After India’s flop, Pakistan rejects proposal to scrap the 5,000-rupee banknote
The Senate proposed eliminating the banknote to stem the circulation of illegal money. The Finance Ministry stopped the move. India’s failure prompted the government to focus on digital banking instead of abolishing cash.
Islamabad (AsiaNews) – The Pakistani government has rejected a proposal to scrap the 5,000-rupee banknote (about US$ 50).
The Pakistani Senate had recommended the change in an attempt to stem the circulation of illegal money and reduce the shadow economy.
However, given the disastrous results of a similar proposal in India – where the surprise elimination of the 500 and 1,000 rupee banknotes had a devastating impact on the population – the Pakistani Finance Ministry ruled out demonetisation.
"Given the continuing use of cash in transactions, the government believes that discontinuation of the 5,000-rupee note would adversely affect the efficiency of exchange in business," the ministry said in a statement.
Pakistan's Senate passed a nonbinding resolution this month calling for the government to follow India to "reduce illicit money flow, encourage the use of bank accounts and reduce the size of the undocumented economy."
But the finance ministry ruled out such a demonetisation, saying it would hurt business.
The controversial banknotes are the most used (as are 500- to 1,000-rupee banknotes in India).
During the last financial year, 17 percent of currency notes printed were of the 5,000 denomination.
Like India, Pakistan has a huge agricultural sector, and transactions are often handled in cash, partly because much of the population does not have bank accounts.
The government frequently offers tax amnesties to encourage people with hidden wealth to declare assets and enter the banking system, hoping to expand an extremely narrow tax base.
But after Delhi’s failed to move to a cashless economy, Pakistan’s Finance Ministry plans to encourage digital banking to "reduce the dependence on currency” without “cancelling any existing denomination”.
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