Monday, January 29, 2024

SBP to introduce 'currency notes with international security features'

Financial expert terms introduction of currency notes with security features as "positive development"

  • SBP governor says notes will have new design, serial numbers.
  • Sources say move comes after complaints of fake bank notes.
  • Expert Schehzad terms SBP's move as "positive development".

KARACHI: The State Bank of Pakistan (SBP) confirmed Monday it would issue new currency notes in line with the international security features soon, clarifying it would not be a disruptive switchover.

“The new notes will be printed with an international security feature. The notes will have new serial numbers, designs, and high-security features,” the central bank's governor said.

Providing an expected time on when the new notes would be available, he said the framework for their design had already started and “I hope that their design framework will be finalised by March”.

“However, we will not change the notes like India,” SBP Governor Ahmad noted, a move that had sent shockwaves across one of the world’s most populous nations when it demonitised 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.