higher denomination currency notes, or is simply introducing new ones," he said.

In response to a question on the effects on the economy, Schehzad highlighted the need for the SBP to contain the printing of currency notes which is a key driving factor behind the increasing inflation.