The move by the Central Bank of Kenya (CBK) Governor Patrick Njoroge to demonetize may have landed the country in a deeper rut than it was mentioned.
Reports by Business Daily on Friday, November 29, indicate that the country has hit a six-year low in the amount of money in circulation, with close to Ksh60 billion unable to be well accounted for.
This comes in a time when Kenyans are complaining that they don't have money in their pockets, despite the government's efforts to improve infrastructure.
The publication reported that a huge chunk of the money was lost without a trace in the period between June to September 2019 when the CBK governor announced the demonetization exercise, where old Ksh 1,000 notes were rendered invalid and new ones introduced.
Business Daily revealed that in that period during the demonetization, the amount of money kept in banks remained at Ksh1.19 trillion in the period between May and September 2019, indicating that there was not much of a shift in currency from people's pockets to short-term savings.
George Bodo, a finance expert, weighed in on the situation and took issue with the announcement by CBK on October 2, which indicated that only Ksh7.3 billion had not been accounted for during the exercise.
"CBK announced the withdrawal of old Ksh 1,000 notes worth Ksh217 billion on June 1 and revealed that it had pumped Ksh149 billion of the new currency in the four months to the end of September, leaving a balance of Ksh67 billion," Bodo told Business Daily.
Discounting the Ksh7.3 billion that was not recovered in the exercise, he stated that the hole left presented a bigger problem than the CBK was willing to admit.
"Do we want to say that there were some Ksh59.9 billion of the old notes delivered without a corresponding entry?" The only explanation to this puzzle could be that maybe the Central Bank reissued the balance in lower denominations, in which case they need to come clean, he posed.
The aim of the demonetization, the governor had stated on June 1, was to curb the illicit flow of cash and the use of funds to bankroll activities like terrorism and drug trafficking.
