May 27, 2006	Saturday	Rabi-us-Sani 28, 1427

KARACHI, May 26: The State Bank on Friday launched highest denomination currency note of Rs5,000 and a new bill of Rs10 with the announcement that all other notes would be replaced by the end of this year.

At a press conference SBP governor Dr Shamshad Akhtar faced a volley of hostile questions from media which insisted that issuance of Rs5,000-note reflected a sharp decline in the value of the rupee. The governor, however, did not agree with this impression.

“Printing of Rs5,000 notes is nothing to do with inflation. It does not reflect that prices have gone up,” said Dr Akhtar. She said it was an international practice that notes of higher denominations were printed to facilitate the people and the market.

In reply to a question that why SBP was printing notes of such big denominations when its policy was to encourage payments through cheques, e-banking and credit cards, she said: “Our market is still currency dominated. The Rs5,000 note will facilitate the market.”

The proposal to print Rs5000 note was approved by the cabinet in 2004. The SBP governor did not agree with the argument that the Rs5,000 has the same purchasing power as the Rs1,000 bill had in 1987.

This is interesting that most of the middle class will avoid taking notes of Rs5,000 as getting change of this will be extremely difficult. The lower middle and poor classes have little chance to use these notes. It seems that the notes would only be used by the elite and business class.

“But the State Bank has been emphasising to make payment through cheques,” said a trader who fears that the big note would increase rate of bribes in the system.

Financial analysts said that the printing of higher denomination note was a clear indication of eroding value of the rupee. However, the SBP governor said that the inflation had been coming down reflected from low consumer price index (CPI).

The second quarterly report of the SBP said that the inflation was coming down on year to year basis because of high base effect which means that the inflation was much higher last year.

The media was informed that banks had been told to facilitate the note holders. General public was advised to call SBP if they face problem in using the note.

The governor did not agree that getting change of even Rs1,000 note was difficult for general public; however, she assured that it would be further facilitated.

She said that all provinces would be represented in the pictures on notes of various denominations. Rs5,000 note shows Faysal Mosque of Islamabad. The new Rs10 note carries an image of Khayber Pass.

She said the security of all notes had been enhanced. Printing experts said eight identifications were present in the note of Rs5,000 while Rs10 had four special identifications. General public can easily differentiate between real and fake notes.