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| Sunday, 25 December 2005 |
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CB explains necessity of printing high denomination notes The Central Bank of Sri Lanka (CBSL) is the sole authority to issue currency notes under section 49 of the Monetary Law Act (MLA). Accordingly, CBSL should supply currency to meet the demand from the public, banks and the Government for their transaction and investment purposes. With the increase of economic activity in the country, the value of transactions increase and that requires an increased amount of currency as well as higher denomination notes. It is necessary to issue higher denomination currency corresponding to the increase in Gross Domestic Product (GDP) of the country. When the GDP was at Rs. 85,005 mn in 1981, CBSL issued its first high denomination note of Rs. 1,000 to facilitate transaction demand generated by the GDP. By the year 2000, the GDP rose to Rs. 1,257,636 mn and the need for another higher denomination note was felt to facilitate enhanced transactions. The need for a higher denomination currency note is increasingly felt today since GDP has risen to a still higher level of Rs. 2,029,411 mn in 2004. High denomination currency will enable banks and financial institutions to facilitate large value cash transactions and ATM network operations. CBSL needs to ensure the convenience and security of currency issued by it as public at large carry currency notes and coins for their transactions. Moreover, in recent times, high incidents of reported counterfeits have compelled the CBSL to enhance security features of the existing high denomination currency notes and the once to be issued in the future. The cost effectiveness of printing currency notes is an important factor in currency management. The printing cost of notes has been increasing over the last several years. The CBSL considered it beneficial and cost effective to issue higher denomination notes instead of several lower denominations. It is also important to note that currency printing is a specialized operation which requires careful designing, inclusion of security features and obtaining a feed back from the general public as to the acceptance of the design and security features. The work relating to the printing of the note took a considerable length of time and CBSL has worked on it during 2000-2004. The printing process took about 10 months and the note was ready early November 2005. Usually, CBSL keeps currency notes stocks sufficient for 12-18 months. By the time the higher denomination Rs. 2,000 note was printed, there were adequate stocks to cater to the demands and, therefore, the CBSL did not issue the new note of Rs. 2,000. The CBSL wishes to emphasise that the decision to print a higher
denomination note was taken in year 2000 and the process was completed in
2005 in a transparent manner with all necessary approvals from the Monetary
Board and the former Minister of finance as stipulated in the MLA. |
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