CBK Governor Patrick Njoroge on Saturday announced that all old 1,000 shillings notes have been withdrawn and Kenyans have until October 1 to exchange them for the new generation currencies. What does this mean to the citizens and the corrupt leaders with loads of cash at hand?
Governor Njoroge noted that the move is meant curb illicit finance, which seems like a necessary evil but at the same time, it’s caught many off guard.
For one, if the government holds true on this policy, corrupt leaders with millions of 1,000 currency notes will be forced to come out or risk losing their “wealth.”
Given that the announcement came unexpectedly, corrupt leaders aren’t the only ones that will be affected.
Recent statistics from the Central Bank of Kenya showed that the hard-cold cash being employed in the country stands at a settlement of up to 96 percent of daily expenses ahead of mobile cash, bank transfers, and pay bill solutions.
What this means is that Kenya is highly dependent on cash transactions as it is the most preferred mode of discharging payments regardless of the rapidly growing digital sector.
The ripple effect of this policy flows all the way to the low-income earners. One factor that contributes to this challenge is the fact that most Kenyans do not have bank accounts.
Although not everyone has the 1,000 currency notes, there is no denying that from today, there will be long lines at banks and ATMs, which could instigate chaos.
If there is one thing we’d all love to see is how leaders with cash under their mattresses get exposed. It will be a sight for sore eyes not to mention how Kenyans will get to know who has been stealing public funds.
The move is aimed at breaking the grip of corruption that’s become uncontrollable in the country as well as getting rid of black money.
Black money and increased cases of corruption are some of the biggest obstacles in eradicating poverty in the country.
Anyone hoarding bills will be forced to deposit or exchange the money. This is bound to allow the relevant authorities to delve deeper into the sources of such cash.
But, will it be the start of the end of corruption? And if these leaders won’t justify how they hold so much money in cash, what will be done? Will they be brave enough to hide their corrupt nature and let their money become obsolete? We all hope their identities won’t be hidden.
Now, from an economic point of view, won’t the sudden announcement send the economy plunging? Cash sales will become stagnant, tourists will be paralyzed by the inability to use the cash in their possession.
Economists will also tell you that this cash crunch has a rippling effect on the supply chain, which might lead to manufacturers cutting jobs, lower productions, and low demand for raw materials. In case the events turn out this way, Kenya will suffer a drop in GDP rendering the current projections of growth a mere dream.
Here is another thing worth mentioning, what has the government put in place to ensure that there is no fraud during the exchange process? It should impose limits on the amount of cash currency an individual can swap.
Here is a loophole though, what if an individual exchanges cash in one bank then heads over to a different bank to do the same? The whole point of the policy implementation is to get rid of corruption, which is why a quick solution is needed here.
The decision by the government might have serious effects like what happened to India in 2016 when it rendered notes belonging to 86 percent of the country’s currency obsolete. It didn’t augur well with the economy.
Similarly, Canada retired its 1,000-dollar currency over its popularity in criminal use. The notes, however, retained their status as legal tenders, and many of them still remained at large. Other countries that have done the same include Singapore and Venezuela.
Nonetheless, the decision will phase out criminal acts including the funding of terrorists, get rid of tax evasion, and put a stop to illegal underground activities like drug and human trafficking.