Could the passivity of a new 50,000 Forint Note Simplify Spending for Tourists?

Could the passivity of a new 50,000 Forint Note Simplify Spending for Tourists?

On April 15, 2024, Budapest György Matolcsy, the governor of the central bank of Hungary, addressed the potential of placing a new 50,000-forint currency into circulation amid rumours and public inquiries. According to Daily News Hungary, Előd Novák, a lawmaker from Mi Hazánk Mozgalom raised the subject during a conversation, questioning the removal of 5-forint coins and the introduction of higher denomination notes.

Tourists could be able to carry less heavy currency thanks to this higher denomination, which could also lower exchange fees by requiring fewer transactions and speed up purchases by removing the need to count out several smaller bills. The new note may require a little period of adjustment before certain stores accept it, but overall, it’s a noteworthy step for visitors to Hungary. But what does the Central Bank Governor have to say?

In response to questions concerning the introduction of a 50,000-forint note, Matolcsy stressed that there are no preparations in the works at this time, as the central bank has not discovered any conditions or disruptions that require intervention in the currency circulation cycle.

Matolcsy emphasised a number of crucial elements that supported the choice. He pointed out that throughout the last two years, payment patterns have not changed, despite the fact that inflation affects the value of individual denominations. Furthermore, the majority of large-value transactions are conducted electronically, negating the need for the introduction of higher-value banknotes.

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Moreover, the National Tax and Customs Administration’s most recent data showed that the quantity of 20,000-forint banknotes in circulation fell by 0.7% in 2023, suggesting that there will be a greater market for smaller denominations. This suggests a preference for smaller denominations, as evidenced by the growing circulation of 500 and 1,000 forint notes in contrast to this trend.

The governor’s answer clarifies the complex dynamics affecting the flow of cash and the central bank’s deliberate introduction of new denominations. Since the last significant adjustments to the Hungarian currency were made in 2008 and 2009, the decision to phase out lower-value coins and convert 200-forint notes into coins is a responsible move that takes economic realities into account.

Matolcsy’s statement highlights the central bank’s dedication to preserving stability and effectiveness in the currency supply chain, even while concerns regarding the future of currency denominations including what will happen to the 5 and 10-forint coins remain.