WARSAW (Reuters) - Going against a global trend of discouraging cash use, the European Union’s biggest eastern economy Poland launched a new 500-zloty ($123.82) banknote on Friday to reduce the cost of storing reserves and better reflect rising levels of affluence.
The central bank took the decision despite a request from a deputy economy minister to reconsider on grounds the new banknotes could facilitate criminal activity and make it more difficult to fight the grey economy.
“It is clear that there is a need to supplement the structure of banknotes in circulation,” central bank board member Jacek Bartkiewicz told reporters. “The need for cash is rising.”
Thanks to its robust economic growth and despite over two years of deflation that ended last year, Poland has seen a steep rise in cash used, with the value of currency in circulation rising by 15 percent last year alone.
Bartkiewicz said the new banknote will be available to the general public, though he did not expect it to be widely used in day-to-day transactions.
He said the banknote would make it cheaper for the central bank to keep and produce its strategic cash reserve.
Poland’s new 500 zloty banknote will be worth approximately the same as the highest denomination note in Denmark, Norway - two countries actively promoting electronic money - and Romania, but still considerably less than in the Czech Republic, Belarus or in the euro zone.
India made a radical decision last year to withdraw all 500 and 1000 rupees bills ($15), accounting for nearly 90 percent of currency in circulation.
The so-called “demonetisation” was designed to crush India’s huge shadow economy, increase tax revenues and promote the use of bank accounts and digital transactions, but forced millions to queue outside banks and hurt economic growth.
Also, the European Central Bank said last year that it would stop issuing 500 euro ($532) banknotes towards the end of 2018 on concerns it could facilitate illicit activities but outstanding bills will remain in use indefinitely.
($1 = 0.9391 euros)
($1 = 4.0380 zlotys)
Reporting by Marcin Goettig