On November 8, Prime Minister Narendra Modi introduced Demonetisation in India. A decision to discontinue Rs. 500 and Rs. 1000 notes was taken so as to curb black money, decrease money laundering and increase the usage of the digital economy. Now Pakistan, a month after Demonetisation in India has issued the withdrawal of Rs. 5000 notes from circulation. As per Pakistan’s Government, this move hopes to put a stop to money laundering. Pakistan is ranked 117 among the 175 countries which has the highest corruption rate. The resolution was put forward by Senator Usman Saifullah, who is a member of the opposition, Pakistan People’s Party. He said the Rs. 5000 note is being used for illegal transactions and hence should be withdrawn from circulation.
Though the move was opposed by the ruling party, Pakistan Muslim League- Nawaz (PML-N) it was passed by the majority of the upper house of parliament, opposition members. The PPP endorsed that in order to reduce illicit money flow, encourage the use of digital economy and reduce counterfeited currency, the discontinuation was mandatory. The Law minister of Pakistan Zaid Hamid pointed out the issues of a cash crunch in India and said that the economy and masses would take a huge blow. He also said this might not be a wise move as in the absence of Rs. 5000 note, people would opt for corruption in foreign currency. Rs.5000 notes account for a total of 30% of money in circulation in Pakistan, which accounts to 3.43 trillion PKR
Hamid said that “Such a huge number of currency notes cannot be pulled from circulation without causing monetary crises. If such steps are taken, people will lose confidence in the Pakistani rupee and will instead prefer foreign currency due to the steep drop in supply of local currency notes.”
For this, the Senator suggested that there must be no printing of Rs. 5000 notes in future and be completely withdrawn after 3-5 years. The highest denomination notes are generally the ones that play the biggest part in Money laundering.
Though Pakistan was under pressure to withdraw Rs. 5000 notes, they had doubts as a phased demonetisation would give a lot of time and sources for the exchange of black money and to buy property or gold.
