Demonetisation of Rs5,000 note will help curb bribery: ex-FBR chief Shabbar Zaidi

• Shabbar Zaidi believes government should provide two month transition period before demonetizing the Rs5,000 note.
• Zaidi believes that the move will improve documentation of the economy and ensure that banking prospers.
• Former FBR chairman argues that demonetisation will also make bribery difficult.

KARACHI: Former Federal Board of Revenue chairman Shabbar Zaidi believes that the government should go for the demonetization of the Rs5,000 note from July onwards.

"5000 Rupee Notes. Demonetise from July 1, 2021. Announce two months earlier" said Zaidi in a tweet on Friday.

The accountant said that in order to go through with the demonitisation the government should announce a "transition" period so that the plan goes smoothly.

Zaidi believes that those against demonetization have "no idea about abuse" and claimed that vested interests doe not let the benefits of the move come forward.

The former tax czar believes that the demonitzation will improve the economy and help the banking sector.

Read more: Left FBR due to 'pressures from disguised mafia', says Shabbar Zaidi

He also claimed that by demonetising the Rs5,000 note, bribery will become difficult.

He also suggested that those hoarding gold in lockers should have to inform the government if bullion is being held and the government should also monitor bullion trading.

What is demonetisation?

According to website Investopedia, demonetisation is the act of stripping a currency unit of its status as legal tender.

"It occurs whenever there is a change of national currency: The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with new currency," explains the website.

In this case, it simply means that the Rs5,000 note should cease to exist and hold value.

Read more: Pakistanis own $150b lying in foreign bank accounts, says former FBR chairperson

However, the move is seen as a drastic intervention as it directly affects the "medium of exchange used in all economic transactions".

But economists believe that the move can help stabilise a country's existing problems but also warn that if the move is taken suddenly of drastically then it can also lead to chaos.

The most recent country to carry our demonetization was India. Demonetization there was done by the Narendra Modi led government in 2016.

Read more: Reversing zero rating of Pakistan export sector regressive, says Shabbar Zaidi

The BJP-led government had ordered the pullout of 500 and 1,000 Indian rupee notes from circulation to tackle widespread corruption and tax evasion.

New Delhi ordered that while people could exchange their old notes for new bills at banks or post offices until the end of the year, or deposit them in their accounts, they would no longer be legal tender from midnight on November 8, 2016.

"To break the grip of corruption and black money, we have decided that the 500 and 1,000-rupee currency notes presently in use will no longer be legal tender from midnight that is 8 November, 2016," Modi had said in a televised address to the nation.