Pakistan's central bank, grappling with the challenge of counterfeit currencies, has announced plans to introduce new currency notes equipped with advanced international security features. The new notes will gradually replace the existing currency, with a focus on minimising disruption and avoiding public panic, according to the Governor of the State Bank of Pakistan Jameel Ahmed.
Ahmed revealed that the enhanced notes would incorporate distinct security numbers and designs, aligning
Pakistan's currency with modern standards.
While the primary goal is to enhance security, there are speculations among financial experts about the possibility of demonetisation of the ₹5,000 or higher denomination notes as a measure to combat the black money market. The circulation of higher denomination notes has facilitated the illegal use of black money, impacting Pakistan's already cash-strapped economy.
Sohail Farooq of Capital Investment acknowledged the positive step taken by the central bank to ensure the integrity of Pakistan's monetary system. However, the question of whether demonetisation will be included in the currency transition remains uncertain.
"Cash-strapped Pakistan’s economy is influenced a lot by the illegal use of black money which is easier due to the circulation of higher denomination notes. It is the right step to ensure the integrity of Pakistan’s monetary system but will this include demonetisation has to be seen," said Farooq.
Another banker said the central bank must just ensure there is no inconvenience to the public and businesses during the implementation of the new currency.
Notably, the inflation rate in Pakistan rose for the second consecutive month in December, driven by IMF-backed energy cost hikes and a weakened currency. The Pakistani rupee depreciated by approximately 24% against the dollar in 2023.
Governor Ahmad acknowledged that inflation remains elevated, and while a decline is expected in January, substantial relief may only be seen after March. The central bank revised its average inflation forecast to 23%-25% for the fiscal year ending June, adjusting from the earlier estimate of 20%-22%. Projected economic growth stands at 2%-3%, aligning with the IMF's estimate of 2.5%.
