An updated K5000 note will enter circulation on October 1 in a bid to fight counterfeiting, but authorities say they are being careful to make sure the move will not upset the money supply and lead to inflation.
The plan is to gradually introduce the new note, which appears similar to the existing red–coloured white elephant note except it includes a watermark elephant, a security thread and a layer of varnish on both sides.
The Central Bank of Myanmar is introducing the note in a bid to prevent counterfeiting, though the existing K5000 note will continue to be legal tender.
A Central Bank official said the amount of new notes being printed is confidential, “but the main purpose is to prevent harm [from counterfeits] when citizens withdraw money”.
The government has attempted to head off any problems from introducing the revamped K5000 note in part by devoting half of the front page of the September 19 New Light of Myanmar to announcing the new bill.
High denomination notes are particularly likely to be counterfeit, the Central Bank’s website said. It added that steps to discover a forgery include checking to see if the suspect note is too smooth, or has no security thread or watermark. The Central Bank also claims there are relatively few counterfeit notes in circulation in Myanmar.
U Thaw Zay Ya, general manager at Kanbawza Bank’s Botahtaung branch, said counterfeit notes often end up at the bank, where they are demolished by punching holes in the note, as long as the customer agrees.
“We discuss the problems of counterfeiting with the customer first and tell them it can’t enter the market,” he said. “The customer is responsible if they don’t accept our advice.”
The Myanmar economy is still largely cash-based, and there is a widespread problem of having old, worn–out notes accepted. Though the Central Bank’s policy is that banks must accept worn-out but genuine notes, it is not universally adhered to.
U Thaw Zay Ya said it can be difficult accepting larger denomination K5000 and K10,000 notes if they are hard to reissue. It also becomes more difficult to tell counterfeit and genuine notes apart as they get older – though even newer bills can still be counterfeit.
“Even the US has to update its notes [due to counterfeiting],” he said.
Still, introducing new bills to make counterfeiting more difficult comes with its own set of perils.
Experts say Myanmar has mishandled some previous currency schemes, including two large-scale demonetisations of existing currency and introduction of bills with odd face values like K45 and K90 in the 1980s. Excessive money printing has also been blamed for high inflation rates in the past, though the Central Bank official said it is keen to avoid repeating this mistake.
Whether the new notes will lead to inflation depends on how they are introduced, said economist U Khine Htun.
If the new K5000 notes are used to replace old notes in a one–for–one exchange, or if the total new money supply is less than the rate of GDP growth, it should not result in undue inflation.
“But if it’s not done this way, printing new money will be the primary reason for inflation,” he said.
Inflation has been on the government’s radar. U Kan Zaw, minister of national planning and economic development, said last month that it is something the government seeks to address, partly through its efforts to ease trade flows and production.
The Asian Development Bank said it estimates inflation at 6.6 percent in 2014, to rise to 6.9pc next year. It anticipates GDP growth at 7.8pc for both 2014 and 2015, according to its website.
Source: MYANMAR TIMES