Pakistan to Introduce New Currency Notes with International Security Features

The State Bank of Pakistan (SBP) has announced plans to introduce new currency notes with international security features. The move is seen as a positive development by financial experts, with the new notes expected to have a fresh design and serial numbers. The decision comes in response to complaints about the circulation of counterfeit banknotes.

SBP Governor Ahmad has confirmed that the new notes will be printed with an international security feature, and will have new serial numbers, designs, and high-security features. The framework for the design of the new notes has already begun, and it is hoped that it will be finalised by March. However, the governor was quick to clarify that this would not be a disruptive switchover like the demonetisation that took place in India in 2016.

When India demonetised its currency a few years ago, it led to significant social unrest and a one-time hit to its quarterly GDP. However, since then, the country has continued to grow at high single-digit levels, with payments largely shifting to digital mediums. This has resulted in muted inflation and mid-single-digit interest rates that spur economic growth.

Sources familiar with the matter stated 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, has 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”.

Schehzad also commented on the narrative that the introduction of new currency notes would address the issue of black money. He 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. He stressed the need to assess the cash hoarded by the people, noting that the public, amid increased inflation, prefers to convert the cash into other forms such as property, cars, gold, and foreign currencies.

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

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