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Nations Wrestle With Coin Shortages
 | By Richard Giedroyc, World Coin News
April 15, 2008 |
South Korea is one of many countries that in recent months has been suffering from a shortage of coinage in circulation. The National Assembly is currently considering legislation that would make "distortion" of Korean coins illegal, but while such legislation is being considered the central bank may want to re-examine itself.
According to a Feb. 20 article written by Yoon Ja-young appearing in The Korea Times newspaper, "A citizen named Yoon Han-jo reported seeing a vending machine that makes a leaf-shaped pendant out of a 10-won coin, for 1,000 won, at the website of the central bank."
The article says there is such a machine at the Busan Cultural Center.
What was the reaction of the central bank, you ask? An unnamed central bank official is quoted in the same article as saying, "It is against the public good to deliberately damage coins or bills, as it disrupts the circulation of money and the order of the economy. It is banned in some countries."
Bank of Korea sources indicate it now costs more than 20 won to produce a 10-won coin. South Korea's coins and bank notes are produced by the Korea Minting & Security Printing Corporation. The coins and currency recycle to banks through deposits and by paying taxes in cash. Just as in the United States severely worn coins and notes are returned to the central bank, are destroyed, and replaced.
According to Bank of Korea figures 137.2 billion won at face value in coins were issued during 2007, however only 16.7 billion won (about 12.2 percent) was redeemed. More specifically, only 9.4 percent or about 276 million of the 2.9 billion issued in 10-won coins were redeemed. The bank suggests many of these coins are being hoarded by consumers.
While South Korea looks to outlaw mutilation of its costly 10-won coins India is taking constructive measures to resolve its coinage crisis, working with the General Post Office to get sufficient coinage into circulation.
In early March the Reserve Bank of India and the GPO agreed to a pilot program through which the post office would be allowed to exchange coins, something the local banks have failed to do.
The program will make 1- and 2-rupee coins available in exchange for bank notes at specific post offices on a three-month trial program. The post office hopes to extend the program to 15 more post offices in the Bhubaneswar region, an area where the coin shortage has been chronic since many of the coins are smuggled over the border into neighboring Bangladesh. Once in Bangladesh the coins are sold for more than their face value, with many of the coins made into razor blades and other commodities which are worth more than is the face value of the coins.
Without the assistance of the post office many merchants in India are forced to used street vendors acting as middlemen to obtain sufficient coinage to be used in commerce. These vendors make a profit off the exchange between coins and paper bank notes.
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