Demonetisation: Pakistan Senate passes resolution to withdraw Rs 5,000 notes from circulation

Pakistan's Senate on Monday passed a resolution for the withdrawal of the country's high denomination currency notes of Rs 5,000 from circulation in the  country. Reports state that the step is being considered to stop the flow of illicit money in the country and to halt money laundering.

The opposition party Pakistan Peoples Party's (PPP) Senator Usman Saifullah proposed the resolution stating that Rs 5,000 notes were being used in the nation for illegal transactions and that they should be withdrawn to put an end to such activities, according to Times of India.

However, the proposition was opposed by the Pakistan Muslim League-Nawaz (PML-N) government, but since the opposition party has a majority in the upper house of parliament, the resolution was endorsed in the senate.

The resolution by the PPP urged the Pakistan government to demonetise the highest denomination currency note "in order to reduce illicit money flow, encourage the use of bank accounts and reduce the size of undocumented economy."

The Law Minister Zahid Hamid however strongly opposed the resolution stating that demonetisation of such a high denomination note will have negative impact on Pakistan's economy and will inconvenience the masses citing India's example.

"Such huge number of currency notes cannot be pulled out from circulation without causing a monetary crises. If such steps are taken, people will lose confidence in the Pakistani Rupee and will instead prefer foreign currency due to the steep drop in supply of local currency notes," the minister said.

Indian Prime Minister Narendra Modi had announced last month on November 8 that the government was scrapping Rs 500 and Rs 1,000 notes and the public had 50 days to deposit their old notes in a bank. The decision was taken by the Indian government to crack down on black money circulating in the economy. The decision, however, caused chaos in the country with serpentine lines forming outside banks and ATMs, immediately after the announcement.

Australia also last week proposed to follow in India's footsteps by scrapping the nation's highest-denomination currency note in an attempt to crack down on "black economy" in the country. The Revenue and Financial Services Minister Kelly O'Dwyer, while talking to ABC ratio, said that a review of $100 note and cash payments over certain limits could be flagged as the Australian government is looking to recover billions of dollars in unpaid tax.