Introduction of the 50,000 Forint Note: Timeline and Considerations
In the landscape of currency, the discourse often veers towards the practicality of coinage and higher denomination banknotes in the wallets of the public.
A pertinent question arises: "When will the authorities phase out the devalued five forints coin and introduce the fifty thousand forint banknotes?" This inquiry was formally posed by Novák Előd, a parliamentary representative of the Our Homeland movement, to the president of the National Bank.
On Friday, György Matolcsy, President of the National Bank, provided a comprehensive response to the representative, outlining why the current time is not opportune for either action: phasing out the five forint coins or introducing banknotes valued higher than twenty thousand forints. The response inadvertently sheds light on what developments are necessary for a future with fewer coins and higher denomination banknotes in our wallets.
Main Points from Matolcsy’s Explanation:
- Despite inflation affecting the purchasing power of various denominations, it has had negligible impact on consumer payment habits in the past nearly two years.
- This is supported by the fact that the quantity of coins in circulation increased by only 4.2% and their value by 3.8% in 2023, while the proportional distribution of different coin denominations has remained stable for over a decade.
- Decisions on the denomination structure that affect broad social strata cannot be based on narrow, momentary considerations of metal prices. Since March 2022, the market prices of copper have fallen by 22%, zinc by 44%, and nickel by 67%, with significant volatility in their values, indicating that "momentary, relative cost benefits cannot form the basis for long-term decisions affecting wide social layers."
Considerations for Introducing the 50,000 Forint Banknote:
- Based on data from the National Tax and Customs Administration's (NAV) online cash registers (OPG), in 2023, there were 2.23 billion cash payment transactions, with an average value of “merely 3,597 forints.”
- Cash usage is prevalent in smaller transactions, where payment with a 50,000 forint note could pose significant challenges in making change. "The potential use of 50,000 forint banknotes would likely result in immediate denomination exchange issues in most payment scenarios."
- Compared to the previous year, the quantity of 20,000 forint notes in circulation decreased by 0.7% in 2023, while the quantities of 500 and 1,000 forint notes increased significantly, by 5.1% and 5.8% respectively.
- For larger transactions, the Immediate Payment System (AFR) introduced on March 2, 2022, provides a fast and reliable platform.
In summary, the National Bank asserts: “The current banknote and coin denominations adequately fulfill their role in cash circulation, WITH NO DISTURBANCE OR CIRCUMSTANCES IDENTIFIED IN THE CASH CYCLE THAT WOULD JUSTIFY INTERVENTION IN THE CURRENT DENOMINATION STRUCTURE.”
On Friday, György Matolcsy, President of the National Bank, provided a comprehensive response to the representative, outlining why the current time is not opportune for either action: phasing out the five forint coins or introducing banknotes valued higher than twenty thousand forints. The response inadvertently sheds light on what developments are necessary for a future with fewer coins and higher denomination banknotes in our wallets.
Main Points from Matolcsy’s Explanation:
- Despite inflation affecting the purchasing power of various denominations, it has had negligible impact on consumer payment habits in the past nearly two years.
- This is supported by the fact that the quantity of coins in circulation increased by only 4.2% and their value by 3.8% in 2023, while the proportional distribution of different coin denominations has remained stable for over a decade.
- Decisions on the denomination structure that affect broad social strata cannot be based on narrow, momentary considerations of metal prices. Since March 2022, the market prices of copper have fallen by 22%, zinc by 44%, and nickel by 67%, with significant volatility in their values, indicating that "momentary, relative cost benefits cannot form the basis for long-term decisions affecting wide social layers."
Considerations for Introducing the 50,000 Forint Banknote:
- Based on data from the National Tax and Customs Administration's (NAV) online cash registers (OPG), in 2023, there were 2.23 billion cash payment transactions, with an average value of “merely 3,597 forints.”
- Cash usage is prevalent in smaller transactions, where payment with a 50,000 forint note could pose significant challenges in making change. "The potential use of 50,000 forint banknotes would likely result in immediate denomination exchange issues in most payment scenarios."
- Compared to the previous year, the quantity of 20,000 forint notes in circulation decreased by 0.7% in 2023, while the quantities of 500 and 1,000 forint notes increased significantly, by 5.1% and 5.8% respectively.
- For larger transactions, the Immediate Payment System (AFR) introduced on March 2, 2022, provides a fast and reliable platform.
In summary, the National Bank asserts: “The current banknote and coin denominations adequately fulfill their role in cash circulation, WITH NO DISTURBANCE OR CIRCUMSTANCES IDENTIFIED IN THE CASH CYCLE THAT WOULD JUSTIFY INTERVENTION IN THE CURRENT DENOMINATION STRUCTURE.”
Translation:
Translated by AI
