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WorldEuropeWith inflation... Why doesn't Egypt issue banknotes over 200 pounds?

With inflation… Why doesn’t Egypt issue banknotes over 200 pounds?

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This issue is not considered new or specific to the Egyptian case, as there are many markets that have experienced the same situation, some of which have seen the supply of papers with higher denominations, and some of which have remained the same.

However, this question brings us to the real reasons for the refusal of a number of countries to issue currency denominations at a higher denomination, and some countries have even canceled their high denomination banknotes.

The fight against crime

This element tops the list of reasons adopted by countries that reject high-denomination banknotes. The existence of such banknotes makes it easier for criminals to transfer large sums of money from point A to point B. For example, the weight of a single banknote, regardless of its dimensions, is one gram, so the weight of a million of a certain 500 note per note is 2 kilograms, but with a 50 note its weight becomes 20 kilograms.

Not to mention space, valuable papers make the process of storing them easier, so who of us hasn’t seen the photo released by Mexican authorities in 2007 of a large room with very huge piles of dollars stacked on top of each other on the ground, some imagined it to be billions, and in fact it was just $207 million.

For this reason, voices have been raised to demand the abolition of the hundred dollar bill. This newspaper is very important for drug traffickers, so it has a special price premium, ranging from 3 to 20% compared to the price dollars on the black market. The borders between Mexico and the United States witness the secret transfer of some 20 to 30 billion dollars each year, derived from the proceeds of drug trafficking.

But the fact that the dollar is the currency of the world, and is used as a unit of account and as a medium of exchange in many countries of the world, where hundred-dollar paper is widely used, so it is not surprising that the unit of one hundred dollars represents more than 85% of the banknotes printed in dollars. Therefore, the abolition of the 100 dollars could threaten the global position of the dollar as an international currency.

Ali Al-Hamoudi, CEO and Chief Investment Officer at ATA Global Horizons, told in exclusive statements to business website Sky News Arabia that facilitating tax evasion and money laundering are among the reasons countries avoid to issue high-value securities, prompting the European Central Bank to cancel a 500 euro note in 2018, due to the ease of carrying out cash transactions that facilitate tax evasion, such as payment a cash portion of transactions to make the taxable value appear lower, in addition to the ease of transferring money within a borderless economic area such as the European Union.

Not for home use

Added to the reasons that lead some countries not to issue high value papers is the lack of use by individuals of these papers: very few people used the 500 euro note before it was abolished, and this paper constituted a third of the total currencies in circulation in the region, says Ali Al-Hamoudi, “Larger banknotes, uncommon above 100 or 200 in most developed economies, in the United Kingdom for example, banknotes of £50 are not very common.

“Not many people use cash these days, and it’s very unusual for legitimate transactions over £100 to be made in cash,” he adds.

A survey by the Swiss Bank of Bern showed that more than half of respondents had never encountered a €500 note, it said, and almost half had never had a €200 note. euros in their possession.

Generally speaking, countries now want to push towards digital financial transactions, to facilitate tracking and inventory, and to reduce fraud and tax evasion.

The upper classes are present

But there are countries that already have high value banknotes, so are they wrong?

“Some countries that have faced massive devaluations of their currencies, and their economies are facing what is called hyperinflation, have no choice but to print more valuable currency in order to facilitate basic uses for their citizens,” Al-Hamoudi said.

As proponents of high denominations point out, many people use these denominations as a store of value rather than to exchange them, and some collect cash in safes and personal safes, especially in times of uncertainty, and these are not necessarily the criminals.

The Swiss Central Bank said in a report: “The high percentage of high-value cash denominations indicates that their use is not limited to a means of payment, but rather a store of value to a large extent.”

In turn, the Zurich police said, in a report published in mid-2013, that they had not noticed that criminals were using high-value cash denominations, and that drug dealers often use cash of a lower value, due to the rapidity of their elimination. , and that the 200 franc note is in fact the highest seized in terms of crimes.

“We only come across 1,000 franc coins, in the so-called ‘retired’ scams, which are extremely rare,” the report adds.

There are economies in the world that have banknotes in high denominations, such as the Singapore dollar in the 10 thousand category and the Brunei dollar in the 10 thousand category, and in Arab countries there are the Emirati dirham in the category of one thousand dirhams.

But historically, the global economy has had a paper that is considered the highest in number one even though its value was low. In 2009, the Central Bank of Zimbabwe introduced a 100 trillion Zimbabwean dollar banknote, the equivalent of around $33 on the black market, in an attempt to alleviate the severe liquidity shortage.

Read the Latest World News Today on The Eastern Herald.

Copyright © 2023 The Eastern Herald.

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Arab Desk
Arab Desk
The Eastern Herald’s Arab Desk validates the stories published under this byline. That includes editorials, news stories, letters to the editor, and multimedia features on easternherald.com.

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