This archive report was first published on 3 October 2019.
The big Sh6.7 billion riddle that defies zero sum theory ¶
Published on October 3, 2019, at 22:00.
Central Bank of Kenya (CBK) Governor Patrick Njoroge holds briquettes made from the old Sh 1,000 notes, with each showing what shredded Sh1, 000, 000 looks like during a briefing on demonetisation in Nairobi on Wednesday. PHOTO | DIANA NGILA
On June 1, 2019, the Central Bank of Kenya announced a demonetisation exercise to deal with illicit financial flows and counterfeits. The exercise aimed to replace old Sh1,000 currency notes with new ones by September 30, 2019.
However, the exercise has left a Sh6.7 billion hole, with 59.969 million old Sh1,000 notes unaccounted for. According to the CBK, there were 217.047 million Sh1,000 denomination notes in circulation as at June 1, but only 209.661 million notes were returned by the end of the exercise.
Commercial banks and other licensed intermediaries were the agents in this demonetisation exercise. They were expected to receive the same amount of new currency notes as the old ones they delivered to the CBK's currency warehouse.
But the logic here is very simple: it's a note for a note (one-for-one). The big question, then, is, where are the extra 67.335 million of the old Sh1,000 notes (of which only 59.969 million came back to the CBK)?
One can argue this to be implausible, for the simple reason that every person who delivered an old series Sh1,000 note ideally received a replacement (with the new series note).
The only explanation to this puzzle could be that maybe the apex bank re-issued the balance in other lower denominations, in which case they need to come clear.
