Does the Number of Banknotes in Circulation Already Exceed 900 Billion?
If every central bank and monetary authoritySee Central Bank More were to consistently publish the number of banknotes in circulation, this article wouldn’t be necessary. However, that isn’t the case, and the question is raised every now then in discussions. Various estimates, some around 550 billion, are cited in industry reports and presentations, which prompted me to dig deeper as the numbers seemed low. This article highlights some of the challenges involved when considering the question and provides an estimate for further discussion.
Banknotes are a liability on the balance sheetA piece of paper or substrate of 800 mm by 700 mm, on which banknotes are printed. The “sheet to sheet” printing technique is the most widely used in printing of banknotes, but the roller printing technique also exists. More of the issuing central bank and the first question is evidently which part of this liability is really ‘in circulation’. It is normal that some notes have been lost, burnt or taken abroad by tourists and seldom return. These amounts differ by denominationEach individual value in a series of banknotes or coins. More, low denominations having a higher share. Other than that, these notes are impossible to count.
More importantly, there might be banknotes which are no longer legal tenderMoney that is legally valid for the payment of debts and must be accepted for that purpose when offered. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered (“tendered”) in payment of a debt extinguishes the debt. There is no obligation on the creditor to accept the tendered payment, but the act of tendering the payment in legal tender discharges the debt. More, but have not yet been demonetised and can still be redeemed by the respective central bank, even if they haven’t been issued for decades. Some central banks separate these banknotes on their balance sheet, and typically in the course of time there are only very minor changes in the annual figures. These notes that are mostly found in death estates or similar are in principle no longer in circulation and hence I have tried to exclude them in the following study.
The treatment of such denominations has a significant impact on calculations. To illustrate the impact let us look at the situation of the two most populated nations of the world, India and China. These countries have the highest number of banknotes in circulation and are in this respect, in their own category.
India and China
India enacted the well-known demonetisation of ₹500 and ₹1,000 banknotes in November 2016. A new redesigned series was thereafter issued, which included the ₹500 but not a ₹1,000 note. The ₹2 and ₹5 notes, which were excluded already from the earlier new designs and upgrades in 1996 and 2011 respectively, weren’t included either.
The ₹1,000 denomination is an example of the impact of the withdrawal and demonetisationSee Demonetised banknote. More of a high denomination. After demonetisation, only around 1% of the ₹1,000 notes were not redeemed, which is quite a typical percentage for a high denomination.
The Reserve BankSee Central bank. More of India (RBI) issued a new high denomination, a ₹2,000 note in November 2016, primarily to meet the currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More requirements after the withdrawal of the legal tender status of ₹500 and ₹1,000 banknotes. In May 2023 the RBI decided to withdraw the ₹2,000 note, which continues to be a legal tender. Recently, circa 31 million notes were still in circulation, which meant that 98.2% have been withdrawn since the announcement of the withdrawal decision.
The ₹2 and ₹5 are examples of low denominations which are still included in the RBI liability, even if they are not part of the current rupee series. At the end of 2024 the amount of these two denominations still in circulation was in total 11 billion pieces. The remaining amount of ₹2 notes was slightly less than 4.3 billion pieces and has been stable since 2015. The number of ₹5 notes in circulation is currently decreasing annually, with some 20 million pieces. Depending on whether only those denominations are included which belong to the current series, or also the ₹5, or both the ₹2 and ₹5, the number of Indian rupee banknotes in circulation at the end of 2024 would be 149.4 or 145.2 or 138.4 billion notes respectively. In the current study, the ₹5 note is included in the calculations but not the ₹2.
For China the impact of the assumption as to which denominations are included in the calculations is even more significant. The balance sheet of the People’s Bank of China (PBoC) gives an interesting illustration in this respect. In the current Chinese note series the lowest denomination is the 1 yuan. The yuan is divided into 10 jiaos and 100 fens, which are currently coinA coin is a small, flat, round piece of metal alloy (or combination of metals) used primarily as legal tender. Issued by government, they are standardised in weight and composition and are produced at ‘mints’. More denominations, but the liability of the PBoC still includes the notes denominated in jiaos and fens.
The notes denominated in fens were withdrawn from circulation in 2007, and their value in circulation hasn’t changed since 2012, which is the earliest year from which denominational data is available on the PBoC website. However, the jiao denominated notes are not withdrawn from circulation and the value of 5 jiao notes in circulation even increased in 2023.
Depending on whether only current denominations are included or also jiao-denominated or both jiao- and fen-denominated notes, very different figures will be reached. According to the 2023 Annual Report of the PBoC, the amount in the first case would be 257 billion notes, in the second 369 billion and in the third 410 billion. In the current study it has been considered appropriate to include the jiao-denominated notes in the calculations, but not the fen-denominated notes.
Hence, according to the assumptions used, the two most populated nations have together more than 500 billion notes in circulation.
The impact of the assumptions regarding the other currencies is not of the same order. However, particularly those issuing authorities which do not publish their figures regularly or not at all create certain challenges.
Other Currencies
Even if China and India form a category of their own, a few nations or currency areas have tens of billions of notes in circulation. The amount of US dollarMonetary unit of the United States of America, and a number of other countries e.g. Australia, Canada and New Zealand. More notes is more than 55 billion (2024), euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More notes exceed 30 billion (2024) and Indonesian rupiah notes 29 billion (2024). That means another 100-plus billion pieces.
The US dollar note statistics include not only the Federal Reserve notes, but also US notes issued by the US Treasury from 1862 to 1971 and other types of notes which haven’t been issued during recent decades, but which remain legal tender. The figures therefore include, for example, the higher denomination $500 to $10,000 notes, which haven’t been issued since 1969. However, their inclusion in the calculations isn’t visible in the numbers used.
That said, considering that the number of US dollar notes has almost tripled during the last quarter of a century, the error margin by including published figures in the calculations is not significant. The history of euro notes is shorter and even if the €500 note isn’t issued any more, it is still circulating and changing hands.
The circulation of several other currencies also exceeds 10 billion notes and even more currencies 1 billion notes, down to the currencies for which the volume is counted in millions. Because some issuers don’t publish data, the amounts should be estimated and a method for the estimation established. To proceed I started off with the data I have.
There are 234 countries and dependent territories. From these, only 154 had to be addressed because the rest use common currencies or currencies issued by another entity. From these 154 currencies a good 100 publish regularly information on the number of banknotes in circulation. In addition, several central bank colleagues have kindly provided me regularly with data for another ten currencies. Furthermore, by way of an occasional statement in a report, an interview, a press release or conference presentation, the amount could be raised to 130 currencies. As a result, I was able to get a figure, for example, for the currencies of the 50 most populated countries in the world, except in three cases.
The next step was to update some of the figures and to find an estimate for the remaining 24 currencies. For that purpose I classified the 130 currencies from which I had at least some data, based on the average value of a note in circulation within the size order of denominations (whether the average value was between the highest and second highest or second highest and third highest denomination etc). The result is depicted in Figure 1.
Fig 1: The average value of a note within the size order of denominations
According to Fig 1 the average value of a note was between the second and third highest denomination for a great majority of currencies (84/130). However, two other categories also had a certain incidence, and are therefore worth analysing.
The currencies which have an average value of the note between the highest and second highest denomination are typically currencies which haven’t changed the denominational structure for quite a while. Because of gradual inflation, the popularity of the highest and second highest denomination has grown continuously and the average value of a note rises up the hierarchy. Examples are the Australian dollar (denominational structure unchanged since 1984), the Japanese yen (also mostly as from 1984) and the Moroccan dirham (since 1996).
Another group of currencies belonging to this group are currencies with recent high inflation like the Lebanese pound (denominational structure unchanged since 2004) or the Turkish lira (since 2009).
Correspondingly, currencies which have the average value of a note between the third highest and fourth highest denomination are typically currencies which have recently issued a new highest denomination and have a diverse denominational structure. Examples are the Brazilian real (seven denominations and a new highest denomination has been issued in 2020) or the Uzbek som (seven denominations and a new highest denomination issued in 2022).
Another group of currencies belonging to this group are those which have a very popular lowest denomination, eg. The Bahamas or Cayman Islands dollar (63% and 68% of the volume respectively).
Based on this analysis I classified the currencies from which I missed recent data or any data at all to one of the above-mentioned classes. However, to reach a conservative estimate for the total number of notes in circulation, I used the value of the second highest denomination for the average value (ie dividing the notes in circulation by the value of the second highest denomination), in case the denominational structure indicated that the average value would be between the second and third highest denomination and similarly with the other classes.
Furthermore, there were a few currencies for which I couldn’t use this estimation method because no data was available on the value of notes in circulation. Most of them were minor currencies and I could make a rough estimate based on the volume of notes printed during the last ten years or so based on the serial numbers. Accordingly, at the very least a rough estimate on the number of notes in circulation was available for all 154 currencies, except the North Korean won.
The most recent data was used for the calculation (mostly end-2023 or -2024 figures). A relevant figure was tried for each currency focusing on notes ‘in circulation’. To take the Venezuelan bolivar as an extreme example, according to the published statistics there were 6.4 billion bolivar notes in circulation at the end of 2024. However, 5.84 billion notes were introduced before the redenomination (1,000,000:1) in October 2021, and their number had been stable since August 2022. Hence, 561 million pieces was used for Venezuelan bolivar.
The Result…
So, what was the result of this exercise? The estimate put together resulted in 921 billion banknotes. In view that conservative estimates have been used, it can be concluded that the number of banknotes in circulation is significantly more than 900 billion pieces.
Even if the number of notes in circulation of some currencies is decreasing, it might be only a question of time when the amount of 1 trillion notes in circulation will be exceeded. Of course, much depends on developments in China and India, not underestimating the efforts of other central banks in taking care of the access to and acceptance of cashMoney in physical form such as banknotes and coins. More by all stakeholders.