Central Bank of Kenya probe whereabouts of 7.4m banknotes
Central Bank of Kenya (CBK) Governor Patrick Njoroge yesterday termed the demonetisation of the Sh1,000 banknote a success.
The bank, however, fell short of its target. Out of the 217 million pieces of the old Sh1,000 note that CBK targeted to collect in the phase-out, it managed to get back 209,661,000.
This means 7,386,000 pieces—amounting to Sh7.3 billion—not returned became worthless paper.
The Sh209 billion that CBK collected by the September 30 deadline was re-injected into the financial system, in new generation notes.
It appears those who held onto the old currency decided to lose it rather than have to explain how they earned it.
Juxtaposed against Kenya’s Sh3 trillion budget, the Sh7.3 billion not collected may look like a drop in the ocean but it can do a lot.
For instance, the billions in unreturned notes, can fund the country’s irrigation projects; foot medical equipment leasing bill and fund geothermal and port development projects lined up in the current financial year.
Questions abound on the now worthless notes. Where is the cash? Was it proceeds of illegal business? Was the period for exchanging the old notes inadequate? Will the gradual phase out of other currency notes achieve the desired purpose?
Njoroge announced the roll-out of new generation currency on June 1, when he also made a surprise move of phasing out the old Sh1,000 note by September 30.
Other notes—Sh500, Sh200, Sh100 and Sh50—will continue to circulate alongside the new series but will be ultimately phased out.
The demonetisation process confirmed CBK governor’s fears of illicit flow of cash and counterfeiting of the currency.
It is also a good sign that compliance to deposit procedures is improving, and now difficult to transact money from unexplained sources.
Critics of the demonetisation process argued the four-month window to phase-out the Sh1,000 note was too short, but Njoroge stood his ground, noting that extending the deadline would give corrupt individuals and criminals a leeway to clean their loot. This would have negated the purpose of phase out.
CBK should remain vigilant of money launderers out to return their ill-gotten wealth in lower denomination legal tender. Further, State agencies should investigate whereabouts of the unaccounted for Sh7.3 billion.
