Over €425m in Maltese liri returned last month

A total of €426 million (Lm183 million) worth of Maltese liri was returned to the Central Bank in January as part of the de-hoarding exercise in connection with the island's switch to euro.

This means that the amount of liri still outstanding is now just over €251.5 million (Lm108 million).

Figures given by the CBM in December on the eve of the currency switch had put the cash in circulation at €675.5 million (Lm290 million), which itself was brought down from the original estimate of €1,211.2 million (Lm520 million) that was in circulation before the Government began its de-hoarding exercise in preparation for the euro in April 2007.

By the end of January when the lira ceased to be legal tender, the CBM had received some €414.6 million (Lm178 million) in banknotes and €11.6 million (Lm5 million) in coins, leaving in circulation about €220.5 million (Lm94.7 million) in banknotes and some €31.9 million (Lm13.7 million) in coins, a spokesman told The Sunday Times.

A substantial amount of the coins is likely to be written off as currency loss, probably exported by tourists who did not bother to cash in their change before leaving the country.

Ireland and Slovenia, for instance, wrote off about 15 per cent of their former currency in circulation in the first year following euro adoption.

In Malta's case the figure could be higher given the bigger role of tourism in the economy and the fact that especially in comparison to Slovenia, the lira had been in circulation for longer.

Whatever the case, the money that is still left in circulation is unlikely to be returned quickly from now on. Yet, the spokesman said it is not unusual for substantial amounts of cash to remain outstanding at the close of the legal tender period.

In particular, the bank is expecting a substantial amount of that money to be returned by the end of March until which date commercial banks will still be exchanging liri for euro and accepting deposits in liri.

After March, however, liri will only be accepted at the Central Bank for a period of 10 years for bank notes and two years for coins.

Technically, there was never an estimate of the amount of money that was actually being hoarded by people who preferred to keep cash at home rather than in the banks.

However, the level of notes and coins in circulation has always been much higher than the EU average, clearly suggesting that a substantial part of the estimated (€1,164 million (Lm500 million) in circulation was in fact hoarded cash.

The banks are now likely to return to a normal level of activity having been placed under considerable pressure in the past month or so.

In a statement yesterday, HSBC said it had handled close to €200 million (Lm85 million) worth of the new currency over its branch counters and through its ATM network during the changeover period while collecting some €197.9 million (Lm85 million).