Bangladesh: Tk 5 Coins and Banknotes Likely to Become Treasury Coins and Notes

[Bimat]

Tk 5.0 likely to become treasury note, coin

Jasim Uddin Haroon

Posted : 28 Mar, 2015 00:00:00

The government moves to take over control on notes and coins of taka-five denomination, primarily to expand its bases on the legal tenders.

Such extended control over the paper currency and coins is apparently aimed at helping the government meet its deficits.

Economists conversant with financial affairs differed on the government move. Some of them smelt a rat in the move, as they foresee a switchover of control on all banknotes from the central bank.       

They argued that this wouldn't help much in narrowing the monetary deficit in government coffers as the aggregate value of coins and notes of Tk 5.0 denomination in circulation is around Tk 4.0 billion.

Some others moved farther afield to argue that this would help establish the government control over all banknotes as treasury notes work as a guarantor of the banknotes.

Currently, the Government of Bangladesh issues Tk 1.0 and Tk 2.0 notes and coins. Their usages have been eroding away fast following high inflation in the economy.

In line with this initiative, a process is underway to make necessary amendments to the existing treasury acts and other related formalities that will require parliamentary approval.

Officials at the finance division, who are working on the matter, told the FE that the finance minister had already given some observations on the file forwarded to him.

"We're now working as per the finance minister's advice," a senior official at the division told the FE Wednesday last.

However, the finance official hinted that it would take at least one year more as there is the need for amending the laws.

Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), thinks this will not help the government much as the aggregate amount to be obtained is not so big.

He said the 'seigniorage' benefits to be accrued from printing the notes and coins of taka-five denomination by government are not big as well.

Seigniorage also spells seignorage or seigneurage. The term, derived from old French 'seigneuriage' (right of the lord (seigneur) to mint money), is the difference between the value of money and the cost of printing and distributing it.

Mr Mansur, who worked as the division chief at the International Monetary Fund (IMF) at its Middle East and Central Asia Office, said the central bank of Bangladesh has long experiences in printing and security affairs on the notes.

"I think Bangladesh Bank is much capable of printing and supervising the notes, then why the government?" He noted.

He said Bangladesh Bank gives dividends to the national exchequer out of the benefits from the seigniorage. "Then, why the government wants to take control of the currency?"

On the other hand, Dr Zahid Hussain, lead economist at the Dhaka office of the World Bank, said the demand for the Tk 1.0 and Tk 2.0 denominations has eroded fast mainly due to the rise in inflation, especially, in recent years.

"In my view, this is the right step by the government on the issue as it works as a guarantee of the banknotes."

Dr Hussain said there is a trend of controlling such type of low-denomination currencies by Government historically-not in Bangladesh but across the world.

During the era of Gold Standard, Government used to provide guarantee of giving gold the equivalent of the notes given by the bearer.

But, in modern era, Government promises to give the same amount of legal tenders to meet the financial obligations. The amount is equivalent to the notes or coins that bearer wants to exchange for.

"As Tk 1 and Tk 2 are getting phased out naturally, so there is need for another denomination that will actually work as guarantee of the banknotes," Dr Hussain noted.

When contacted, sources at the central bank said they will do as the government orders.

"The banknotes and coins of five denominations will be withdrawn from the market after government's issuance of the same," said an official working at the Bangladesh Bank's Department of Currency Management.

They said the central bank has been issuing the coins and notes as the government is yet to give any order in this respect.

Habibur Rahman, deputy general manager at the Department of Currency Management, told the FE: "We've completed another fresh tender for printing notes of taka-five denomination recently."

However, Finance Minister AMA Muhith last January told the media that government would withdraw Tk 1.0 and Tk 2.0 notes from circulation.

The minister had told the media that Tk 5.0 would be the lowest denomination instead of the existing Tk 2.0.

He had stated so as media reports said that the lower-denomination notes are 'useless'.

At present, notes of taka-five denomination and above are issued by Bangladesh Bank and Tk 1.0 and Tk 2.0 coins and notes by the finance ministry with finance secretary's signature.

Bangladesh has now Tk 5 paper currency numbering 700 million pieces and coins of the same denomination counting 50 million pieces.

Source: The Financial Express

[Pabitra]

Interesting.
Currently, Bangladesh 5 Taka coin is issued under the name of Bangladesh Bank ( and not Bangladesh) so it is like a promissory note.
If it is to become a currency then a new design will have to be issued( strictly legally speaking).
Looking forward to new design.

[Bimat]

Tk5 to go under govt notes and coins

Posted : 08 Sep, 2015 22:00:39

A Bill titled 'Bangladesh Coinage (Amendment) Act, 2015' was placed in the Jatiya Sangsad (parliament) on Tuesday aiming to bring the Tk5 coin under government notes and coins. Finance Minister AMA Muhith placed the Bill in the Parliament and it was sent to the respective Parliamentary Standing Committee for further scrutiny. The Committee was asked to submit its report within one month. In the objective of the Bill it was stated that after 19 long years, The Bangladesh Coinage Order was amended in 1989 to bring the Tk 2 coin under the jurisdiction of the government coin. "Some 26 years have passed in the meantime, now a decision has been taken to bring the Tk 5 notes under the jurisdiction of the government as its purchasing capacity has been reduced a lot compared to previous times," it said. It also said that the inflation of the country will not be hampered due to this as the total amount of money in circulation will remain the same. The objective of the bill mentioned that in 1974-75 the percentage of the government notes was 10.70 which came down to 0.90 in 2013-2014. The percentage of the government notes and coins will be increased to 1.50 per cent after turning the Tk5 notes and coins into government ones, according to a news agency.

Source: The financial Express

[Bimat]

Coins of Tk 5 denomination to remain in circulation

Chief Economics Correspondent,  bdnews24.com
Published: 2015-11-17 23:19:50.0 BdST Updated: 2015-11-17 23:19:50.0 BdST

The government has made it clear that the coins of Tk 5 denomination will remain in circulation.

The finance ministry issued a media statement on Tuesday, a day after Minister Abul Maal Abdul Muhith's remarks created confusion in the financial market.

After the 'Bangladesh Coinage (Amendment) Bill-2015' was tabled for passage on Monday, Muhith told Parliament, "I should withdraw all the five-taka coins."

The Act, eventually passed at the same session, has now empowered the government to issue notes and coins of Tk 5 denomination, like those of Tk 1 and 2.

According to the ministry statement, the amended Act has made Tk 5 notes and coins the government's legal tender like Tk 1 and 2 notes and coins, all of which are currently in use.

The new Tk 5 notes and coins will also be in circulation along with the current ones, it added.

Banknotes of denominations between Tk 1 and Tk 1,000 are currently in use in Bangladesh.

There are both notes and coins for Tk 1, Tk 2 and Tk 5, but Tk 10, 20, 50, 100, 500 and 1,000 are only found in notes.

Until now, the government had been issuing Tk 1 and Tk 2 notes and coins, while the Bangladesh Bank released the rest.

The finance minister on Monday had questioned the central's bank's authority to issue the Tk 5 coin.

"Bangladesh Bank is not authorised to issue this coin. They can't do this. They are only authorised to release Tk 1 coin," he had said in Parliament.

Muhith had faced harsh criticisms in January this year for saying he wanted to withdraw Tk 1 and Tk 2 notes from the market.

But a day later, he retracted the statement and said, "We can't just withdraw currency notes that are in the market. They will cease to exist if people stop using them."

Source: BD News24

[Figleaf]

This is all pretty murky. The government and the central bank are two manifestations of the same thing. Who issues what is pretty irrelevant as the final responsibility for the money supply is for the government, even if the central bank is independent for its monetary policy decisions - which may or may not be the case in Bangladesh. It looks like there is no change of design in the coins and banknotes, only the status of the Tk 5 changes.

My best guess is that for some reason, profitable denominations are handled by the central bank, while the unprofitable ones are done by the treasury. This might make some kind of accountancy sense.

Peter

[Pabitra]

My best guess is that for some reason, profitable denominations are handled by the central bank, while the unprofitable ones are done by the treasury. This might make some kind of accountancy sense.

Not really the first sentence but it is really the second part which is effective.
It has got everything to do with accountancy. The prudent financial policy dictates that what Govt. owns is its money and what it borrows from central bank, must be shown in a physically different form.
The current 5 Tk coins do not mention Bangladesh or show national symbol. They show Bangladesh Bank logo and indicate that as name of the authority.