Demonetization ideas

This refers to the letter ‘Demonetization’ (Mar 3) by Pir Shabbir Ahmad. I do not agree with the views expressed by the writer who opposed demonetisation and mentioned the example of the demonetisation policy of India. His fears are unfounded as there are plenty of ways to streamline the process. Initially, the State Bank of Pakistan (SBP) can quietly use up the Rs5,000 notes that are in circulation in the market and supply smaller denomination notes to banks. After a while, the government can formally announce the demonetisation of the Rs5,000 note. A 30-day period should be provided to people for the exchange of notes at banks. People who surrender Rs 5,000 notes should not be given cash over the bank counter. Instead, the amount should be deposited in their bank accounts. They can then withdraw the cash from the bank. If the 30-day period is insufficient, it can be increased for the convenience of depositors. In this way, businessmen and ordinary account holders will not face any difficulty.

Demonetisation, if carried out in an efficient manner will ensure the documentation of the economy and bring black money into the formal economy – and tax evaders into the tax net. It will discourage corruption and money laundering as the higher denomination notes usually promote wrong practices. In India, the demonetisation policy was announced all of sudden, and the government provided limited time to people to exchange currency notes. As a result, there were long queues in banks. Also, India is a large country and people had to travel miles to reach banks.

Arif Majeed

Karachi