Central Bank of Kenya today reported that Ksh209.6 billion worth of the old 1,000 shilling notes was returned, falling short of the Ksh217 billion target.
CBK had announced on 1st June 2019 when it launched the new currency that there was Ksh217 billion of the old 1,000-shilling note in circulation.
Despite the shortfall, CBK Governor Dr Patrick Njoroge said the demonetization process went well and termed the process successful. “We did well and we are happy with the outcome,” he said at a media briefing.
But questions still remain on the whereabouts of about Ksh7 billion of the phased out currency that was not returned into the banking system by the 31st September 2019 deadline. Is the money really lying in people’s houses, hidden somewhere in the bush, or did the owners find clever ways of cleaning it?
The CBK Governor said 7,386,000 pieces of Ksh 1,000 did not return, meaning Ksh7,386,000,000 became worthless pieces of paper. Incidentally, the value of money is equivalent to the value lost during the Goldenberg case.
The Ksh50, Ksh100, Ksh200, Ksh500 and Ksh1000 denominations have also been changed and will be phased out slowly.
“Demonetisation has been successful because we have completed it smoothly, with AML/CFT filters firmly in place, and kept out money whose owners did not want to be subjected to the relevant checks in the system,” Dr Njoroge said. “The citizens of our country demand and deserve a fresh start, and the demonetisation process is a beginning.”
The currency change was aimed at fighting counterfeit money which had become a great concern, as well as clean dirty money from the economy.
Money to be shredded
The stringent 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 and whoever is holding this is poorer,” he said.
The returned money will be shredded and turned into briquettes, said the governor. Each briquette will be equivalent to Ksh 1,000,000 in shredded banknotes.
As of September 30, 149.6 million pieces of the new generation Ksh1,000 notes had been released into the banking system.
Printing new notes
“If you put all the 217 million pieces of the Ksh 1,000 notes, they would fit in only five 40-ft containers,” Dr Njoroge said. “When we receive banknotes, we punch them and shred them, then compact them into a briquette.”
The launch was hoped to also help in dealing with wanton embezzlement of public funds as well as money laundering and enhance liquidity in the economy by encouraging money hoarders to embrace banking.
It was also believed that corrupt elements who had pilfered public funds were hiding their loot in house safes, thus curtailing circulation in the market. This forces the government to print new money.