Redenomination
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Redenomination

Redenomination is the process of changing the face value of banknotes or coins in circulation. It may be done because inflation has made the currency unit so small that only large denominations of the currency are in circulation. In such cases the name of the currency may change or the original name may be used with a temporary qualifier such as "new". Redenomination may be done for other reasons such as changing over to a new currency such as the Euro or during decimalisation.

Redenomination itself is considered symbolic as it does not have any impact on a country's exchange rate in relation to other currencies. It may, however, have a psychological impact on the population by suggesting that a period of hyperinflation is over, and is not a reminder of how much inflation has impacted them. The reduction in the number of zeros also improves the image of the country abroad.

Inflation over time is the main cause for the purchasing power of the monetary unit decreasing; but there are a variety of political reasons for the government not reigning in inflation or for not redenominating the currency when its value has depreciated significantly. There are some economic and social benefits of redenominating, including improved efficiency in processing routine transactions. Redenomination typically involves the substitution of new banknotes in place of the old ones, which usually cease being legal tender after the end of a short transition period.

Inflation

In general, redenomination is implemented in response to hyperinflation, which progressively increases the nominal prices of products and services, decreasing the real value of the monetary unit in the local market. Over time, prices become excessively large, which can impede routine transactions because of the risk and inconvenience of carrying stacks of bills, or the strain on systems, e.g. automatic teller machines (ATMs), or because human psychology does not handle large numbers well. Authorities may alleviate this problem by redenomination: introducing a new unit that replaces the old unit, with a fixed number of old units being converted to 1 new unit. If inflation is the reason for redenomination, this ratio is much larger than 1, usually a positive integral power of 10 like 100, 1000 or 1 million, and the procedure can be referred to as "cutting zeroes".[1] Recent examples of redenominations, include:

New unit = × Old unit Year
Argentinian peso = 10 000 Argentine peso ley 1983
Argentine austral = 1 000 Argentine peso 1985
New Mozambican metical = 1 000 old meticais 2006
Second Zimbabwean dollar (ZWN) = 1 000 ZWD (first dollar) August 2006
Third Zimbabwean dollar (ZWR) = 10 000 000 000 ZWN August 2008
Fourth Zimbabwean dollar (ZWL) = 1 000 000 000 000 ZWR February 2009
This table is not exhaustive.

Although the ratio is often a positive integral power of 10 (ie., removing some zeros), sometimes it can be a×10n where a is a single-digit integer and n is a positive integer. Partial examples include

New unit = × Old unit Year
German Rentenmark = 1 000 billion Papiermark 1923
Chinese "gold" yuan = 3 million old yuan 1948
Chinese "silver" yuan = 500 million "gold" yuan 1949
New Taiwan dollar = 40 000 old dollars 1949
Azerbaijani new manat = 5 000 old manat 2006
This table is not exhaustive.

Occasionally, the ratio is defined in a way such that the new unit is equal to a hard currency. As a result, the ratio may not be based on an integer. Examples include

New unit = × Old unit = Anchor currency year
Brazilian real = 2 750 cruzeiros reais = United States dollar 1 July 1994
Yugoslav novi dinar = 10~13 million 1994 dinara = Deutsche Mark 24 January 1994
This table is not exhaustive.

In the case of hyperinflation, the ratio can go as high as millions or billions, to a point where scientific notation is used for clarity or long and short scales are mentioned to disambiguate which kind of billion or trillion is meant.

In the case of chronic inflation which is expected to continue, the authorities have a choice between a large redenomination ratio and a small redenomination ratio. If a small ratio is used, another redenomination may soon be required, which will entail costs in the financial, accounting, and computing industries. However a large ratio may result in inconveniently large or small prices at some point in the cycle.

After a redenomination, the new unit often has the same name as the old unit, with the addition of the word new. The word new may or may not be dropped a few years after the change. Sometimes the new unit is a completely new name, or a "recycled" name from previous redenomination or from ancient times.[]

New unit = × Old unit year Nature of the new unit
Turkish new lira = 1 million old lira 2005 "new" is an official designation and was dropped in 2009.
New Taiwan dollar = 40 000 old dollars 1949 "new" is an official designation and is still used in official documents today.
Argentine austral = 1 000 Peso argentino 1985 completely new name
Yugoslav 1993 dinar = 1 million 1992 dinara 1993 no official designation
Brazilian real = 2 750 cruzeiros reais 1994 recycled unit of Brazil before 1942
This table is not exhaustive.

Decimalisation

All countries that previously had currencies based on pounds-shillings-pence (£sd) system (£1 = 20 shillings = 240 pence) have now adopted decimal currencies, with several changing the name of the main currency unit at the same time.

Currency union

When countries form a currency union, redenomination may be required. The conversion ratio is often not a round number, and may be less than 1.

New unit = x Old unit year Monetary union
Danish krone = 0.5 Danish rigsdaler 1873 Scandinavian Monetary Union
Gulden österreichischer Währung = 20/21 Gulden Conventions-Münze 1858 Wiener Münzvertrag between the states of the German Customs Union and the Austrian Empire
This table is not exhaustive.

List of Euro redenominations

The most notable currency union today is the Eurozone. Euro cash was introduced in 2002.

Country Old unit Exchange rate
(Euro in units of old currency)
Year
Belgium Belgian franc 40.3399 1999
Luxembourg Luxembourgish franc 40.3399 1999
Germany Deutsche Mark 1.95583 1999
Andorra, Spain Spanish peseta 166.386 1999
Andorra, France, Monaco French franc 6.55957 1999
Ireland Irish pound 0.787564 1999
Italy, San Marino, Vatican City Italian lira 1936.27 1999
Netherlands Dutch guilder 2.20371 1999
Austria Austrian schilling 13.7603 1999
Portugal Portuguese escudo 200.482 1999
Finland Finnish markka 5.94573 1999
Greece Greek drachma 340.75 2001
Slovenia Slovenian tolar 239.64 2007
Cyprus Cypriot pound 0.585274 2008
Malta Maltese lira 0.4293 2008
Slovakia Slovak koruna 30.126 2009
Estonia Estonian kroon 15.6466 2011
Latvia Latvian lats 0.702804 2014
Lithuania Lithuanian litas 3.4528 2015

List of currency redenominations

This table lists various currency redenominations that have occurred, including currency renaming where the conversion rate is 1:1, but excluding decimalisation and joining the eurozone, already listed on the table above.

New unit Exchange rate (new:old) Old unit Year Country Cause Note
!a -9e99 !a !a !a !a !a
~z 9e99 ~z ~z ~z ~z ~z
Zimbabwean Dollar (4th) 1 000 000 000 000 Zimbabwean Dollar (3rd) 2009 Zimbabwe hyperinflation Subsequently abandoned.
Zimbabwean Dollar (3rd) 10 000 000 000 Zimbabwean Dollar (2nd) 2008 Zimbabwe hyperinflation
Chinese "silver" yuan 500 000 000 "gold" yuan 1949 China (Republic of China) inflation
Chinese "gold" yuan 3 000 000 (old) yuan 1948 China (Republic of China) inflation
Peruvian nuevo sol 1 000 000 Peruvian inti 1991 Peru hyperinflation "nuevo" is an official designation and is still in use
Yugoslav 1944 dinar 20 Serbian 1941 dinar 1944 Yugoslavia Reconstituted Yugoslav Federation dinar replacing currency in use in its constituents
Yugoslav 1944 dinar 40 Independent State of Croatia kuna 1944 Yugoslavia Reconstituted Yugoslav Federation dinar replacing currency in use in its constituents
Yugoslav 1966 dinar 100 1944 dinara 1966 Yugoslavia inflation
Yugoslav 1990 dinar 10 000 1966 dinara 1990 Yugoslavia inflation
Yugoslav 1992 dinar 10 1990 dinara 1992 Yugoslavia inflation
Yugoslav 1993 dinar 1 000 000 1992 dinara 1993 Yugoslavia hyperinflation no official designation
Yugoslav 1994 dinar 1 000 000 000 1993 dinara 1994 Yugoslavia hyperinflation Lasted for 23 days.
Yugoslav novi dinar 13 000 000[2] 1994 dinara 1994 Yugoslavia hyperinflation Anchor currency: Deutsche Mark
Turkish new lira 1 000 000 Turkish lira 2005 Turkey inflation "new" is an official designation and has been dropped in 2009.
Karbovanets (third) 1 Soviet ruble 1992 Ukraine Independence
Hryvnia 100 000 Karbovanets (third) 1996 Ukraine inflation
New Taiwan dollar 40 000 Taiwan dollars 1949 Taiwan (Republic of China) inflation "new" is an official designation and is still used in official documents
Second Renminbi yuan 10 000 First Renminbi yuan 1955 China (People's Republic of China) inflation
Peso argentino 10 000 Peso ley 1983 Argentina inflation
Peso (convertible) 10 000 Austral 1992 Argentina inflation
Polish z?oty 10 000 Polish z?oty 1995 Poland inflation
Leu 10 000 Romanian leu 2005 Romania inflation
New Ghanaian cedi 10 000 Cedi 2007 Ghana inflation
Ghanaian cedi 1.2 Old cedi 1967 Ghana convenience of exchange This was an opportunity to remove Kwame Nkrumah from every denomination.
Second Azerbaijani manat 10 Soviet ruble 1992 Azerbaijan Independence
Azerbaijani new manat 5 000 Second Azerbaijani manat 2006 Azerbaijan inflation
Turkmenistani new manat 5 000 (old) manat 2009 Turkmenistan inflation
Real 2 750 Cruzeiro real 1994 Brazil inflation Anchor currency: United States dollar
Cruzeiro (antigo) 1 000 Real (old) 1942 Brazil inflation
Cruzeiro (novo) 1 000 Cruzeiro (antigo) 1967 Brazil inflation
Austral 1 000 Peso argentino 1985 Argentina inflation
Peruvian inti 1 000 Peruvian sol (1863-1985) 1985 Peru inflation
Cruzado 1 000 Cruzeiro (novo) 1986 Brazil inflation
Cruzado Novo 1 000 Cruzado 1989 Brazil inflation
Cruzeiro real 1 000 Cruzeiro (third) 1993 Brazil inflation
New Shekel 1 000 Shekel 1986 Israel inflation
Bulgarian new lev 1 000 Bulgarian lev 1999 Bulgaria inflation Anchor currency: German mark
New Mozambican metical 1 000 (old) meticais 2006 Mozambique inflation
Bolívar Soberano 100 000 Bolivar Fuerte 2018 Venezuela Hyperinflation
Bolivar Fuerte 1 000 (old) Bolivar 2008 Venezuela inflation
Zimbabwean dollar (2nd) 1 000 Zimbabwean dollar (1st) 2006 Zimbabwe inflation
Slovenian tolar 1 Yugoslav 1990 dinar 1991 Slovenia Independence
New French Franc 100 French Franc 1960 France inflation "New" was a temporary designation dropped in 1963
New Finnish markka 100 Finnish markka 1963 Finland inflation
Peso ley 100 Peso moneda nacional 1970 Argentina inflation
Icelandic króna 100 Icelandic króna 1981 Iceland hyperinflation
Peso moneda nacional 25 Peso moneda corriente 1881 Argentina inflation
Peso moneda corriente 8 Real 1826 Argentina
Cruzeiro (third) 1 Cruzado Novo 1990 Brazil renaming
Austro-Hungarian krone 0.5 Austro-Hungarian gulden 1892 Austria-Hungary monetary union Moving from silver to gold standard
Austrian krone 1 Austro-Hungarian krone 1920 Austria collapse
Austrian schilling 10 000 Austrian krone 1925 Austria inflation
Hungarian korona 1 Austro-Hungarian krone 1919 Hungary collapse
Hungarian peng? 12 500 Hungarian korona 1927 Hungary inflation
Hungarian forint 400 × 1027 Hungarian peng? 1946 Hungary hyperinflation
Shekel 10 Israeli pound 1980 Israel inflation
Croatian dinar 1 Yugoslav 1990 dinar 1991 Croatia Independence
Croatian kuna 1 000 Croatian dinar 1994 Croatia
Surinamese dollar 1 000 Surinamese guilder 2004 Suriname inflation Old coins denominated in cents were declared to be worth their face value in the new cents
Peso uruguayo 1 000 Nuevo peso 1993 Uruguay inflation
Nuevo peso 1 000 Peso moneda nacional 1973 Uruguay inflation
Zambian kwacha 1 000 (old) Kwacha 2013 Zambia inflation
United States dollar 25 000 Sucre 2000 Ecuador inflation Full dollarization for banknotes. Ecuador also issues centavo coins
United States dollar 8.75 Colón 2001 El Salvador dollarization
Talonas 1 Soviet ruble 1991 Lithuania Independence
Lithuanian litas 100 Talonas 1993 Lithuania inflation
Ariary 5 Franc malgache 2005 Madagascar From 1961, banknotes were issued denominated in both francs and ariary
Nuevo peso mexicano 1 000 Peso mexicano 1993 Mexico inflation "nuevo" was a temporary designation dropped in 1996
Chilean escudo 1 000 First Chilean peso 1960 Chile inflation
Chilean peso 1 000 Chilean escudo 1975 Chile inflation
First zaïre 1 000 First congolese franc 1967 Democratic Republic of the Congo inflation
Nouveau zaïre 3 000 000 First Zaïre 1993 Democratic Republic of the Congo inflation
Second congolese franc 100 000 Nouveau zaïre 1998 Democratic Republic of the Congo inflation
First Kwanza 1 Second Angolan escudo 1975 Angola Independence
Novo kwanza 1 First Kwanza 1990 Angola seizure of money supply by government Angolans could only exchange 5% of all old notes for new ones; they had to exchange the rest for government securities
Kwanza reajustado 1 000 Novo kwanza 1995 Angola inflation
Second Kwanza 1 000 000 Kwanza reajustado 1999 Angola inflation
Peso boliviano 1 000 First boliviano 1963 Bolivia inflation
Boliviano 1 000 000 Peso boliviano 1985 Bolivia inflation
Guinea-Bissau peso 1 Portuguese Guinean escudo 1975 Guinea-Bissau Independence
CFA franc 65 Guinea-Bissau peso 1997 Guinea-Bissau monetary union West African CFA franc
Peseta guineana 1 Spanish peseta 1969 Equatorial Guinea Independence
Ekwele 1 Peseta guineana 1975 Equatorial Guinea
CFA franc 4 Ekwele 1985 Equatorial Guinea monetary union Central African CFA franc
First Guinean franc 1 CFA franc 1959 Guinea Independence
Syli 10 First Guinean franc 1971 Guinea
Franc guinéen 1 Syli 1985 Guinea
Franc malien 1 CFA franc 1962 Mali Independence
CFA franc 2 Franc malien 1984 Mali monetary union West African CFA franc
Ouguiya 5 CFA franc 1973 Mauritania
First nicaraguan córdoba 12.5 Nicaraguan peso 1912 Nicaragua
Second nicaraguan córdoba 1 000 First nicaraguan córdoba 1988 Nicaragua
Third nicaraguan córdoba (córdoba oro) 5 000 000 Second nicaraguan córdoba 1991 Nicaragua inflation
First ugandan shilling 1 East African shilling 1966 Uganda Independence
Second ugandan shilling 100 First ugandan shilling 1987 Uganda inflation
First macedonian denar 1 Yugoslav 1990 dinar 1992 Republic of Macedonia Independence The first denar was a temporary currency, no coins were issued
Second macedonian denar 100 First macedonian denar 1993 Republic of Macedonia
South Korean hwan 100 first South Korean won 1954 Republic of Korea Inflation after Korean War(1950-1953), Independence from Japan(1945)
Second South Korean won 10 South Korean hwan 1963 Republic of Korea Inflation
First Belarusian ruble 10 Soviet ruble 1994 Belarus Collapse of Soviet Union When Soviet rubles were still in use in Belarus, Belarusian ruble denominations were implied to be ten times more than Soviet rubles.
Second Russian ruble 1 000 First Russian ruble 1998 Russia inflation
Third Belarusian ruble 10 000 Second Belarusian ruble 2016 Belarus Inflation
Second Mauritanian ouguiya 10 First Mauritanian ouguiya 2018 Mauritania Inflation
Sudanese dinar 10 First Sudanese pounds 1992 Sudan inflation Applies only to North Sudan
Second Sudanese pound 1 000 First Sudanese pounds 2007 Sudan inflation Currency unification (peace treaty)
Second Sudanese pound 100 Sudanese dinars 2007 Sudan inflation Currency unification (peace treaty)
Second São Tomé and Príncipe dobra 1 000 First São Tomé and Príncipe dobras 2018 São Tomé and Príncipe inflation

Alternatives

In 2016, the Colombian peso was rated at around 3,000 per U.S. dollar, with banknotes up to 50,000 pesos. Instead of redenominating the currency, a new banknote design was introduced, with the last three zeroes replaced by the word "mil" (thousand), making the values easier to read.

See also

References

  1. ^ "It's decided: 2005 talk instead of 1 Leu RON 10,000; Ziarul Financiar". Zf.ro. 2004-01-29. Retrieved .
  2. ^ Pegged to the Deutsche Mark upon renomination, but subsequently subject to drift

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Redenomination
 



 



 
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