25 Billion Shillings in Old Currency Notes Resurface Ahead of September Deadline

The declaration by the Central Bank of Kenya (CBK) to phase out old currency notes saw 25 billion shillings resurface to circulation.

According to the financial regulator’s annual data, the money outside the banks has significantly reduced by 9.8 percent, making it the first-ever negative growth since 2015.

Within a month after the CBK Governor, Dr. Patrick Njoroge announced the plans to phase out old 1000-shilling notes by October 1, 2019, money outside of banks has reduced to 196 billion shillings, from 222 billion shillings.

The CBK says that the money outside banks could well be what is in the citizens’ pockets for their day to day use, but a considerable amount is thought to be money that had been kept away from banks and used for illicit businesses.

Dr. Njoroge had publicly said, on June 1, 2019, that his team had observed that 1000-shilling notes were being used illegally both in and outside the country and that to deal with the vice, the old 1000 shillings would cease to be a legal tender.

The announcement gave owners of illicit money a ‘grace period’ of four months, and the 25-billion-shilling circulation only shows how owners of the monies are desperate to beat the September 30 deadline.

With only 40 days remaining before the deadline, the CBK officials said that they were on the lookout to see how much more money that had been hidden will resurface.

According to financial experts, should more money resurface within the remaining 40 days, prices of goods and services may increase as Kenyans will be rushing to spend the old money.

“If people with hidden money release more of it to the market, they will be wise enough to spend it on buying assets because, by this time, it will still count as ‘clean money’,” said Reginald Kadzutu, a financial analyst.

Analysts also believe that the availability of excess money has contributed to the weakening of the shilling as traders have sought to buy US dollars so as to buy goods from the world market after recently finding themselves with huge sums of money.