Decimalisation

Decimalisation

In the management of currencies, decimalisation (or decimalization) is the process of converting from traditional denominations to a "decimal" system, usually with two units differing by a factor of one hundred.

The logical appeal of decimalisation in general has generally been much more popular in currency than in physical measurements, and few countries have coupled the two processes.

All countries that had non-decimal currencies have decimalised, at least in practice.

Decimal currency

Decimal currency is the term used to describe any currency for which the ratio between the basic unit of currency and its sub-unit is a power of 10.

In practice this usually means that 100 sub-units make up 1 of the basic units, but currencies divided into 1000 sub-units also exist, especially in Arab countries.

For example:

Today, the only currencies which are not decimal are those that have no sub-units at all, except for:

Historically, non-decimal currencies were much more common, such as the British pound Sterling before decimalisation in 1971. Until 1971, the pound Sterling worked on a system of pence (12 to a shilling) and shillings (20 to a pound), plus other combinations (ha'pence, guinea, and crown); and in addition the penny was divided into 4 farthings. A pound could be subdivided in 19 different ways into integral numbers of pence (for example, 1/4, 1/5, 1/6, 1/8 and 1/10 of a pound were respectively 60, 48, 40, 30, and 24 pence exactly) and in 8 additional ways into integral numbers of farthings (for example, 1/64 pound was 3 pence 3 farthings, written 3¾d).

Formal decimalisations

Russia

Russia was the first country to convert to a decimal currency. In 1710, Peter the Great set the ruble equal to 100 kopecks in a series of reforms to modernise Russia.

The United States

The United States introduced decimal currency with the dollar in 1792 (adopting only the currency aspects of a more comprehensive decimal system of measurement proposed by Thomas Jefferson).

France

In France, decimalisation of the coinage was accompanied by metrication of other measures, introducing the franc in 1803 to replace the Livre tournois, abolished during the Revolution.

France introduced decimalisation on a number of countries that it occupied during the Napoleonic period.

Canada

Decimalization in Canada was complicated by the different jurisdictions before Confederation. However, the first coin for Canada, in 1858, was a decimal one cent piece.

Sri Lanka

Sri Lanka (known in the West as Ceylon at that time) decimalised in 1869.

Cyprus

Cyprus decimalised the Cypriot pound in 1955 by dividing it into 1000 mils, later replaced by 100 cents.

India & Pakistan

India changed from the rupee, anna, pie system to decimal currency on 1 April 1957. Pakistan followed in 1961.

South Africa

South Africa decimalised in 1961, introducing the rand as the new unit of currency at half a South African pound (ten shillings).

Australia & New Zealand

Australia decimalised on 14 February 1966, with the new Australian dollar equivalent to ten shillings or half an Australian pound in the previous currency. Since a shilling became equal to ten cents, the Australian cent was equal to 1.2 Australian pence, although they were usually exchanged on a 1:1 basis during the brief period when both were circulating.

A similar strategy was followed in New Zealand on 10 July 1967, with the introduction of the New Zealand dollar to replace the New Zealand pound.

UK and Ireland

On Decimal Day, 15 February 1971, the United Kingdom decimalised the pound sterling and the Republic of Ireland the Irish pound.

Malta

Malta decimalised its currency the Maltese Lira in 1972.

Non Currency Cases

In the special context of stating the prices of stocks, traded almost always in blocks of one hundred or more shares and usually in blocks of many thousands, stock exchanges in the U.S. used eighths or sixteenths of dollars, until converting to decimals between 2000 and 2001.

£sd conversion

In places where £sd was used, the decimalisation process either defines one new penny = pound, where the main unit (the pound) is not changed; or a new main unit (such as the dollar), is introduced as a half pound, and one cent = dollar.

The following table shows the conversion of common denominations of coins of the £sd system.

Common name Amount New £p New $c
Halfpenny d. p ≈ 0.208p c
Penny 1d. p ≈ 0.417p c
Threepence 3d. p c
Sixpence 6d. p
Shilling 1/- 5p 10¢
Florin 2/- 10p 20¢
Half crown 2/6 p 25¢
Crown 5/- 25p 50¢
Half sovereign 10/- 50p $1
Sovereign £1 £1 $2

Rupee-anna-paisa-pie conversion

In India, Pakistan, and other places where a system of 1 rupee = 16 annas = 64 paise = 192 pies was used, the decimalisation process defines 1 new paisa = rupee. The following table shows the conversion of common denominations of coins issued in modern India and Pakistan. Bold denotes the actual denomination written on the coins

Rupee Anna Paisa Pie New paisa
1 ≈ 0.5208
= 0.78125
1 3 = 1.5625
2 6 = 3.125
1 4 12 = 6.25
2 8 24 = 12.5
4 16 48 25
8 32 96 50
1 16 64 192 100

De facto decimalisation

Mauritania and Madagascar theoretically retain currencies with units whose values are in the ratio five to one: the Mauritanian ouguiya (MRO) is equivalent to five khoums, and the Malagasy ariary (MGA) to five iriambilanja.

In practice, however, the value of each of these five units is quite small: as of 2005, the MRO is traded against the euro at about 330 to one, and the MGA at about 2300 to one. In each of these countries, the smaller denomination has fallen out of use.

Decimalisation experience and introduction of the euro

Before the introduction of physical euro notes and coins on 1 January 2002, the plans and experiences of various decimalisations, particularly decimalisation in the United Kingdom in 1971, were studied by the European Central Bank because many of the lessons could be learnt and applied to the introduction of the euro. For example, on how to educate the public (particularly the elderly), how long the transition was likely to take, the likely speed of uptake of the new currency, the likely effects on inflation for those currencies where one cent was greater in value than the smallest coin in circulation before the transition and the likely criminal activities which might be attempted during the transition period.

See also

External links

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