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 reining 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. In 2002, euros in cash form was introduced.
| Country | Old unit | Exchange rate (old units per €) |
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 (old:new) | Old unit | Year | Country | Reason | Note |
|---|---|---|---|---|---|---|
| Hungarian forint | 4×1029∶1 | Hungarian pengő | 1946 | Hungary | Hyperinflation | |
| Zimbabwean dollar (4th) | 1×1012∶1 | Zimbabwean dollar (3rd) | 2009 | Zimbabwe | Hyperinflation | Subsequently abandoned. |
| Greek drachma (2nd) | 50,000,000,000∶1 | Greek drachma (1st) | 1944 | Greece | Hyperinflation | |
| Zimbabwean dollar (3rd) | 10,000,000,000∶1 | Zimbabwean dollar (2nd) | 2008 | Zimbabwe | Hyperinflation | |
| Rentenmark | 1,000,000,000∶1 | Papiermark | 1923 | Germany | Hyperinflation | |
| Yugoslav 1994 dinar | 1,000,000,000∶1 | 1993 dinara | 1994 | Yugoslavia | Hyperinflation | Lasted for 23 days. |
| Chinese "silver" yuan | 500,000,000∶1 | "gold" yuan | 1949 | China (Republic of China) | Hyperinflation | |
| Hungarian forint | 200,000,000∶1 | Hungarian adópengő | 1946 | Hungary | Hyperinflation | |
| Yugoslav novi dinar | 13,000,000∶1 | 1994 dinara | 1994 | Yugoslavia | Hyperinflation | Initially pegged to the Deutsche Mark upon renomination, but subsequently subject to drift. |
| Nicaraguan córdoba (oro, 3rd) | 5,000,000∶1 | Nicaraguan córdoba (2nd) | 1991 | Nicaragua | Inflation | |
| Chinese "gold" yuan | 3,000,000∶1 | (old) yuan | 1948 | China (Republic of China) | Inflation | |
| Nouveau zaïre | 3,000,000∶1 | First Zaïre | 1993 | Democratic Republic of the Congo | Inflation | |
| Boliviano | 1,000,000∶1 | Peso boliviano | 1985 | Bolivia | Inflation | |
| Peruvian nuevo sol | 1,000,000∶1 | Peruvian inti | 1991 | Peru | Hyperinflation | The "nuevo" designation lasted until 2015. |
| Yugoslav 1993 dinar | 1,000,000∶1 | 1992 dinara | 1993 | Yugoslavia | Hyperinflation | no official designation |
| Second Kwanza | 1,000,000∶1 | Kwanza reajustado | 1999 | Angola | Inflation | |
| Turkish new lira | 1,000,000∶1 | Turkish lira | 2005 | Turkey | Inflation | The "new" designation lasted until 2009. |
| Hryvnia | 100,000∶1 | Karbovanets (third) | 1996 | Ukraine | Inflation | |
| Second Congolese franc | 100,000∶1 | Nouveau zaïre | 1998 | Democratic Republic of the Congo | Inflation | |
| Bolívar Soberano | 100,000∶1 | Bolivar Fuerte | 2018 | Venezuela | Hyperinflation | |
| New Taiwan dollar | 40,000∶1 | Taiwan dollars | 1949 | Taiwan (Republic of China) | Inflation | "new" is an official designation and is still used in official documents |
| United States dollar | 25,000∶1 | Sucre | 2000 | Ecuador | Inflation | Full dollarization for banknotes. Ecuador also issues centavo coins. |
| Hungarian pengő | 12,500∶1 | Hungarian korona | 1927 | Hungary | Inflation | |
| Austrian schilling | 10,000∶1 | Austrian krone | 1925 | Austria | Inflation | |
| Second Renminbi yuan | 10,000∶1 | First Renminbi yuan | 1955 | China (People's Republic of China) | Inflation | |
| Peso argentino | 10,000∶1 | Peso ley | 1983 | Argentina | Inflation | |
| Yugoslav 1990 dinar | 10,000∶1 | 1966 dinara | 1990 | Yugoslavia | Inflation | |
| Peso (convertible) | 10,000∶1 | Austral | 1992 | Argentina | Inflation | |
| Polish złoty (3rd) | 10,000∶1 | Polish złoty (2nd) | 1995 | Poland | Inflation | |
| Romanian leu (4th) | 10,000∶1 | Romanian leu (3rd) | 2005 | Romania | Inflation | |
| New Ghanaian cedi | 10,000∶1 | Cedi | 2007 | Ghana | Inflation | |
| Third Belarusian ruble | 10,000∶1 | Second Belarusian ruble | 2016 | Belarus | Inflation | |
| Azerbaijani new manat | 5,000∶1 | Second Azerbaijani manat | 2006 | Azerbaijan | Inflation | |
| Turkmenistani new manat | 5,000∶1 | (old) manat | 2009 | Turkmenistan | Inflation | |
| Real | 2,750∶1 | Cruzeiro real | 1994 | Brazil | Inflation | Anchor currency: United States dollar |
| Cruzeiro (antigo) | 1,000∶1 | Real (old) | 1942 | Brazil | Inflation | The cruzeiro was an alternative name for one mil réis. |
| Greek drachma (3rd) | 1,000∶1 | Greek drachma (2nd) | 1954 | Greece | Inflation | |
| Chilean escudo | 1,000∶1 | First Chilean peso | 1960 | Chile | Inflation | |
| Peso boliviano | 1,000∶1 | First boliviano | 1963 | Bolivia | Inflation | |
| Cruzeiro (novo) | 1,000∶1 | Cruzeiro (antigo) | 1967 | Brazil | Inflation | |
| First zaïre | 1,000∶1 | First congolese franc | 1967 | Democratic Republic of the Congo | Inflation | |
| Nuevo peso | 1,000∶1 | Peso moneda nacional | 1973 | Uruguay | Inflation | |
| Chilean peso | 1,000∶1 | Chilean escudo | 1975 | Chile | Inflation | |
| Argentine austral | 1,000∶1 | Argentine peso (1983) | 1985 | Argentina | Inflation | |
| Peruvian inti | 1,000∶1 | Peruvian sol (1863) | 1985 | Peru | Inflation | |
| Cruzado | 1,000∶1 | Cruzeiro (novo) | 1986 | Brazil | Inflation | |
| New Shekel | 1,000∶1 | Shekel | 1986 | Israel | Inflation | |
| Nicaraguan córdoba (2nd) | 1,000∶1 | Nicaraguan córdoba (1st) | 1988 | Nicaragua | ||
| Cruzado Novo | 1,000∶1 | Cruzado | 1989 | Brazil | Inflation | |
| Cruzeiro real | 1,000∶1 | Cruzeiro (third) | 1993 | Brazil | Inflation | |
| Nuevo peso mexicano | 1,000∶1 | Peso mexicano | 1993 | Mexico | Inflation | "nuevo" was a temporary designation dropped in 1996 |
| Peso uruguayo | 1,000∶1 | Nuevo peso | 1993 | Uruguay | Inflation | |
| Croatian kuna | 1,000∶1 | Croatian dinar | 1994 | Croatia | ||
| Kwanza reajustado | 1,000∶1 | Novo kwanza | 1995 | Angola | Inflation | |
| Second Russian ruble | 1,000∶1 | First Russian ruble | 1998 | Russia | Inflation | |
| Bulgarian new lev | 1,000∶1 | Bulgarian lev | 1999 | Bulgaria | Inflation | Anchor currency: German mark |
| Surinamese dollar | 1,000∶1 | Surinamese guilder | 2004 | Suriname | Inflation | Old coins denominated in cents were declared to be worth their face value in the new cents. |
| New Mozambican metical | 1,000∶1 | (old) meticais | 2006 | Mozambique | Inflation | |
| Zimbabwean dollar (2nd) | 1,000∶1 | Zimbabwean dollar (1st) | 2006 | Zimbabwe | Inflation | |
| Second Sudanese pound | 1,000∶1 | First Sudanese pounds | 2007 | Sudan | Inflation | Currency unification (peace treaty) |
| Bolivar Fuerte | 1,000∶1 | (old) Bolivar | 2008 | Venezuela | Inflation | |
| Zambian kwacha | 1,000∶1 | (old) Kwacha | 2013 | Zambia | Inflation | |
| São Tomé and Príncipe dobra (2nd) | 1,000∶1 | São Tomé and Príncipe dobra (1st) | 2018 | São Tomé and Príncipe | Inflation | |
| Liberation đồng | 500∶1 | Đồng | 1975 | South Vietnam | Fall of Saigon | |
| South Korean hwan | 100∶1 | first South Korean won | 1954 | Republic of Korea | Inflation after Korean War(1950-1953), Independence from Japan(1945) | |
| New French Franc | 100∶1 | French Franc | 1960 | France | Inflation | "New" was a temporary designation dropped in 1963 |
| New Finnish markka | 100∶1 | Finnish markka | 1963 | Finland | Inflation | |
| Yugoslav 1966 dinar | 100∶1 | 1944 dinara | 1966 | Yugoslavia | Inflation | |
| Peso ley | 100∶1 | Peso moneda nacional | 1970 | Argentina | Inflation | |
| Icelandic króna | 100∶1 | Icelandic króna | 1981 | Iceland | Hyperinflation | |
| Second Ugandan shilling | 100∶1 | First Ugandan shilling | 1987 | Uganda | Inflation | |
| Lithuanian litas | 100∶1 | Talonas | 1993 | Lithuania | Inflation | |
| Second macedonian denar | 100∶1 | First macedonian denar | 1993 | North Macedonia | ||
| Second Sudanese pound | 100∶1 | Sudanese dinars | 2007 | Sudan | Inflation | Currency unification (peace treaty) |
| North Korean won (2nd) | 100∶1 | North Korean won (1st) | 2009 | North Korea | Inflation | Redenomination by state |
| CFA franc | 65∶1 | Guinea-Bissau peso | 1997 | Guinea-Bissau | monetary union | West African CFA franc |
| Yugoslav 1944 dinar | 40∶1 | Independent State of Croatia kuna | 1944 | Yugoslavia | Reconstituted Yugoslav Federation dinar replacing currency in use in its constituents | |
| Peso moneda nacional | 25∶1 | Peso moneda corriente | 1881 | Argentina | Inflation | |
| Yugoslav 1944 dinar | 20∶1 | Serbian 1941 dinar | 1944 | Yugoslavia | Reconstituted Yugoslav Federation dinar replacing currency in use in its constituents | |
| Nicaraguan córdoba (1st) | 12.5∶1 | Nicaraguan peso | 1912 | Nicaragua | ||
| South Korean won (2nd) | 10∶1 | South Korean hwan | 1963 | Republic of Korea | Inflation | |
| Guinean syli | 10∶1 | Guinean franc (1st) | 1971 | Guinea | ||
| Israeli shekel (1st) | 10∶1 | Israeli pound | 1980 | Israel | Inflation | |
| Azerbaijani manat (2nd) | 10∶1 | Soviet ruble | 1992 | Azerbaijan | Independence (from the Soviet Union) | |
| Sudanese dinar | 10∶1 | First Sudanese pounds | 1992 | Sudan | Inflation | Applied only to North Sudan |
| Yugoslav 1992 dinar | 10∶1 | 1990 dinara | 1992 | Yugoslavia | Inflation | |
| First Belarusian ruble | 10∶1 | Soviet ruble | 1994 | Belarus | Break-up of the 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 Mauritanian ouguiya | 10∶1 | First Mauritanian ouguiya | 2018 | Mauritania | Inflation | The redenomination was an opportunity for the central bank to introduce more secure polymer banknotes. |
| United States dollar | 8.75∶1 | Colón | 2001 | El Salvador | dollarization | |
| Peso moneda corriente | 8∶1 | Real | 1826 | Argentina | ||
| Ouguiya | 5∶1 | CFA franc | 1973 | Mauritania | ||
| Ariary | 5∶1 | Franc malgache | 2005 | Madagascar | From 1961, banknotes were issued denominated in both francs and ariary. | |
| CFA franc | 4∶1 | Ekwele | 1985 | Equatorial Guinea | monetary union | Central African CFA franc |
| CFA franc | 2∶1 | Franc malien | 1984 | Mali | monetary union | West African CFA franc |
| Ghanaian cedi | 1.2∶1 | Old cedi | 1967 | Ghana | Decimalisation, change of government | This was an opportunity to remove Kwame Nkrumah from every denomination. |
| Hungarian korona | At par |
Austro-Hungarian krone | 1919 | Hungary | Break-up of Austria-Hungary | |
| Austrian krone | At par |
Austro-Hungarian krone | 1920 | Austria | Break-up of Austria-Hungary | |
| First Guinean franc | At par |
CFA franc | 1959 | Guinea | Independence | |
| Franc malien | At par |
CFA franc | 1962 | Mali | Independence | |
| First Ugandan shilling | At par |
East African shilling | 1966 | Uganda | Independence | |
| Peseta guineana | At par |
Spanish peseta | 1969 | Equatorial Guinea | Independence | |
| First Kwanza | At par |
Second Angolan escudo | 1975 | Angola | Independence | |
| Ekwele | At par |
Peseta guineana | 1975 | Equatorial Guinea | ||
| Guinea-Bissau peso | At par |
Portuguese Guinean escudo | 1975 | Guinea-Bissau | Independence | |
| Franc guinéen | At par |
Syli | 1985 | Guinea | ||
| Novo kwanza | At par |
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 |
| Cruzeiro (third) | At par |
Cruzado Novo | 1990 | Brazil | renaming | |
| Croatian dinar | At par |
Yugoslav 1990 dinar | 1991 | Croatia | Independence | |
| Talonas | At par |
Soviet ruble | 1991 | Lithuania | Independence (from the Soviet Union) | |
| Slovenian tolar | At par |
Yugoslav 1990 dinar | 1991 | Slovenia | Independence | |
| First macedonian denar | At par |
Yugoslav 1990 dinar | 1992 | North Macedonia | Independence | The first denar was a temporary currency, no coins were issued |
| Karbovanets (third) | At par |
Soviet ruble | 1992 | Ukraine | Independence (from the Soviet Union) | |
| Đồng (unified) | 0.8∶1 | Liberation đồng | 1978 | South Vietnam | Unification | |
| Austro-Hungarian krone | 0.5∶1 | Austro-Hungarian gulden | 1892 | Austria-Hungary | monetary union | Moving from silver to gold standard |
Alternatives
Japanese invasion money suffered from heavy inflation. At the end of World War II governments of liberated countries and territories opted to simply declare them worthless.
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.
References
- "It's decided: 2005 talk instead of 1 Leu RON 10,000; Ziarul Financiar". Zf.ro. 2004-01-29. Retrieved 2016-12-05.