ISLAMABAD: Pakistan’s senate passed a resolution on Monday seeking withdrawal of Rs 5,000 notes from circulation to money laundering.
Pakistan is ranked 117th on the list of corrupt nations out of 175, according to the 2015 Corruption Perceptions Index reported by Transparency International. Corruption rank in Pakistan averaged 107.90 from 1995 until 2015, reaching an all time high of 144.00 in 2005.
Senator Usman Saifullah of opposition Pakistan People’s Party (PPP) tabled the resolution, arguing that the Rs 5,000 note was being used in illegal transactions and should be withdrawn.
The move was strongly opposed by the ruling Pakistan Muslim League-Nawaz (PML-N) government. However, since the PPP has a majority in the upper house of parliament, the resolution was endorsed.
A member of Pakistan People’s Party said that the government must withdraw 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”.
Opposing the resolution, law minister Zahid Hamid said that the move would have repercussions on the economy and the masses in general, as is happening in neighbouring India. He also said that withdrawal of the notes would create crisis in the market and people would resort to foreign currencies in absence of Rs 5,000 notes.
Hamid said that around 3.43 trillion Rs 5,000 banknotes were in circulation in Pakistan – around 30% of the total currency in flow in Pakistan now.
“Such a huge number of currency notes cannot be pulled from circulation without causing a monetary crises. 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,” the minister said.
At this, senator Saifullah said that instead of withdrawing the Rs 5000 currency note, its printing should be halted and the withdrawal should take place in a time span of three to five years.
The PPP senator said that most illegal transactions in the country were carried out using the Rs 5,000 note.
Ever since the Indian government ended high denomination currency notes by banning 500 and 1000 rupee notes , there has been increasing demands that Pakistan take similar steps that will help in revealing hidden assets and prevent tax evasion
But, there were reservations expressed by some observers about the success of the move, as phased demonetisation would give ample time to illicit holders of currency notes to buy property or gold.