President Uhuru Kenyatta on Saturday launched new currency notes during the Madaraka Day celebrations in Narok County, a move that will see the old notes of Ksh 1,000 withdrawn come October 1, 2019.
Numerous Kenyans have questioned the four-month period offered by the CBK to cater for the transition with some urging for the period to be shortened.
CBK Governor Patrick Njoroge responded to these sentiments on Monday while addressing the media.
He stated that the bank based its actions on a lot of factors and considered the impact an immediate ban would have on the lives of Kenyans, especially those living in remote areas.
This move was a result of the CBK bench-marking India which withdrew its banknotes immediately and suffered some setbacks.
“We had to benchmark with countries such as India who also withdrew some banknotes from the economy, theirs was an immediate withdrawal which also had its shortfalls,” explained Governor Njoroge.
People with more Ksh5 million were advised to exchange their old notes at the Central Bank while those with less than Ksh5 million in the old notes to exchange at their local banks.
“If we had gone the Indian way, people in remote areas would have been affected most for lack of enough time to exchange the notes with new ones. The grace period will allow banks and other financial institutions to have enough stock of the new generation Ksh1000 notes,” he stated.
The Indian government withdrew 500 and 1000-rupee banknotes from its financial system overnight in a strategy aimed at making it difficult for hoarders of undeclared wealth, or "black money", to exchange their undeclared cash for legal tender at banks.
People across the country had to rush to ATMs that offered 100-rupee notes in an attempt not to be left without cash over the next few days.
Dr. Njoroge added that the implementation of the new directive would take into consideration the success and failure of other countries that have taken the same path.
While launching the new bank notes of other denominations, Njoroge stated that older versions of smaller denominations would remain in circulation alongside the new ones, but after October 1, the older 1,000 shilling note would be invalid.