Governor warns against premature euro exchange

Central Bank Governor Michael Bonello has warned against the premature exchange of the Maltese lira into the euro, as de-hoarding starts to take place.

Many are choosing to exchange lira notes for euro notes on the black market, while others are paying unnecessary bank commissions to do so, the Governor said.

Mr Bonello's warning came at the end of a plenary session organised by the National Euro Changeover Committee, which yesterday presented its third revised master plan 10 months before the anticipated introduction of the euro.

Statistics give a clearer picture of the movement of liquid cash which had been stashed away at home for years.

At the end of 2005, the value of money in circulation reached some Lm500 million, which the governor said was probably the world's highest per capita.

Since the end of 2005, the currency in circulation was down by Lm38 million, Mr Bonello said.

A total of Lm11 million worth of Lm20 notes and Lm26 million worth of Lm10 notes have filtered back to the Central Bank.

EU figures released at the end of last year showed that the amount of cash held by the Maltese - an average of €2,789 (Lm1,197) per capita - was more than twice the European average of €1,374 (Lm590).

Though it was difficult to establish what will happen over the coming months, Mr Bonello said the level of cash in circulation will probably go down to a level which more closely reflects the transaction needs of the economy.

The Governor said it was worrying to note that people were prepared to pay a high price to obtain euro notes, either by paying exchange commissions to the banks, or, in the case of euro notes purchased from the street, by also running the risk of being given counterfeit money.

"This is a trend we need to discourage especially since the euro remains a foreign currency until the last day (December 31).

"There is no reason why anybody should be conducting business in Malta in any currency other than the Maltese lira. It's only the tourist who has no lira and wants to purchase something, who really should be using it," he cautioned.

He reminded consumers that exchanging money now means paying unnecessary commissions and foregoing higher bank interest on lira accounts. Suffice it to say that the cost of exchanging Lm10,000 at the bank is around Lm250 in commissions.

"People are paying this kind of money unnecessarily. They seem to be unaware that they can exchange their money for free during the dual-circulation period."

Besides, the Central Bank will carry on exchanging Maltese lira notes for 10 years and coins for two years after the euro changeover, without charge.