Pakistan to Demonetize Rs 5000 Banknote

[Bimat]

Pakistan senate adopts resolution to withdraw Rs 5000 banknotes

Omer Farooq Khan | TNN | Dec 19, 2016, 10.11 PM IST

ISLAMABAD: Pakistan's Senate on Monday passed a resolution seeking withdrawal of high denomination Rs 5,000 currency notes from circulation to halt illicit money flows and money laundering.

Senator Usman Saifullah of opposition Pakistan Peoples Party (PPP) tabled the resolution, arguing that the Rs 5000 note was being used in illegal transactions and should be withdrawn.

The move was strongly opposed by the Pakistan Muslim League-Nawaz (PML-N) government but since the PPP has a majority in the upper house of parliament, the resolution was endorsed without any hindrance.

It called on the government to demonetise the highest denomination currency note "in order to reduce illicit money flow, encourage the use of bank accounts and reduce the size of undocumented economy".

Opposing the resolution, Law Minister, Zahid Hamid, said that the move would have repercussions on the economy and the masses in general, as is happening in neighbouring India. He said that around 3.43 trillion Rs 5,000 banknotes were currently in circulation in Pakistan. He said that about 30 percent of the total currency in circulation comprises of these high denomination notes.

"Such a huge number of currency notes cannot be pulled from circulation without causing a monetary crises. If such steps are taken, people will lose confidence in the Pakistani Rupee and will instead prefer foreign currency due to the steep drop in supply of local currency notes," the minister said.

At this, Senator Saifullah said the Rs 5000 currency note shouldn't be withdrawn at once from circulation as was done in India, but its printing should be halted and withdrawal should take place in a time span of three to five years. The PPP senator said that most illegal transactions are carried out using the Rs 5,000 note.

Ever since the Indian government ended high denomination currency notes by pulling out 500 and 1,000 Indian rupees notes from circulation, it was frequently discussed in Pakistan that such steps could help in revealing hidden assets and prevent tax evasion.

Source: Times of India

[Figleaf]

It looks like the headline of the story is more accurate than the title of this thread...

Peter

[Bimat]

It looks like the headline of the story is more accurate than the title of this thread...

Peter

Yes...but since parliament has already adopted the resolution, it seems that it will only be a formality to demonetize them. It may be noted that Pakistan successfully demonetized its old series of banknotes recently (and most importantly, without any inconvenience to people ) It was going on for almost two years and implemented quite well.

Aditya

[dheer]

Yes...but since parliament has already adopted the resolution, it seems that it will only be a formality to demonetize them. It may be noted that Pakistan successfully demonetized its old series of banknotes recently (and most importantly, without any inconvenience to people ) It was going on for almost two years and implemented quite well.

Aditya

Sorry only the Senate [Upper House] has passed the bill and it would then go to National Assembly [lower house]. If passed, then it would be become a law. In the National Assembly PML has majority.

Further circulation of currency notes can be deemed as Money Bill and can unilaterally be passed by National Assembly.

[zwiggy]

I assume a typo/misquote since 3.43 trillion 5000 notes equate to 164 trillion US dollars, making Pakistans economy larger than the US. If that is 30% of the cash (accorigong to the minister), it would give an unlikely 550 trillion US dollarsof cash....

[dheer]

I assume a typo/misquote since 3.43 trillion 5000 notes equate to 164 trillion US dollars, making Pakistans economy larger than the US. If that is 30% of the cash (accorigong to the minister), it would give an unlikely 550 trillion US dollarsof cash....

It's a wording issue; value of 3.43 trillion PKR held as Rs 5000 denomination notes.

[Bimat]

Sorry only the Senate [Upper House] has passed the bill and it would then go to National Assembly [lower house]. If passed, then it would be become a law. In the National Assembly PML has majority.

Further circulation of currency notes can be deemed as Money Bill and can unilaterally be passed by National Assembly.

I do not think parliament can actually prevent the government/central bank from demonetizing the currency (or even force demonetization), just as in India. It's up to government to decide and implement. In case of Pakistan however, military can play a major role...

Aditya

[dheer]

In case of Pakistan however, military can play a major role...

Aditya

are you sure you wanted to use "can".

[Bimat]

are you sure you wanted to use "can".

I was just trying to be diplomatic.

Aditya

[Bimat]

Rs5,000 note not being withdrawn, says govt

KALBE ALI — PUBLISHED about 3 hours ago

ISLAMABAD: The ministry of finance has made it clear that there are no government plans to withdraw the highest value currency note of the country and that reports about demonetisation of the Rs5,000 currency note are false.

"Given the continuing use of cash in transactions, government believes that discontinuation of Rs5,000 note would adversely affect the efficiency of exchange in the business," a statement issued by the ministry said on Monday.

It said the government had neither taken such a decision nor was there any justification for the discontinuation of the Rs5,000 note.

The statement said that the printing of the Rs5,000 note was significantly small as compared to those of major currencies, such as US $100, 200 euros and 50 pound sterling banknotes. During 2015-16, only 17 per cent of the notes printed were that of Rs5,000 denomination.

The ministry has noted that the rumour circulating in some sections of society about the demonetisation of Rs5,000 currency was a source of discomfort and anxiety for people, especially members of the business community.

The finance ministry's statement said that the upcoming 'National Financial Inclusion Strategy' being pursued with the State Bank of Pakistan would significantly reduce the dependence on currency.

The strategy encompasses digital transactions and branchless banking through mobile phones and other internet modes.

"This is the way to move forward for promoting documentation in the economy rather than by cancelling any existing denomination," the statement added.

Meanwhile, Chairman of Senate Standing Committee on Finance Saleem Mandviwalla said in a statement that there was no reality in reports about demonetisation of Rs5,000 currency note. He said the government was neither going to ban the highest value currency note of the country nor had any future plan to do so.

He said withdrawing Rs5,000 note would have a negative impact on the economy. Such a move would have its own pros and cons, he said, adding that any such proposal would be approved with the consultation of all stakeholders.

He, however, made it clear that there was no consideration on the demonetisation of Rs5,000 note at the moment.

He said people, especially members of the business community, should not get into a panic on false rumours.

Published in Dawn December 27th, 2016

Source: Dawn