THIS refers to the letter ‘Demonetisation’ (March 8) which has opposed the idea of demonetisation of higher denomination note by quoting the example of what happened in India. However, the fear is totally unfounded as there are plenty of ways to make the process workable and easy.

In Pakistan, just over 20 per cent of the population maintains bank account, with majority of them being small depositors. Initially, the State Bank of Pakistan (SBP) can quietly and confidentially start mopping up a portion of Rs5,000 notes in circulation in the market by printing and supplying notes of smaller denomination to banks as its replacement.

After a while, the government can formally announce demonetisation of Rs5,000 note. Adequate window, say a 30-day period, should be provided to the public for its exchange at the banks. Persons surrendering Rs5,000 notes should not be given cash over the bank counter, but the amount be deposited in their respective bank accounts.

They can then withdraw the cash from the bank in the usual way. If the timeframe of 30 days is considered insufficient, it can be increased. Genuine businessmen and ordinary account holders will not face any difficulty.

Demonetisation in the above manner will ensure documentation of the economy, bringing black money into the formal economy and the tax-evaders into the tax net. It will discourage corruption and money laundering as the higher denomination notes facilitate wrong practices.

Regarding India’s adverse experience, it was due to the fact that the demonetisation was announced suddenly and limited timeframe was provided for its exchange at the banks. Hence, there were long queues at the banks. Besides, India is a large country and people had to travel miles to get to the banks.

As regards the incurrence of extra cost on printing smaller denomination notes, the justification is frivolous. If extra cost is a real concern, the government would be better off printing notes of Rs10,000 or even higher denomination to save the printing cost. The demonetisation will clean up the system and yield huge benefits for the nation.

Arif Majeed
Karachi

Published in Dawn, March 14th, 2021