Kenya’s central bank recorded a difference of $73.8 million (Ksh7.38 billion) from the Ksh1,000 notes in circulation and those returned after the conclusion of a demonetization exercise on Tuesday.
When the new banknote was introduced by the government on June 1, the amount in circulation was $2.17 billion (Ksh217 billion) but after the swap ended, Kenyans returned the old bill worth $2.096 billion (Ksh209.6 billion).
According to the Central Bank of Kenya (CBK) Governor, Dr. Patrick Njoroge, the missing amount did not return to the banking system by close of the deadline but the demonetization process was a success.
“The demonetization process progressed very well,” said Dr. Njoroge at a media briefing. “We did well and we are happy with the outcome.”
Although the old Shs1,000 note has stopped being legal tender there is no deadline on the return of other old notes – KShs50, KShs 100 and KShs 200. The returned money is expected to be shredded and turned into briquettes.
The withdrawal of the older version of the Ksh1,000 notes by the government was primarily aimed at tackling illicit financial flows and counterfeiting. And with the missing money running into millions of dollars, the exercise proved effective.
Emphasizing on the success of the swap, the CBK Governor added that the tough rules could have discouraged those with illicit money from exchanging the old notes in banks.
“The anti-money laundering measures we put in place were a success. Whoever is holding this (unreturned money) is poorer,” the governor said, adding that about 149.6 million pieces of the new generation Ksh1,000 notes had been released into the banking system a day before the October 1 deadline.
Meanwhile, commercial banks and currency dealers in neighboring countries, particularly in Uganda, are waiting on their central banks to dictate the next steps before they start trading the new Kenyan currency notes.
Banks in Uganda have not started trading in the new notes and are reluctant to trade cash. According to Peter Mbowa, the Head of Treasury at Uganda’s Barclays bank, which is a member of Absa Group, the only trading of Kenyan shillings has been electronic.
Generally, the uptake of new Kenyan notes is said to remain low and some people are even asking for United States dollars in the place of Kenya shillings, which shows a lack of certainty regarding the whole demonetization process.
Going forward, The Monitor notes that CBK and its regional counterparts will have to pronounce themselves on how banks and forex bureaus can proceed.