Rs 153.75 billion currency notes printed in fiscal year 2010: Hafeez tells National Assembly

Minister for Finance, Revenue and Planning and Development Dr Abdul Hafeez Sheikh on Monday told the National Assembly that currency notes valuing Rs 153.750 billion were printed during FY10. In a written reply to a question, he said that banknotes printing order is placed with Pakistan Security Printing Corporation (PSPC) annually on the basis of expected demand for meeting the requirement of public/banks.
He said there is no quota specified for printing of banknotes. As per section 24(1) of SBP Act, 1956 SBP has sole right to issue banknotes. "The issuing of currency notes results in increased currency in circulation and reduced financial intermediation. During FY11 so far, the currency in circulation has increased by Rs 263 billion, showing a year on year growth of 19 percent as on February 15, 2011 from June 30, 2010. While, the currency deposit ratio has increased to 33 as on February 4, 2011 from June 29, 2010.
The prime reason for the increase in currency in circulation is heavy government borrowings from the SBP for budgetary support. The government borrowing from the SBP essentially means creation of new money and besides being inflationary," he said.
He added that the declining government reliance on the SBP for financing of fiscal deficit since mid-December 2010 is likely to continue as an understanding between the SBP and the government to restrict such borrowings at the end-September level. This is expected to help in restraining the printing of new notes and to reduce the currency in circulation, he said.