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Wondering why banknotes are destroyed?

Wondering why banknotes are destroyed?
A man holds new South African banknotes at the value of ten, twenty, fifty, one hundred and two hundred South African Rand depicting former South African president Nelson Mand   -  
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PHILL MAGAKOE/AFP or licensors

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There comes a time in the life of every banknote where it can no longer be used, though, in some circumstances, it may still have some value.

According to research, Central banks across the globe destroy billions of banknotes each year, an action which has been described by analysts as an important part of the cash cycle.

Why are banknotes damaged?

Torn, stained and in some circumstances wrinkled notes all qualify to be destroyed according to experts.

When there is also enough proof that a banknote is counterfeit, it is destroyed to prevent it from circulating.

Liberia burns old banknotes worth $4m

In the case of Liberia which is the latest country to conduct this exercise, 600m Liberian dollars ($4m; £3m) worth 4 million dollars, old and mutilated banknotes have been burnt.

According to the central bank, the disposal follows concerns that old currency notes remain in circulation despite the government printing new ones in recent years.

It also comes after the apparent disappearance of state funds in 2018 - with allegations that more than $100m worth of newly printed Liberian banknotes had gone missing.

The central bank has however denied it.

President George Weah’s government is yet to account for $25m withdrawn from the country’s reserve accounts the same year to replace older Liberian dollars and strengthen the local currency.

Pressure groups have asked for an explanation and accountability of how the exercise was carried out.

The Liberian economy has been struggling in recent years but in his recent annual address to parliament, President Weah said the economy was stable and growing.

How much does it cost to burn and replace banknotes?

it is not clear how much it will cost for the government to replace the destroyed notes. However, in 2017, Malawi's Reserve Bank stated that it was going to cost the country 12 to 13 billion Malawi kwacha every year (about $17 million; 15 million euros) “ to destroy damaged notes and replace them with new ones."