The Bangko Sentral ng Pilipinas (BSP) said it will save as much as P2.4 billion in circulating polymer banknotes which has a longer lifespan compared to paper-based money.
The P1,000 polymer banknotes have been on a test run since April this year with an initial 10 million pieces in circulation along with its New Generation Currency (NGC) designed paper version which has a 20-percent abaca content.
BSP officials told the recent Senate hearing on polymer and currencies, which questioned BSP’s decision on choosing polymer banknotes at this time and its impact on the abaca sector, that use of polymer would result in lower replacement cost and higher production cost savings.
“Using data on the actual volume of 2021 new banknote withdrawals by banks from the BSP and lifespan assumptions ranging from 2.5 times to 4 times longer than that of paper, estimated production savings amount to P1.2 –2.4 billion, holding other factors constant,” according to BSP Deputy Governor Mamerto E. Tangonan.
“Higher production savings would redound to higher net profits, 50 percent of which accrues to the National Government (NG),” he told the recent Senate Committee on Banks, Financial Institutions and Currencies deliberations on polymer.
Tangonan said that at the end of the polymer circulation test which is until 2023, the BSP will come out with its findings on weather or not plastic-based banknotes present more benefits to Filipinos compared to paper-based banknotes.
“(The BSP) has developed a polymer evaluation framework that consist of empirical studies to be undertaken no later than 2024 – these would help us assess objectively if the reported benefits hold under Philippine condition,” Tangonan assured politicians and the abaca industry players who were present during the Senate deliberations.
The BSP’s planned polymer evaluation framework will cover the following: carbon footprint analysis (lifecycle analysis); microbial contamination analysis; perception surveys and sentiment analysis; and banknote lifespan analysis.
Tangonan explained further that with a longer lifespan, banknote issue expenses “could be reduced by 40 percent to 60 percent per experience of other central banks.
He cited as examples the Bank of England which documented reduced production costs by 25 percent or about £100 million in savings over a ten-year period while Australia had $1 billion net savings over the past 25 years since it switched to polymer money. There are 56 countries that use polymer banknotes.
At the moment, the BSP’s printing facilities are only equipped to print paper-based banknotes. The polymer banknotes are outsourced and printed by Note Printing Australia, a subsidiary of the Reserve Bank of Australia.
Meantime, in printing paper-based banknotes, the BSP uses 80 percent cotton and 20 percent abaca which is a banana fiber produced in the Philippines.
Tangonan said BSP has accredited local abaca pulp suppliers Pulp Specialties Philippines Inc. and Albay Agro-Industrial Development Corp.
The BSP imports the banknote paper or outsourced finished banknotes from foreign manufacturers, he added.
Meanwhile, Tangonan said the estimated share of banknotes’ abaca content to total volume of abaca fiber production in 2020 is about two percent while the share of the abaca content to abaca export earnings is less than two percent when the BSP had multi-year procurement.
The BSP official also informed the Senate that the circulation test of 500 million pieces of P1,000 polymer banknotes is estimated to affect 0.2 percent to 0.4 percent of abaca farming jobs or about 210 – 481 jobs, and 0.1 percent to 0.2 percent of abaca export revenues amounting to P8.5 million to P17 million.
The central bank plans to circulate more polymer banknotes in different denominations such as P500 and P100 in the future, especially if the public will adapt well to the first batch of polymer circulation.
The BSP paid Note Printing Australia P3.7 billion to produce, supply and deliver 500 million pieces of P1,000 polymer banknotes.
Meantime, the BSP in July launched a dedicated webpage for the polymer banknotes to increase public awareness and encourage its use.
The website contains information of the circulation and release timeline of the polymer banknotes which has been initially circulated last April for a limited 10 million pieces, part of the 500 million pieces that BSP will circulate until 2023.
The BSP has announced earlier that the banking networks’ cash-processing machines including automated teller machines (ATM) will be able to dispense polymer banknotes by end-December this year.
At the moment, polymer banknotes are available via over-the-counter-servicesof banks.