The increased demand of cash money (bills and coins) is a result of the concussion in the banking system in the past months, the Bulgarian National Bank explains. That is why the bank initiated an urgent order aimed at printing 60 million new banknotes with a nominal of 10, 20 and 50 leva. This amount is twice higher as compared to the amount of printed banknotes in 2013.

Before it made such steps the central bank has analyzed well the situation and the possible effects over the behavior of the citizens who lost most of their confidence in the country’s financial system and commercial banks. Undoubtedly this action has attracted the public attention in times of ongoing crisis in Corporate Commercial Bank, which is suffering liquidity problems and was put under special supervision and ongoing ill-natured rumors about problems in other Bulgarian banks. People start asking various questions and many local experts provide different and controversial answers, including purely speculative ones.

If we assume the arguments of the BNB about the necessity to print new banknotes in this very moment, we should try to learn about the scale of the planned operation and its possible effects over the country’s monetary system.

The money in circulation is to the tune of nearly EUR 5 billion (10 billion leva). The number of the banknotes in circulation amounts to 330 million pieces. The number of banknotes with a nominal of 20 leva is highest-32% of all banknotes in circulation followed by the bills with a nominal of 10 leva (20.45% of all banknotes) The remaining 50% are distributed between banknotes with nominal of 2, 5, 50 and 100 leva. In other words, the amount of the newly-printed banknotes amounts to 1,648 billion leva (EUR 825 million), or 16% of all banknotes in Bulgaria. The increase can not be neglected easily, but it would by no means cause inflation increase, because inflation does not depend on the volume of the banknotes in circulation. It is influenced by other complex economic indicators regarding the money supply and demand at given markets, production costs, labor productivity, etc. So, the new banknotes will only facilitate the money turnover and will replace bills which have already been worn out or damaged. The newly-printed banknotes will also fill the strategic reserves of the Bulgarian National Bank in times of increased cash demand.