Pak, Zimbabwe, Australia: Countries that Demonetised Like India
India is not the only country to have demonetised. It’s not even the first time India has done so.
Demonetisation has been the buzzword to ‘trump them all’ since Prime Minister Narendra Modi announced that Rs 500 and Rs 1,000 bank notes will no longer be legal tender starting 9 November. There’s a lot of support for the decision and just as many questions raised about how effective the move will actually be in fighting black money. But just to get some perspective, India’s not the only country to have demonetised. It’s not even the first time India has done so. Here’s a list of demonetisation efforts that have taken place across the world.
The country planned to switch completely to using the US dollar by the end of September 2015. Till June of this year, nine countries counted as legal tender in the country, though the maximum transactions take place in US dollars.
Soviet Union
In 1991, the country invalidated about a third of its money in circulation by scrapping 50 and 100 ruble notes. The reform, targeted at taking on the black economy, failed to stop inflation and led to a drop in public confidence in the government.
North Korea
In 2010, the Kim Jong-Il government put in place a reform that took two zeros off the face value of the country’s old currency. This was an attempt to tighten control of the economy and halt black markets, but it left the country with severe food shortages because of a poor harvest.
Zaire
In the early 1990s, banknote reforms led to inflation surges and a collapse in the exchange rate against the dollar.
This move changed all the currency in the country to a new type of banknote that was made of a different more durable material. The first plastic currency in the country was released in 1992 and by 1996, all the banknotes being produced were polymer-based.
Ghana
In 1982, the country got rid of its 50 cedi note to deal with tax evasion and corruption, but the move eroded confidence in the banking system and the black market flourished. Rural dwellers had to walk miles to exchange their money and after the deadline bundles of notes were abandoned because they were left worthless.
The the RBI governor – IG Patel – was not in favour of the step. In his book, Glimpses of Indian Economic Policy: An Insider’s View, he wrote that when the then finance minister told him about the decision, he insisted that measures of the sort rarely have positive results.
Nigeria
In an anti-corruption move, the country issued new banknotes with a different colour in 1984, and gave a limited period of time to exchange old notes. The move failed to fix the country’s debts and rising inflation.
In 1987, Myanmar made around 80 percent of the currency in circulation invalid to curb the black market. It led to student protests and a government crackdown that killed thousands.
(With inputs from Bloomberg Quint)
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