Burundians in Bujumbura are reacting to the recent introduction of new 5,000 and 10,000 Burundian franc banknotes. It comes as they struggle to exchange their old notes for new ones, particularly since the deadline expired in June.
“This is the beginning for the government to be able to start reforms, a necessary awareness to really break this cultural conservatism,” says Faustin Ndikumana, an economist and president of PARCEM think tank. “(In) Burundian culture … each person wants to keep his wealth at home” Ndikumana explains.
However, not everyone agrees. At least not in the markets, where many people are having problems trading due to a scarcity of new currency notes.
_”When you don’t have a bank account, your old bills aren’t replaced. It’s impossible. They force us to open accounts at the bank when we have no means to add to an account”, _Chantal Mugisha, a merchant at the COTEBU market said.
The two denominations, worth $1.77 U.S. and $3.54 U.S., are the highest of the six in circulation in a country with a per capita GDP of $270.
The Bank of the Republic of Burundi attributed the move to what it called an increase in circulation in the “informal circuit” that led to instability in the activities of financial institutions. It also said in its press announcement that there was a shortage of these notes in banks that destabilized activities.
All 5,000- and 10,000-franc notes dated July 4, 2018, were withdrawn as of June 7, and replaced by new ones dated Nov. 7, 2022. There was a 10-day time limit that expired on June 17 for holders to deposit the old notes in their accounts and to open a bank account if necessary. The old notes were to be legal tender only until June 17.
“I have here a sum of old 170,000 Fbu (Burundian francs, about 54.8 euros) banknotes. I wanted to get gas from Gatumba and I heard that if I don’t have new bills they can’t give me gas. So I wonder how to deposit these notes in my boss’s bank account and I will be forced to stay in Bujumbura, I live inside the country,” says Abdoul Karim Niyonkuru, a Taxi driver in Bujumbura.
Further restrictions by the Bank of Burundi limited individual total deposits of cash to 10 million francs ($3,543) and legal entities to 30 million francs per day and per account. Burundi’s apex bank has said it would deploy agents to rural areas to assist in the exchange.
Banknote maker De La Rue has said that demand for cash around the world is at its lowest level in 20 years.
The company, which designs a third of banknotes globally, said demand for cash had fallen since the pandemic when central banks stocked up on currency.
It said the downturn would hit its full-year profits, which are set to fall short of expectations.
The firm is having to renegotiate its loan agreements with its banks due to the tougher trading conditions.
“The demand for banknotes has been at the lowest levels for over 20 years, resulting in a low order book going into fiscal year 2024,” De La Rue said in a trading update.
Its boss, Clive Vacher, told the BBC that central banks had stepped up orders for bank notes during Covid as they always did in economic crises. But they were now delaying new orders as they ran through their stock.
“They always do that when there are crises, because of the security that having cash around them has,” he said.
“So we expected a downturn, which has indeed happened, but that downturn is probably extending deeper and probably for an extra 9-12 months than we’d normally expect in the normal cycle of things,” he said.
It comes as consumer use of cash is in decline in many countries as more transactions are made online or with cards, and particularly contactless payments.
De La Rue said there are signs of recovery but is not sure when that will happen. Shares in De la Rue fell by as much as 30% on Wednesday after it published its trading update.
The 200 year-old firm said it was in talks with its banks over its loan agreements because of lower profits and higher interest rates, following a succession of rises by the Bank of England.Media caption,
Alan Turing £50 banknote being printed
De La Rue now expects its full-year profit to be in the “low £20m range” while the interest costs on its loans has risen.
It said it is “in discussions with its lending banks in relation to seeking an amendment to its banking covenants, reflecting the revised outlook and also reflecting the increase in the company’s funding costs resulting from higher Bank of England base rates”.
De La Rue employs 1,800 people globally and works with 140 countries.
All current Bank of England banknotes are printed by the firm at a site in Debden, Essex.
The scene inside the De La Rue banknote printing hall is a mixture of the mundane and the surreal.
The factory floor feels very familiar with hi-tech machinery, pallet carriers and staff that appear typical of many production centres.
But the “product”, as it is called, turns your head. Millions of banknotes, in various stages of production, are here. Obviously, the security is extremely tight.
So many banknotes printed every day feels at odds with our everyday lives – when, for many people, cash use is a rarity as we pay for goods and services with cards and smartphones.
De La Rue is also printing the new banknotes featuring the image of King Charles, although those will not enter circulation until the middle of next year.
The company, which is headquartered in Basingstoke, Hampshire, has contracts with central banks around the world.
For some of those banks, it prints money, while for others, it provides polymer for banknotes well as other services.
Nigeria’s Supreme Court on Wednesday temporarily suspended Friday’s deadline to stop using old banknotes, which had caused a cash crisis in the country.
The Supreme Court’s decision comes after a legal challenge initiated by the northern states of Kaduna, Kogi and Zamfara earlier this month.
Many banks have not had enough of the new naira notes, leading to desperate and chaotic scenes as people tried to get their hands on them.
There were fights at ATMs, protests and mob attacks on commercial banks, local media have been reporting for days now.
The chaos led to concern that it could affect this month’s elections, as many Nigerians do not have bank accounts.
The head of the election commission said some election service providers will need to be paid in cash, and that could prove to be difficult.
The Central Bank said the currency redesign would help it tackle inflation, which is currently running at about 21%, curb counterfeiting and promote a cashless society.
It added that 80% of the notes currently in circulation were being held outside financial institutions.
It hoped the redesign would bring some of that money being hoarded by individuals and companies back into the financial system, and so stop prices from rising so quickly.
Their lawyers argued that the government’s policy had led to an “excruciating situation that is almost leading to anarchy in the land”.
After careful consideration of the motion exparte in the application, Justice Okoro granted the prayer.
Ruling on the motion, Justice Okoro held that “An order of Interim Injunction restraining the federal government through the Central Bank of Nigeria (CBN) or the commercial banks from suspending or determining or ending on February 10, 2023, the time frame with which the now older version of the 200, 500 and 1,000 denomination of the naira may no longer be legal tender pending the hearing and determination of their motion on notice for an interlocutory injunction”.
The case has been adjourned to 15 February for a hearing of the main suit.
