In recent years, the number of notes
in Pakistan has been increasing. In the financial year ended June 30, 2020,
there has been the largest increase in the currency of notes in the last eight
years. The number of notes has increased by 1.1 trillion in just one financial
year.
According to those tracking the
economic pace of Pakistan, this growth is unusual and also has a negative
impact on the economy.
He says that if the number of notes
has increased, it means that the government has replaced the old notes with new
ones. Apart from this, a large number of new notes have also been printed.
According to him, to balance the
supply and demand of the notes in the market, new notes are printed in general,
which leads to some growth. But the extraordinary growth means that a lot of
notes have been printed.
In the past year, the financial
results of 'Security Papers Limited', which makes note printing papers in
Pakistan, have also seen an increase. According to the financial results of the
company listed on the Pakistan Stock Exchange, its profit has increased by more
than 60% in the last financial year.
Remember that the increase in the
number of currency notes in circulation in Pakistan is being seen at such a
time. When the trend of e-commerce and digital transactions is also increasing,
especially online banking and digital transactions have increased after the
outbreak of Corona virus.
Currency increase in circulation on
an annual basis
The information of currency in
circulation in the last eight financial years is available on the website of
the Central Bank in Pakistan. According to him, the number of currencies in
circulation at the end of FY 2012 was 1.73 trillion which increased to 1.93
trillion the following year.
At the end of fiscal year 2014, the
number rose to 2.17 trillion, then the following year it reached 2.55 trillion.
In FY16, the number of currencies in
circulation increased even more and closed at 3.33 trillion.
The following year it increased to 3.91
trillion. At the end of FY 2018, the number reached 4.38 trillion and the
following year saw a huge increase, closing at a high of 4.95 trillion.
It saw an unusual increase in its
numbers in the last financial year 2020 when it closed at the level of 6.14.
According to Fareed Alam, Head of
Research, AKD Securities, the growth in the last financial year was the
highest.
He said that the present government
has increased twice as compared to the previous government. He said that the
government is printing more currency, due to which this growth is coming in
view.
Increase in currency in
circulation
In Pakistan, the increase in new
notes against old notes is seen at a time when the government is not borrowing
from the State Bank of Pakistan (central bank) under an agreement with the IMF.
And it will collect money from commercial banks through open market operations
to meet the budget deficit.
Remember that even before the
governments used to take loans from the State Bank, the State Bank used to
print this new currency to meet this need. But now due to the condition of the
IMF, the way to take money from the State Bank is closed.
In this regard, famous economist Dr.
Qaiser Bengali said that the huge increase in currency in circulation is a sign
that a large number of new currency has been printed. According to him, money
is not being taken from the State Bank, but not everything is transparent in
Pakistan.
He told that, "On the occasion
of the budget, we had raised the question why the number of new notes increased
when the loan from the State Bank has stopped."
He said that the government also
settled the matter by giving a vague answer. According to Qaisar Bengali, the
huge increase in the currency in circulation is evidence that currency notes
are being printed very fast.
Sana Taufiq, an economics analyst at
Arif Habib Securities, said in this regard that currency growth has been going
on for the last five or six years.
He said that this unusual trend of
growth occurred at a time when the government had increased the tax on
transactions through banks five years ago. And people started keeping cash
instead of depositing money in banks.
According to Sana, in the agreement
with the IMF during the current government's reign, the emphasis has been on
increasing taxes and revenue. And the government has also taken many steps in
this regard.
However, for this reason people have
resorted to cash hoarding instead of transactions through banks. This also
increased the demand for notes. Due to which the printing of notes also
increased.
Farid Alam said that borrowing money
from commercial banks is also causing printing of currency to some extent.
According to experts, the IMF has
banned the government from taking loans from the State Bank to cover the budget
deficit. But other expenses, such as the possibility of printing new notes in
relation to the relief package announced by the government during the corona
virus epidemic, cannot be ruled out.
How does printing of notes increase
inflation?
A large number of currency notes
increase inflation.
Analyst Sana Taufiq says that
printing more notes means more money is coming to people. This is increasing
their purchasing power and if they spend more money, then along with the prices
of things, inflation It also increases the rate.
She says that interest rates are
raised to control such inflation.
Dr. Qaisar Bengali said that
inflation has increased due to supply problems in the first two years of the
present government. However, with the huge increase in the prevailing currency,
there is a danger of an increase in inflation in terms of demand as well.
What are the negative effects of
increasing the number of notes?
Talking about the negative effects of
increase in the number of currency notes, analyst Sana Taufiq said that this
increase increases black marketing.
He said, "If a large number of
notes are being printed, it means that people are saving their money in the
form of cash instead of depositing it in the bank. It is called non-official or
black economy."
He said that smuggling and money
laundering also increase due to printing of currency notes in large numbers.
She says, "It means that people
are keeping money with them instead of banks and it is the same money that is
transferred illegally."
He said that a high currency note
becomes a means of cash hoarding and limits the money to a few hands.
