……….Talk about pulling abracadabra on the monetary policy in our country by…..demonetization of our currency…… According to financial players, “demonetization” move is meant to force the release of billion of shillings stashed in houses and also to fight graft…..

………Talk about pulling abracadabra on the monetary policy in our country by…..demonetization of our currency. This is what President Uhuru Kenyatta and, Central Bank Governor, Dr. Patrick Njoroge, did to our economy be demonetizing our currency by unveiling new currency notes….it was a pap thing.

And, with that move of demonetization of our currency ……Kenya has thrust itself back on the global financial map after it announced it was withdrawing the old Kshs.1000 notes from the economy and replacing it with a new one.

According to financial players, “demonetization” move is meant to force the release of billion of shillings stashed in houses and also to fight graft.

This is going to be the first and perhaps the most important exercise of the Central Bank of Kenya, unde the leadership of Dr. Njoroge. And, this demonetization of the Kshs.1000 notes have been launched at a time when the Central Bank of Kenya, has tightened regulations governing the banking sector beyond the normal prudential and money laundering guidelines to mitigate money laundering.

During the madaraka day celebrations, on June 1, in Narok County, President Kenyatta in conjunction with Central Bank Governor, Dr. Patrick Njoroge, they unveiled new currency notes in what was envisioned in the constitutional dispensation, while at the same take….demonetizing the Shs.1000 note.

But, what surprised the Kenyan citizenry and financial players is the demonetization of the Kshs.1000 notes in the economy with specific deadlines coupled with stringent banking rules and regulations meant to deter money laundering.

It has been argued that so many people stash these Shs.1000 notes in their homes in anticipation of laundering them back into the financial systems without detection. And, it is believed that most of these people who practice this kind of ……home banking …..are corrupt, or, they do engage in illicit trade and dealings.

But, in a matter of introspective, the million dollar question still begs, was it the right initiative drive of demonetizing the Shs.1000 notes the President initiated to tame the runaway corruption?

As the recent experience in India has shown, that restrictions can be circumvented. In addition, a secondary currency market could develop, benefitting rent-seekers.

Also, it has been a mixed bag of fortunes for countries that have taken that route, with some thriving and others hurting those meant to be protected. And, attempts by a number of countries to remove from circulation some notes have been met with both success and serious backlash, sometimes hurting the very people the moves were meant to protect in the first place.

According to the Consumer Federation of Kenya ( COFEK), a lobby group that pushes for the interests of consumers on it’s part wants the government to put in place measures that will ensure the process doesn’t end up hurting the common man interest.

……”From all the experiments that have happened before, printing new currency has always resulted in a spike in inflation and this will affect the cost of living”.

On its’ part the Institute of Certified Public Accountants of Kenya, (I.C.P.A.K), warns that though demonetization is good for the country, experiences from other jurisdiction indicate that the intensity of the move effects has mixed results among them inflation and cash shortages.

“At the initial stage, it might lead to a shortfall in cash circulation which will impact negatively on small businesses and households that mainly depend on the cash transactions.”


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