Abel Birhanu Ethiopian news - Update on Jawar Mohammed and Berehane Meskel
The Ethiopian Economics Association (EEA) said on Thursday that the introduction of new banknotes and denomination into the monetary system might cause a shift in deposit preferences towards holding currency instead of depositing in the bank.
According to the EEA, the optimal mix of currency denominations has an essential significance, and “the introduction of a higher denomination, a 200-birr note, may result in a shift of preference towards holding currency instead of deposits.”
The statement the EEA has sent to The Reporter also cautioned that the sluggish replacement of notes might result in a dwindling circulation of currency in the economy. Hence, the EEA advised the government to speed up the demonetization process as timing is a critical factor for preferable outcomes of the currency change.
Since the penetration of new currencies requires careful handling in rural and remote areas, the EEA suggested availing the new currency notes in those areas on time could help dodge unintended implications. In a statement, the Association warned that the new 200-birr denomination might bring about unforeseen macroeconomic consequences.
- Ethiopian News