NBE to move to 200 birr notes

(Reporter)The National Bank of Ethiopia (NBE) has commissioned a study to move to a higher currency denomination of 200 birr notes, abandoning the 100 birr notes as the highest legal tender in Ethiopia. According to sources close to the matter, decades-long tenure of the 100 birr note as the highest and most valuable legal tender in Ethiopia might not last for long. In the face of the runaway inflation in the economy, which spiked 39.2 percent last month, a currency with 100 birr note as its highest nomination could not sustain the volume of transaction in the economy, sources explained to The Reporter.

On the other hand, some of the banks that operate Automatic Teller Machines (ATMs) have been requesting the central bank, the only commissioned government entity to decide on currency nomination, to consider coining a currency of higher value. According to these banks, thus far, the maximum amount that an ATM customer can withdraw at a time is limited to below 4,000 birr for lack of larger notes. Hence, sources say that NBE is studying the matter at the moment.

Nevertheless, some of the economic professionals The Reporter talked to say that it is not only about facilitating banking operation. According to the professionals, the volume of transaction in the economy is expanding year-on-year, while the purchasing power of the birr in the local market, exhibited in the ever increasing inflation, goes down. “In terms of its value against other currencies, the birr is slipping consistently.”

According to monetary professionals, the financial system in Ethiopia, which is taking baby steps towards full automation just now, is another reason to consider a move to a larger bill. “Had the financial system been electronic-based instead of cash, the currency note and handling the currency would not have been an issue,” they argue. Nevertheless, according to last professionals, carrying around large amount of cash with 100 birr as its highest unit is becoming a tall order.

On the flip side, others also say that moving to higher currency value also has its risks. As the legal tender gains larger value notes forgery becomes attractive, they argue. “It is always profitable to forge 200 or 500 birr notes than those with lower value.”

Furthermore, source also disclosed that a currency between 1 and 5 birr notes are also up for consideration at bank, for reasons stated above.