Governor of the Bank of Guyana Lawrence Williams has said that the bank will be seeking to ensure that the new $5,000 currency note shortly to be introduced lessens consumer dependency on the $1,000 note thereby reducing the risk of inflation in the economy.
Government’s announc-ed intention to introduce the higher denomination currency note has led to concerns in some quarters that the move might lead to higher inflation. But Williams says that “introducing higher denomination will only lead to higher inflation if it increases money in circulation such that there is an excess supply of money.” He added, “if the bank ensures that the new denomination replaces some of the dependency on the $1,000 notes such that money supply does not increase beyond normal trends, then there is no reason to expect that the introduction of higher denomination will lead to higher inflation.”
In a paper delivered at a July 25 banking and investment seminar hosted by the Georgetown Chamber of Commerce and Industry, Williams said that enhancing the efficiency of the country’s currency structure apart, a higher denomination currency notes is anticipated to yield other significant benefits.
He cited the realization of significant savings in banknote printing and processing costs, which he said had been on an “upward trajectory” until last year. The central bank governor also noted that the introduction of the new $5,000 currency denomination was expected to lead to “significant reduction in the wear and tear on currency sorting equipment” and greater care of the new notes, which “should translate into longer life and reduced frequency of replacement leading to further cost savings.”
While Williams’ presentation sought to allay fears that the new currency note was likely to trigger an inflationary trend in the economy, he said nonetheless that the move was not without attendant “concerns”. According to Williams, while the new $5,000 denomination would make large-value transactions more efficient, “higher denomination notes could inadvertently facilitate illegal transactions (money laundering, drug trafficking, tax evasion and counterfeiting) by making them more efficient as well. Counterfeiters, in particular, may be willing to take the risk in the face of higher potential rewards.” Williams noted that while the concern that criminal elements might move to take advantage of the introduction of a higher currency note is understandable. “It does not defeat the argument that the currency structure should line up with the needs of the people for transaction purposes. The general public should not be held hostage by a criminal minority and the currency structure should be allowed to adjust in line with the country’s development.”
Williams said that the central bank will be moving to thwart the efforts of counterfeiters by ensuring that higher denomination banknotes are incorporated with enhanced visual and machine-readable security features designed to prevent counterfeiting.
