Demonetisation and it’s meaning. How many times and countries have applied it.

What is demonetization?

Demonetisation the act of banning a currency from its status of being a legal tender. It occurs during a change applied to the national currency. The current forms of money have been removed from circulation and abolished. This thus replaces new types of currencies whether notes or coins. A country may also decide to return the old currency with entirely new values of currency's or sometimes they may just choose to change the design or material. The validity of a currency expires, and date is specified to get rid of such holdings. This process takes a lot of time and is highly sophisticated. Demonetization creates significant economic distress and takes a lot of time to resolve problems. The government needs the full support of the public to put such a feature. This must take place as some problems occur that may put the citizens under the track.

It is also a protest against corruption. It takes place for the following reasons:

  1. To combat inflation
  2. To remove corruption and crime (tax evasion etc.)
  3. Discouraging a cash-dependent economy
  4. Finally, to facilitate trade.

How many countries have implemented it and when?

The coinage act of 1873 demonetized silver as legal tender of the united states to fully adopt the gold standard. Many coins such as the two and three cents piece and half dime were stopped. This withdrawal from the economy resulted in a reduction in the money with the public. It thus leads to a 5-year economic depression in the entire country. With regards to this and pressure from their farmers, silver miners, and refiners the Bland Ellicent Act got silver back into the markets in 1878.

The European Union began to use the Euro in 2002 as their official currency. This occurred for trade purposes. When this was introduced in physical form the old national currencies such s the German mark, The French Frank and The Italian Lira were all abolished. However, these currencies remained convertible to Euros for a long time at fixed exchange rates to assure the economy faced no problems.

The measure was never new. Many other countries followed demonetization before. Some countries met the purpose of implementing it, and some of them failed horribly. Some of the countries that implemented this regime are as follows:


The naira replaced the pound. Each naira was equal to two pounds. The country had implemented demonetization in the 1980's under the reign of Muhammadu Buhari. The country, however, failed miserably as it was already a debt-ridden country.


In December 2016 Pakistan implemented this strategy as it brought out new designs in their currencies. The citizens had gotten time to exchange the notes for new notes as the government announced it 1.5 years ago.


Ghana went on to change their 50 cedis notes to curb tax evasion and remove a lot of liquidity. Thus the people in the country supported the black market and started investing in physical assets which then went on to make the economy weak.


In 2015 President Robert Mugabe issued notices to remove inflation through insane value notes. Zimbabwe had a hundred trillion dollar note. Demonetisation got the value down to 5 dollars, and the currency went on e-bay for sale. This strengthened the US economy and dollar even more.


It became the first ever country to introduce polymer notes to stop counterfeiting. Since only the material changed from paper to plastic, there were no effects on the economy and its working.

North Korea

When demonetization took place in this country, people suffered hunger and poverty. Kim-Jong 2 introduced reforms that kicked two zeros from the face value of the old currency to banish black market.

Soviet Union

An order by Mikhail Gorbachev to withdrew large ruble bills to remove the black market came into force. Demonetisation broke soviet into Two and got his authority down as the masses did not follow the move.


Myanmar's military banned around 80% of the value of money In 1987 to curb the black market. This decision led to the economic disruption leading to mass protests and killed many people.

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