Resistance has already began. But the Central Bank of Kenya (CBK) is standing firm.
Following the roll out of new bank notes as well as the withdrawing of Ksh1,000 “old series” notes, court cases have already been filed.
While East African Legislative Assembly (EALA) MP Simon Mbugua and activist Okiyah Omtata rush to the courts, CBK Governor Patrick Njoroge has defended the process saying all the legal procedures, including public participation, was followed.
The CBK head had strong words for those questioning why the new roll out was going on in light of current circumstances.
“Iko shida. (There’s a major problem). You don’t wait until the house is burning to grab the fire extinguisher,” said Njoroge
The CBK supremo was addressing journalists on June 3, just days after changes in currency roll out that Njoroge described as a “major milestone for the country, financial sector and CBK.”
Njoroge’s “iko shida” quote referred to one of the reasons behind the recent demonetisation order of the Ksh1,000 notes. With new bank notes in circulation, the CBK has put a deadline of October 1 for the end to the old notes of Kenya’s largest monetary denomination.
As per the CBK head, recent Illicit and counterfeit transactions that “have been reported in the media” are further proof that a problem is on the horizon. For a currency which Njoroge described as the “regional dollar,” it faces the danger of illicit flow of cash.
This prompted CBK to act, Njoroge told journalists.
At the same time, the CBK Governor acknowledged the existence of the legal challenges to the roll out, terming it “more than just an inconvenience.”
“It’s something we wouldn’t call for – but so be it,” he said.
Njoroge added that the bank would be looking at the challenges so as to deal with them as a matter of urgency.
“There’s nothing worse than having uncertainty with regard to the currency, because every one of us uses that currency day in day out. It’s important for every Kenyan to have that assurance,” he said.
The CBK Governor also defended claims that the Central Bank had the right to demonetise the Ksh1,000 old series denomination.
“We have always had that right, and it’s not the first time we have used it. This is part of our normal operations of which we have complete independence. We will have our day in court,” Njoroge said.
The India Dilemma
While also clarifying the CBK position on the new notes rollout, Njoroge also said that the Kenyan situation would be different from the case in India.
India’s demonetisation has been making headlines after the move nearly led to economic collapse with the shrinking of the country’s growth rate.
Njoroge said that CBK looked at the India situation and made judgements in a bid to avoid certain mistakes, such as not to demonetise too rapidly as was the case in India.
“f you’re too aggressive and close it too quickly, you’ll have an honorous task on the Wanjiku, the common person who is actually doing the right thing and has no concerns with ilicit flow. The ones punished the most would be the common Kenyan.” We hope it is a correct balance.
At the same time, Njoroge said there wasn’t enough cash in ATMs in India, and that this is something CBK will ensure does not happen in Kenya.
“Our intention is in a matter of days, it should be available in every single bank outlet in the country.”