It seems the voice of the people has reached the members of the government. Ever since the Indian government ended high denomination currency notes and replaced them with new ones, it became common knowledge that such steps could help in revealing hidden assets and hinder tax evasion.
The Senate has passed a resolution on Monday calling the administration to withdraw the high denomination Rs. 5,000 notes from circulation.
The resolution was moved by Senator Osman Saifullah Khan of the opposition Pakistan People Party. The move was strongly opposed by the PMLN government but since the PPP has a majority in the Senate, the resolution was passed.
The resolution called on the government to demonetise the highest denomination currency note “in order to reduce illicit money flow, encourage the use of bank accounts and reduce the size of undocumented economy”.
According to the Osman Saifullah, most illegal transactions are carried out using the Rs. 5,000 note. However, the Senator said that the government should use the same method which was employed by the Indian government, which led to great distress and caused several problems for the general public.
The Senator suggest that the government should stop printing the Rs. 5,000 currency note and then gradually phase out the note from circulation in 3 to 5 years’ time.
Federal Minister for Law and Justice Senator Zahid Hamid led the government backed opposition against the resolution. He said that around 3.43 trillion Rs. 5,000 bank notes were currently in circulation in Pakistan. According to him, about 30 percent of the total currency in circulation comprises of these high denomination notes.
The minister said that such a huge number of currency notes cannot be pulled from circulation without causing a monetary crises. He said that 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.
It is still to be seen whether how the government goes about in handling this resolution and whether it will have any benefits at all since demonetising the currency note over such a long time will have no effect with regards to the aforementioned intentions of Senator Osman. The culprits could avoid returning the notes to the banks by finding workarounds if the time duration is indeed so long.