EVERY Eid, the State Bank of Pakistan issues fresh notes. This creates a demand and supply imbalance of money because this issuance is not backed by gold or foreign exchange reserves.
The issuance of fresh currency notes is a crucial part of monetary policy which requires the backing of reserves to keep the economy stable. For Eid, the issuance is not routed through this process and results in a serious disequilibrium leading to inflation.
Another downside of fresh currency notes on Eid is that bankers face unreasonable demands from account holders for fresh currency notes. In some cases, the bank branch staff has no option except purchase bundles of fresh currency notes from the black market to meet customers’ wishes. This has created a black market where fresh currency is sold at very high rates with the advent of Ramazan.
The State Bank has taken a number of initiatives to tackle the matter but failed to address the issue.The SBP and federal government need to revisit and permanently resolve this matter.
Muhmmad Anus Khan
Published in Dawn, July 8th, 2017