Farewell to the Rs10 note

The SBP's plan to phase out the Rs10 banknote and replace it with a coin became inevitable several years ago, when the Rs10 coin first entered circulation. However, the coin's failure to receive widespread public acceptance meant that the currency note has remained in parallel circulation for several years, despite the relatively high cost of production and replacement required to keep the note available in the market.

A Rs10 note costs more than that amount to produce. Meanwhile, top SBP officials have said that new Rs1,000 and Rs5,000 notes cost about Rs14 to produce, which is a much better cost-to-value ratio. Meanwhile, coins are usually priced to have higher face value than their component metals, and can last for several decades, even under rough-use conditions, while most currency notes get worn out in a year or two. Also notable is that Rs10 notes currently account for about 35% of all currency notes printed annually, according to a recent report. That comes to between Rs8 billion and Rs10 billion every year in replacement costs. These are not trivial sums in a country grappling with fiscal constraints. The SBP must ensure that this transition does not become a stealth tax on the poor, for whom the small face value still has great significance. Though the bank has said any transition would be gradual, rather than an overnight move, it is critical that the Rs10 coin be made widely available so that it can organically replace the currency note.

Beyond the coin, this moment should be seized to accelerate Pakistan's transition to electronic payments, which are more efficient, more transparent, and less costly to administer than any physical currency. If the disappearance of the Rs10 note nudges even a fraction of cash-dependent users toward mobile wallets or bank transfers, the policy will have delivered a secondary benefit.