The demonetization of the old Ethiopian Birr notes this week will play a crucial role to boost the economy by stabilizing the macroeconomy and controlling illegal money transactions, experts said.
In an exclusive interview with ENA, the economist Dr. Berhanu Danu said the change will not only help to control contraband and illicit financial activities, but also play pivotal role in improving the economic development of the country.
According to him, the economy will get a boost to recover as the macroeconomy would be stabilized through this process as banks get a chance to collect huge amount of money.
“The change of the currency notes will make people deposit money in banks which in turn will have sufficient amount of money to provide in loan for investments,” he explained.
In doing so, new investment will be highly encouraged and jobs created. “When supported and encouraged new investments can create jobs and the manufacturing sector will expand and become productive,” Dr. Berhanu stated.
Public Policy Advisor Professor at Addis Ababa University, Costantinos Berhe said the new notes mainly help the National Bank of Ethiopia to undertake monetary policy, know the amount of money that comes out of the coffers of the government.
Even if the government may have several reasons for changing the notes, the recent move would play a vital role in collecting all the money that has been hoarded in private homes or offices, he noted. Therefore, it is very important for the National Bank to exactly know the amount of money in private hands for a long period of time.
In addition, the professor said, there are illicit financial flows, especially those associated with contraband trade and illegal activities around border, he said. “Another reason could be the possibility that Ethiopian money would be printable illegally, and therefore it is very important to have new currency that has better security features that the government can control,” according to the professor.
Costantinos further stated that with the introduction of currency change and limit on depositing money at home to less that 1.5 million Birr, the government will have the opportunity to scrutinize the money and check its authenticity, Yet he said “I don’t think change in Birr by itself will improve the economy,” adding that what is important to improve is to have a discussion on the entire financial package of financial reform.
He noted that the government has come up with macroeconomic transformation plan and the 10-year prospective plan that would improve the economy, keep it going on higher growth rate. The National Bank of Ethiopia announced on Monday the launching of new currency notes and new 2.9 billion birr notes are now replacing the old notes, it was learned. Ethiopia has spent 3.7 billion Birr to print the new 10, 50 and l00 Birr denominations with an additional new 200 Birr note.
The Ethiopian herald September 20/2020
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