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Switching currencies will be costly, says economist

PETALING JAYA: A think tank has warned of the high cost of changing the Malaysian currency as a means of fighting corruption, saying going cashless would be a better idea.

Commenting on the prime minister’s recent statement that the government was considering the two options, economist Adli Amirullah of the Institute for Democracy and Economic Affairs said expenses would be incurred not only in the minting of new notes but also in the work involved in disposing of the old currency.

He also said switching currencies might be unproductive if the latest technology were not used to ensure that the new notes incorporate features to frustrate money launderers.

He told FMT he believed Malaysia should move towards becoming a cashless society as it would befit a country aspiring to become a developed nation.

He said going cashless would increase the efficiency of transactions and help in the fight against corruption, and he urged the government to prepare the infrastructure appropriate to a cashless society.

Last year, Permodalan Nasional Berhad chairman Abdul Wahid Omar said requiring large transactions to be done electronically could help reduce corruption because of the audit trail they would leave.

Malaysian Anti-Corruption Commission (MACC) adviser Ramon Navaratnam also spoke to FMT about the idea of changing currencies. He said it would be only one of many possible ways of fighting corruption.

He said the government could also opt to scrap large denominations of the ringgit, like was done in 1999, when RM1,000 and RM500 notes were taken out of circulation.

However, he added, a more effective and simpler way of checking corruption would be to monitor people seeming to live beyond their means.

“But above all,” he said, “there must be political will and the MACC must be allowed to carry out its duties independently. Don’t go after the big fish in the opposition only, but also those in power.”

In 2016, the Indian government demonetised the 500 and 1,000 rupee notes, which constituted 86% of cash in circulation in India.

According to a CNN report, the Reserve Bank of India had to rush new, smaller sized 500 and 2,000 rupee notes to banks and ATMs, about 200,000 of which needed to be refitted to dispense the new bills.

Chaotic scenes reportedly became routine with many people waiting for hours in line to exchange their old notes for new ones.

Three weeks before the deadline to deposit the old cash, about 87% of the old notes had been returned. Critics of the move said only a small amount of the country’s untaxed income was in cash and that the currency change brought more inconvenience than benefits.

First published in,  June 29, 2018.

2018-08-01T13:43:58+00:00 29th June 2018|News|Comments Off on Switching currencies will be costly, says economist