The State Bank of Pakistan (SBP) has revealed its intention to introduce fresh currency notes incorporating upgraded international security features. Mr. Jameel Ahmad, the governor of the central bank, mentioned that the forthcoming notes will feature new serial numbers, designs, and advanced security elements.
The State Bank of Pakistan (SBP) has affirmed its intention to introduce new currency notes with international security features shortly, emphasizing that the transition will not cause any disruption.
The central bank’s governor stated that the new notes will incorporate an international security feature, containing new serial numbers, drawings, and enhanced security characteristics. He mentioned that the design framework for the new notes had already commenced, expressing hope that it would be finalized by March 2024.
“However, we will not undergo a note change similar to India”, said SBP Governor Ahmad, referencing a move that had reverberated through one of the world’s most populous nations during its demonetization in 2016. Mr. Jamil Ahmed also emphasized that the transition would be gradual, aiming to avoid disruptions and public panic issues, as seen in some other countries in the past.
Following India’s demonetization a few years ago, massive social unrest arose, and its quarterly GDP experienced a one-time decline. However, after this event, India has sustained growth at high single-digit levels, with a notable shift towards digital payments. This transition has resulted in subdued inflation and mid-single-digit interest rates, fostering economic expansion.
In a press statement released by SBP, the central bank stated that introducing new banknotes every 15 to 20 years for security reasons is a well-established protocol.
As an integral step in the initial design phase, the SBP is hosting an art competition to solicit creative and thematic design concepts for the upcoming banknote series.
The central bank stated that local artists, designers, and art students are eligible to participate in the art competition, emphasizing that submissions can explore themes such as social and cultural identities, diversity, climate change and environmental protection, economic development, natural landscapes, architectural heritage, and national symbols.
Design submissions are open until March 11, following which a jury comprising esteemed artists will evaluate and recommend six designs for each denomination.
The designs will undergo evaluation by professional banknote designers, who will then recommend six designs for each denomination to the SBP. The SBP will subsequently make the final selection of three designs. These final designs will be forwarded to the federal government for approval.
The designers of the top three designs for each denomination will receive prizes of PKR 1 million, PKR 500,000, and PKR 300,000, respectively.
Sources familiar with the matter informed EAT News that the central bank is contemplating this action in response to complaints regarding the prevalence of counterfeit currency notes in circulation.
Mr. Khurram Shehzad, CEO of the Alpha Beta Core financial advisory firm, expressed that it would be premature to evaluate the SBP’s decision currently. However, he characterized the introduction of currency notes with new security features as a “positive development”. Commenting on the notion that the introduction of new currency notes would alleviate the issue of black money, Shehzad emphasized that this goal couldn’t be appreciated unless solid and concrete steps are taken to “nullify” or at least diminish the presence of higher denomination currency notes in circulation.
Emphasizing the importance of evaluating the cash hoarders held by individuals, the financial expert highlighted that amid rising inflation, the public tends to convert cash into alternative assets like property, vehicles, gold, and foreign currencies. “It’s essential to evaluate the rationale behind discontinuing higher denomination currency notes like the PKR 5,000”, Mr. Khuram Shahzad stated. “Similar actions in countries like India and others undergoing demonetization have not yielded significant success”, the expert added. “It remains to be seen how the central bank proceeds, whether by discontinuing higher value currency notes (PKR 5000) or simply introducing new ones”, he remarked. In response to a query regarding the economic impacts, Mr. Khuram Schehzad emphasized the necessity for the SBP to curb the printing of currency notes, as it serves as a pivotal driver behind the escalating inflation.
Economic experts suggest that Pakistan’s cash-strapped economy is significantly influenced by the unlawful use of black money, facilitated by the circulation of higher denomination notes.
“It’s a positive move to safeguard the integrity of Pakistan’s monetary system, but whether this will involve demonetization remains to be seen”, stated Sohail Farooq, the chief executive of Capital Investment. He confirmed the central bank’s concern over the increasing use of counterfeit and forged currency notes in the market. “If new currency notes are circulated, it will enhance reliability in circulation and instill confidence among businesses”, Mr. Sohail remarked.
Another banker stressed that the central bank’s foremost responsibility should be to ensure that the public and businesses face no inconvenience during the implementation of the new currency.
This initiative to introduce new currency notes in Pakistan is aimed at enhancing trust in the country’s monetary system and boosting confidence among both businesses and citizens. The gradual replacement of old currency notes with new ones is a common practice to ensure a smooth transition and minimize disruption in the economy.
According to reports from the local media, the State Bank of Pakistan (SBP) has been rolling out new banknote series since 2005, starting with the Rs 20 denomination and subsequently introducing new denominations such as Rs 50, Rs 100, Rs 500, Rs 1000, and Rs 5000. This phased approach allows for the orderly replacement of currency in circulation, ensuring that the public has sufficient time to exchange old notes for new ones.
By introducing updated currency notes, the SBP aims to modernize the monetary system, incorporate security features to deter counterfeiting and improve the overall integrity of Pakistan’s currency. This move is crucial for maintaining stability in the financial sector and fostering trust in the country’s economy.
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