The State Bank of Pakistan has increased the printing of its currency notes and has alerted the currency printing press to meet the increase in demand of cash as the country goes into a lockdown.
Experts have said that following the decision, it’s likely that inflation would go up, causing prices of essential items to increase.
Economist Baqir Jaffari, however, debunked these speculations. “The general perception is that when notes are printed, the money supply increases, resulting in an increase in inflation,” he said on SAMAA TV’s programme Naya Din on Thursday.
“This time, however, the printing is being done to prevent contaminated notes from being circulated in the market and to contain the spread of the coronavirus,” Jaffari said.
Pakistan, like other countries, has been taking measures to limit the spread of the disease after the number of cases surged.
“So what the State Bank is doing is not addition but replacement,” the economist said. Another thing he pointed out was that businesses have been closed across the country and in such situations people prefer keeping cash on themselves.
“They resort to taking out cash from ATMs,” he said. “So to maintain liquidity and ensure that sufficient cash is available, the supply of money in the economy has to be increased,” Jaffari explained.
He called it the “accelerated replacement mechanism”. Prices of commodities in the economy increase when without these reasons, the bank increases its liabilities and the money supply in the economy, the economist clarified.
He added that as coronavirus has tightened its grip across the globe, countries have given relaxations to credit customers. Pakistan can do the same but it already is in so much debt that it won’t make much of a difference, Jaffari said.
“One thing that we can learn from these times is that it’s extremely important to invest in education, health and technology because these things can actually save you in times of crisis,” he added.