Many countries print their money abroad
As reported by BBC, in India in August there was also a scandal around money, but for a different reason: the newspaper South China Morning Post reported that Indian rupees would be printed in China. The Indian government denied this report, stating that in fact all cash in India is printed at four Indian printing houses under high security conditions.
Both these cases raise an involuntary question: does it matter where the money we use is printed? Some countries, such as India, indeed print all cash domestically. In the United States, there is a federal law requiring the printing of American banknotes on its own sovereign territory.
However, many other states often turn to foreign mints or companies, and some small countries, such as Liberia, have no mint of their own at all.
There are a number of commercial companies specializing in the production of banknotes and coins. According to one of them – the British De La Rue, the commercial market in this sector produces 11% of all banknotes produced worldwide. The largest manufacturers in this industry are located in Europe and North America.
De La Rue, which did not win the contract to print new British passports this year, is the world's largest banknote producer. It prints money for about 140 national central banks. If you stacked the banknotes it prints in a week, it would reach the height of two Mount Everests.
Its competitor – the German company Giesecke & Devrient – prints banknotes for about 100 central banks. Among the major producers are the Canadian Banknote Company and the American-Swedish Crane.
Although this is a large industry, it does not advertise itself much and tends to conduct its business confidentially. BBC contacted a number of such companies, but all refused to disclose which central banks they print money for. Many governments also prefer to remain silent on this issue. They can be understood, recalling the recent scandal in India, where such information sparked a surge of nationalism and protests.
Why don't all countries print their own money? First of all, because it is expensive and complicated. Firms that print banknotes have been doing this for hundreds of years and have accumulated enormous experience. They have special equipment, production capacities, and strictly observe security standards.
De La Rue began producing banknotes in 1860. The first country to order it to print its national currency was Mauritius. It is De La Rue that also produces the new plastic banknotes of the Bank of England in denominations of 5 and 10 pounds.
For small countries, it makes sense to order the printing of banknotes abroad. If they need a relatively small number of banknotes, it is not worth investing large sums in purchasing expensive presses. In addition, issuing money requires special knowledge in the fight against counterfeiters.
In the United States, approximately seven billion banknotes are printed annually. A typical company printing banknotes produces between 1 and 1.4 billion banknotes per year. Therefore, if a country's central bank needs a smaller volume, it is not profitable for it to print them itself.
In the Solomon Islands, with a population of only 600,000, it was found beneficial to order the design and printing of new banknotes from De La Rue. Among other countries using the services of this British company are Macedonia and Botswana.
How risky is such outsourcing? A characteristic example is provided by the experience of Libya. In 2011, the British government seized 1.86 billion dinars (about one billion pounds), 140 million of which were printed by De La Rue. This led to a cash shortage in Libya in the final days of Colonel Muammar Gaddafi's regime. However, such cases are rare. The Libya incident did not affect the banknote production industry, although it shocked experts.
Most countries in the world continue to print their own money. In Russia, this is done by the state company Goznak. In the global market for banknote paper and banknotes, the enterprise is among the leading world suppliers. The company's products are ordered by more than 20 countries in Asia, Africa, and Europe, as well as CIS countries. In 2014, Goznak supplied over 1.1 billion finished banknotes for export. In addition, the company produces passports and coins for export.
However, in recent years, people in developed countries are increasingly using less cash, preferring contactless payments using cards and smartphones. According to the People's Bank of China, in 2016, only 10% of all payment transactions in China's retail trade were made with cash. Among Chinese, payment applications on smartphones are becoming increasingly popular.
But despite new technologies, the demand for banknotes worldwide continues to grow. Globally, the growth is 3.2%, and the market size is estimated at $10 billion. The demand for banknotes is growing fastest in Asian and African countries. So it is not a matter of complete replacement of cash in the coming years.