Forhad Hossain goes to Dhaka's Kaptan Bazar kitchen market almost every passing day for shopping. There he has been facing severe shortages of lower-denomination coins and currencies for long.
The crunch used to involve Tk 1.0 and Tk 2.0. And now the dearth reaches the next rung at Tk 5.0.
Consequently, grocers cannot give him accurate changes against purchases of commodities. Earlier, he would speak angrily with them but now turned into a stoic person. There are some instances, by contrast, when sellers also sacrifice such small fractions as they lack the exact exchanges.
This reckoning on such small denominations has now been much more important when the government cut bus fares by Poisha 5 per kilometre. Many wonder how Poisha 5 will be transacted with the bus conductors at a time when one-taka note or coin is scarcely seen on the market.
However, Mr Hossain, now 51, and resident of Wyre Street of Wari, also faces similar problems in almost every cash transaction, for example, while purchasing data packs from street vendors, paying for rickshaw fares, and even facing similar cases in the banks.
He is one of the millions of citizens who have been facing such a situation every moment and losing millions a great amount of money. And this is happening not only in Kaptan Bazar, but everywhere in Bangladesh.
"I lose around Tk 200 a month simply for lack of small-denomination currencies in the market," Mr Hossain, who works in a senior position at one of the state-owned corporations, told the FE recently.
This amount [Tk 200] is more than the basic salary of a first-class officer under the country's first national pay scale of 1973.
The problem has intensified now at a time when the velocity of money has increased after two years of encumbrance caused by covid-19 lockdowns.
Traders now follow 'rounding formula' to solve the shortages by equating cash memos to the nearest unit of the currency available. For example, if a consumer or end-user buys a product worth Tk 8.0, the trader, actually, demands Tk 10 or 25- per cent higher than the MRP.
Economists familiar with the development told the FE that higher inflation is the main reason behind the disappearance of the lower-denomination currencies in the market, as those buy nothing these days.
Amid the fastest disappearances, the government has yet to demonetize such currencies -- even kept Poisha-1 as the lowest unit of currency of Bangladesh, though it is not seen on the market in many decades.
Dr Habibur Rahman, Chief Economist at the central bank of Bangladesh --- Bangladesh Bank (BB) --- has an explanation for such extinction of small money at a time of high price. "The simple answer is uselessness [of the lower-denomination notes and coins] in the market," he told the FE.
Inflation weakens the purchasing power of money. When the lowest-value transaction considerably exceeds the face value of the lowest unit of currency, then it loses out its power as money.
"Money or medium of exchange is money only if it has value. If it doesn't have value, it is no longer money," he argues.
"If you give a beggar one-taka coin, do you think the beggar will take it from you happily?" What is he going to use it for? Dr Rahman quipped.
His argument is more or less consistent as the lower-denomination coins in Latin American country Argentina -- peso -- also discontinued on grounds of higher inflation there. The two-time FIFA winner is one of the top 'hyperinflation' economies in the world. Bangladesh, by contrast, never faced hyperinflation. But its 5.0- 6.0- per cent yearly average, its cumulative rates over the years, is a matter to reckon with.
As prices of the commodities get higher and higher, people prefer to hold bigger notes as the smaller ones do not enable them to do lots of purchases, argues Dr M Masrur Reaz, another economist and chairman at the Policy Exchange of Bangladesh, during a WhatsApp conversation with this scribe.
"With lower demand, smaller denominations tend to be less available in the market," Dr Reaz told the FE while explaining the reason behind the disappearance of the currencies.
But, he mentioned another argument: there is a lack of consistency between the rate of inflation and the rate of disappearance of small currencies from the market.
"The official rate of inflation remained much lower than the rate of the disappearance. To my mind, the actual inflation will be higher otherwise why the smaller denominations are driven out from the market so quickly".
However, there is another reason for the disappearance of small coins from the market: when metal prices shot up over the face value of the coins, it melted down to derive higher value by a section of unscrupulous people or traders.
Once coffer, a precious metal, used to be used for minting coins, especially for minting Poisha-5, but now they do not exist as the metal now more expensive. The use of aluminium and bronzes were in the past but presently coins are made of stainless steel or SS.
However, the use of Poisha 10 is very much available in the financial market, for example, in the trading of shares and accounting of interests on investments.
Such government currencies, called treasury notes as these belong to the government, were invented in order to combat financial crises especially when the central bank disagrees to comply with the central government's order or advice to circulate the money.
And the seigniorage benefits or a difference between the production cost of currencies and their face values is used to feed the government deficits.
Historically, the practice of minting such treasury notes was introduced during British Prime Minister Winston Churchill's period soon after World War II.
Mr Churchill discovered it as the then Governor of the Bank of England refused to print money as per directions of the British premier, and since then, it has now been a practice of government keeping her own notes.
However, commenting on the shortage of such-denomination notes and coins in circulation, Zakir Hossain Chowdhury, managing director at the Bangladesh Security Printing Corporation, popularly called 'Takshal' at Shimultoly of Gazipur, told the FE that they produce notes of such denominations upon demand from the government.
The Corporation has no facility for minting coins. They print all types of paper currencies. Bangladesh's government mainly procures it from European countries like France, Finland and Czechoslovakia.
"We produce lower-denomination treasury notes upon demand from the government," says Mr Chowdhury.
He says the one-taka note is not being printed for long, since1993. The Tk-2 note is also not being printed at the Corporation right this moment.
"During my one-year tenure, I did not print Tk2 notes. I printed Tk 5 notes seldomly," the chief keeper of Takshal adds.
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