Experts’ prediction that the value of the shilling would depreciate upon the demonetization of the old 1000 shilling notes has apparently been proven wrong as at the last day of demonetization, September 30th, the Central Bank of Kenya’s data show that the shilling is still stable.
Analysts, after the new currency notes, were unveiled and a deadline set for phasing out the old a thousand notes had said that there would be a likelihood of the weakening of the shilling due to the availability of excess money in circulation.
Their argument was that due to traders finding themselves with too much money, they had resorted to buying US dollars to allow them to buy goods from the world market, something that would lead to possible depreciation of the shilling.
Renaissance Capital had predicted in their report that was released earlier this month (September), that the shilling would lose this year, closing at 105 against the dollar.
The CBK’s data, however, reveals that contrary to financial experts’ expectations that the shilling would weaken, the shilling has, in fact, remained stable.
The data, as at September 30th showed that Kenyan commercial banks quoted the shilling at 103.89 against the dollar, an increase from Friday 27th September’s quotation at 103.82, while Google traders’ quotation was at 103.86.
In its bulletin, the CBK said that “the Kenyan shilling has remained stable against the dollar and other major international and regional currencies as of September 26th, as it exchanged at 103.86 per US dollar by September 26th as compared to 103.91 on September 19th.”
The CBK Governor Dr. Patrick 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.
Since CBK’s announcement, the shilling had been reported to depreciate as it traded at 104.21 in July 31st.
The deadline for phasing out the old 1000 shillings note officially comes to an end today, September 30th, 2019, with CBK insisting that there won’t be additional time given to people to exchange their old noted after today.