Redenomination

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In monetary economics, redenomination is the process of changing the face value of banknotes and 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[edit]

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 (i.e., 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
2nd Polish złoty = 1.8 million Polish marka = Swiss franc 1 April 1924
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.[citation needed]

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[edit]

All countries that previously had currencies based on pounds-shillings-pence (£sd) system (£1 = 20 shillings = 240 pence) have now adopted decimal currencies (currencies related by powers of 10), with several changing the name of the main currency unit at the same time. As of 2020, only two currencies are non-decimal, being the Mauritanian ouguiya and Malagasy ariary, with one of each divided into five subdivisory units.

Currency union[edit]

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[edit]

The most notable currency union today is the Eurozone. In 2002, euros in cash form were 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[edit]

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 The total value of all circulating pengő notes was less than 110 of a fillér.
Zimbabwean dollar (4th)
1×1012∶1
Zimbabwean dollar (3rd) 2009 Zimbabwe Hyperinflation Subsequently abandoned and replaced with Zimbabwean bond notes and the Zimdollar in February 2019 after a period of time in which numerous foreign currencies were used
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.
3rd Krajina dinar
1,000,000,000∶1
2nd Krajina dinar 1994 Republic of Serbian Krajina Hyperinflation
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 Anchor currency: Deutsche Mark
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
Polish złoty (2nd)
1,800,000∶1
Polish marka 1924 Poland Hyperinflation Anchor currencies: Swiss franc (equal in value, but not pegged) and United States dollar (pegged $1 = 5.18 zł)
To limit production costs of coins, only banknotes were printed until November 1924. To further limit such costs, 500,000-mark and 10,000,000-mark notes were cut in two and overprinted 1 GROSZ and 5 GROSZY in red.
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
2nd Krajina dinar
1,000,000∶1
1st Krajina dinar 1993 Republic of Serbian Krajina Hyperinflation
Georgian lari
1,000,000∶1
Georgian kuponi 1995 Georgia Hyperinflation
Second Kwanza
1,000,000∶1
Kwanza reajustado 1999 Angola Inflation
Transnistrian ruble (3rd)
1,000,000∶1
Transnistrian ruble (2nd) 2001 Transnistria Hyperinflation
Turkish new lira
1,000,000∶1
Turkish lira 2005 Turkey Inflation The "new" designation lasted until 2009.
Venezuelan bolívar (4th)
1,000,000∶1
Venezuelan bolívar (3th) 2021 Venezuela Hyperinflation
Hryvnia
100,000∶1
3rd Ukrainian karbovanets 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
4th Soviet ruble
50,000∶1
3rd Soviet ruble 1924 Soviet Union Hyperinflation To stop hyperinflation, the new currency was backed by gold.
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
2nd Soviet ruble
10,000∶1
1st Soviet ruble 1922 Soviet Union Hyperinflation A superunit, called a chervonets (червонец) was also introduced that year. It was worth 10 rubles.
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
4th Polish złoty
10,000∶1
3rd Polish złoty 1995 Poland Inflation For 2 years after the redenomination, the old currency coexisted with the new one, so prices had to be denominated in both currencies.
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
United States dollar
~6,900∶1[2]
Indonesian rupiah 1999 United Nations Transitional Administration in East Timor Start of UN administration
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
Moldovan leu
1,000∶1
Moldovan cupon 1993 Moldova Inflation
Peso uruguayo
1,000∶1
Nuevo peso 1993 Uruguay Inflation
Croatian kuna
1,000∶1
Croatian dinar 1994 Croatia
2nd Uzbekistani soum
1,000∶1
1st Uzbekistani soum 1994 Uzbekistan Inflation
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
Tajikistani somoni
1,000∶1
Tajikistani ruble 2000 Tajikistan Inflation
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
Sierra Leonean leone
1,000∶1
(old) Sierra Leonean leone 2021 [3] Sierra Leone Inflation
Liberation đồng
500∶1
Đồng 1975 South Vietnam Fall of Saigon
Turkmenistani manat
500∶1
7th Soviet ruble 1993 Turkmenistan Break-up of the Soviet Union
Kazakhstani tenge
500∶1
7th Soviet ruble 1993 Kazakhstan Break-up of the Soviet Union
3rd Haitian gourde
300∶1
2nd Haitian gourde 1872 Haiti
2nd Latvian lats
200∶1
2nd Latvian rouble 1993 Latvia Recycling old currency
Kyrgyzstani som
200∶1
7th Soviet ruble 1993 Kyrgyzstan Break-up of the Soviet Union
Armenian dram
200∶1
7th Soviet ruble 1993 Armenia Break-up of the Soviet Union
3rd Soviet ruble
100∶1
2nd Soviet ruble 1923 Soviet Union Hyperinflation
3rd Polish złoty
100∶1
2nd Polish złoty 1949 Poland Monetary reform [pl] All bank assets were revalued at a ratio of 100∶3.
South Korean hwan
100∶1
first South Korean won 1954 Republic of Korea Inflation after Korean War (1950–1953) and 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
Tajikistani ruble
100∶1
First Russian ruble 1995 Tajikistan Break-up of the Soviet Union
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
Guatemalan quetzal
60∶1
Guatemalan peso 1925 Guatemala
1st Latvian lats
50∶1
1st Latvian rouble 1922 Latvia Approval of "Regulations on Money"
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
2nd Haitian gourde
10∶1
1st Haitian gourde 1870 Haiti
5th Soviet ruble
10∶1
4th Soviet ruble 1947 Soviet Union Inflation
6th Soviet ruble
10∶1
5th Soviet ruble 1961 Soviet Union Monetary reform
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
Talonas
10∶1
7th Soviet ruble 1991 Lithuania Independence (from the Soviet Union) No coins denominated in talonas were issued.
Estonian kroon
10∶1
7th Soviet ruble 1992 Estonia Break-up of the Soviet Union
Azerbaijani manat (2nd)
10∶1
7th Soviet ruble 1992 Azerbaijan Break-up of 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
7th 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
1st Haitian gourde
8.25∶1
Haitian livre 1813 Haiti 8 livres and 5 sous. 1 sous was equal to 120 of a livre.
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
Mongolian tögrög
At par
4th Soviet ruble 1925 Mongolia
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
7th Soviet ruble
At par
6th Soviet ruble 1991 Soviet Union Monetary reform, money seizure 50-ruble and 100-ruble notes were withdrawn from circulation.
Croatian dinar
At par
Yugoslav 1990 dinar 1991 Croatia Break-up of Yugoslavia
Slovenian tolar
At par
Yugoslav 1990 dinar 1991 Slovenia Break-up of Yugoslavia
2nd Latvian rouble
At par
7th Soviet rouble 1992 Latvia Lack of money supply While Soviet roubles were still used in Latvia, it had to introduce its own currency to make its monetary policy independent.
Moldovan cupon
At par
7th Soviet ruble 1992 Moldova Break-up of the Soviet Union The cupon was a temporary currency, no coins were issued.
1st Krajina dinar
At par
Yugoslav 1992 dinar 1992 Republic of Serbian Krajina Break-up of Yugoslavia
1st Russian ruble
At par
7th Soviet ruble 1992 Russia Break-up of the Soviet Union
First Macedonian denar
At par
Yugoslav 1990 dinar 1992 North Macedonia Break-up of Yugoslavia The first denar was a temporary currency, no coins were issued
3rd Ukrainian karbovanets
At par
7th Soviet ruble 1992 Ukraine Break-up of the Soviet Union
Georgian kuponi
At par
7th Soviet ruble 1993 Georgia Break-up of the Soviet Union Only banknotes were issued.
1st Uzbekistani soum
At par
7th Soviet ruble 1993 Uzbekistan Break-up of the Soviet Union
Đồng (unified)
0.8∶1
Liberation đồng 1978 South Vietnam Unification
Austro-Hungarian krone
0.5∶1
Austro-Hungarian florin 1892 Austria-Hungary monetary union Moving from silver to gold standard

Alternatives[edit]

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.

See also[edit]

References[edit]

  1. ^ "It's decided: 2005 talk instead of 1 Leu RON 10,000; Ziarul Financiar". Zf.ro. 2004-01-29. Retrieved 2016-12-05.
  2. ^ "Historical Rates Tables - IDR; 25 October 1999". Xe. Retrieved 2 May 2021.
  3. ^ "Sierra Leone to cut three zeros from currency". 12 August 2021.