By CoinWeek News Staff….
On Sunday, January 18, Bangladeshi Finance Minister Abul Maal A. Muhith announced that the government planned to withdraw the one- and two-taka denominations of notes and coins from circulation, leaving five-taka bills and coins as the smallest denomination of currency.
The taka (৳ or Tk) is the currency of Bangladesh. While most denominations are issued by the central bank, Tk 1 and Tk 2 notes are issued by the government itself.
The announcement was made at the secretariat office after a meeting to discuss amendments to a value-added tax (VAT) law.
“We will gradually withdraw the notes and coins of Tk 1 and Tk 2 denominations from the market”, Mr. Muhith said.
He added that consumers would no longer be burdened by the “useless notes”, though many disagree. Other Bangladeshi economists say that withdrawing the denominations from circulation could would cause inflation by unnecessarily raising prices.
“It is not a logical move,” Dr. Salehuddin Ahmed, a former governor of the central bank, said. “Once it is implemented, it would cause artificial hikes in the prices of many goods and services.”
Senior economist Mustafa K. Mujeri, Director-General of the Bangladesh Institute of Development Studies and a former chief economist for the central bank, seconded Dr. Ahmed’s statement, warning that protecting consumers should be a priority.
Mr. Muhith estimated that it would cost the government about ৳3 billion to effect their removal.
However, on Monday, January 19, when questioned about the previous day’s announcement, the Finance Minister denied that the government had plans to recall the denominations.
“We can’t just forcefully withdraw banknotes that are in the market… They will cease to exist if people stop using them,” Mr. Muhith said.
At the time of writing, one Bangladeshi taka (BDT) trades for approximately $0.01 USD.