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NEW COINAGE SLOW TO CATCH ON
BY AMENA BAKR
It has been two months since the Central Bank
of Egypt (CBE) officially issued new coin versions of the £E
1 and 50-piastre notes, but millions of Egyptians have yet to handle
the coins. According to the CBE, 3.5 million of the £E 1 coins
and 2.2 million of the 50-piastre coin are already in circulation,
compared to over 700 million £E 1 bank notes. Treasury officials
say the plan is to steadily increase the number of new coins in
circulation and, as the public gets used to them, phase out the
equivalent bank notes within two years.
But the public’s response has been tepid at best. While some
Egyptians were eager to see the new £E 1 and 50-piastre coins,
imprinted with the faces of King Tut and Cleopatra respectively,
many find them cumbersome and fear their issuance will lead to inflation.
They argue that the conversion to coinage will give the impression
that one pound is merely pocket change, having more in common with
existing 5, 10 and 25 piastre coins than the larger £E 5 to
£E 100 denomination bank notes. This perception will ultimately
devalue the pound. “They [the government] are turning the
pound into a coin just to prove to the people that it’s become
totally worthless,” complains Atef Soliman, a 43-year-old
grocery owner in downtown Cairo.
Treasury head Mostafa Ahmed dismisses the “conspiracy theories”
that have surrounded the issuance of the new coins. “People
have a psychological attachment to bills and feel that coins are
worthless, which is not true,” he told Business Monthly. “The
£E 1 [coin] will still have the same purchasing power as before.”
Ahmed explained that the main reason for the conversion to coinage
was that bills were becoming increasingly expensive to print. He
elaborates that complex anti-counterfeiting “blueprint”
techniques and materials made the £E 1 bank note cost almost
as much to print as its actual value. “Coins do not require
blueprints and are generally harder to forge,” he says, adding
that minting £E 1 coins is 60 percent cheaper than printing
bills.
In addition, coins are far more durable than bank notes. Metal coins
can stay in circulation for over 20 years; cotton-fiber bank notes
by contrast rarely last two years in Egypt and by that time are
usually torn, stitched together, filthy and faded. “This is
a chance to get rid of all the tattered and torn £E 1 and
50-piastre bills that are out there, which are supposed to last
for two years but actually last for much less,” he says.
To date, most of the coins in circulation have gravitated towards
the lower income brackets, where citizens use small change for street
food, shop purchases and transportation. Cairo’s underground
subway system has already become accustomed to the new coinage,
and reports no serious issues with it. “Whether we deal in
£E 1 coins or notes it makes no significant difference to
us,” insists Mahmoud Abdel Monem, Metro operations manager.
The higher volume of coins has some Metro officials thinking it’s
time to invest in specially designed cases for cashiers, who currently
keep coins and bills together in a drawer at their window. At the
end of each day, the coins are sorted and wrapped, then sent to
the bank, where they are counted manually. This could create a potential
bottleneck, warns Abdel Monem, who expects automated counting machines
to be introduced at banks as the number of coins in circulation
increases.
A bigger issue, he argues, is the public’s rejection of 5
and 10 piastre bank notes, which were introduced in 1997 and have
gained a reputation as Monopoly money. “Here at the Metro
we accept them, but the majority of the passengers don’t want
them back as change, and if they do accept them they use them to
buy another Metro ticket because nobody else accepts them,”
he says.
Mostafa Hussein, a 38-year-old kiosk owner, admits he outright refuses
to accept 5 and 10 piastre bank notes. “At first I used to
accept them, but when I found out that the banks don’t take
them, I stopped taking them from my customers,” he explains.
Ahmed denies the widely-held perception that banks refuse to deal
in the tiny bills. He urges customers and shop owners to insist
on their right to use the legally tender bank notes. “The
5 and 10 piastre notes are real money and people should simply learn
to fight harder for their rights so that shops and banks will accept
them,” he says.
He confirmed that, for the time being at least, the CBE has no plans
to stop the circulation of the small bills. Nor will it be deterred
from its plan to replace £E 1 and 50-piastre bank notes with
coins. “People have to get used to the idea of dealing with
the new coins and the 5 and 10 piastre bills since they will be
around for a while.”
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