Analysts comment on CBK demonitisation process
Inflation unavoidable as crooks earlier up to clean up dirty money
Experts have keenly assessed Central Bank’s efforts to demonitise Kenyan currency and revealed that this will ultimately led to inflation or general price increases in the economy. The price of goods and services will rise as a result. This will be because of Kenyan crooks who have been hidding dirty money will now release it as they seek to launder it in order to beat CBK’s deadline of 1 October, 2019.
Kenya has joined nations such as Nigeria, Fiji, North Korea, India, Ghana, Australia and Myanmar among others in mopping money out of the economy. In all these states, the unintended consequences was that of inflation as wll as rise in black market trading activities.
The analysts have also observed that there may be a currency scarcity in circulation. This is according to a statement released by the Institute of Certified Public Accountants of Kenya (ICPAK).
The demonitisation exercise has had mixed outcomes in other countries where it was implemented in the past. The institute further stated that small and medium businesses will bear the most impact of the scheduled demonitization exercise by the Central Bank of Kenya. If you or your business depend on cash transactions then you are in for a rough ride.
In conclusion, ICPAK supported Central bank of Kenya’s efforts to demonitize the old currency. This process is expected to be more valuable in the long-term because if implemented well it will deal a blow on corruption. The other impact will be on curtailing terror financing as well as money laundering and counterfeiting.
Stephen Mutoro, the Consumers Federation of Kenya Secretary General concurs with ICPAK that inflation is inevitable. Many people with huge sums of money will be in a rush to dispense their old currency and the next four months we will witness cracy expenditures in a scale we never seen before.
Printing new currency has various macroeconomic challenges and inflation is the most obvious. high cost of living will be the end result.
The Kenya Bankers Association (KBA) has reported that commercial banks have already confirmed that they had anticipated the move and are well prepared to start replacing old currencies. However, the demonitisation process comes at a cost considering that now banks will have to reconfigure currency counters, automated teller machines (ATMs) and have increased coordination with the Central Bank of Kenya and the currency centers located in Nakuru, Nyeri and Meru.
It’s estimated that there are 780 bank branches, 66,000 bank agents and 1,700 Automated Teller machines across Kenya.
Kenya Bankers Association has called upon all actors such as citizens, banks and bank agents to remain vigilant during the four month-window because some crooks will attempt to use the banking system to launder their ill-gotten money. Now, any individual who deposits more than Ksh. 1 million is a suspected money launderer.
Once the crooks find that they cannot use the banking system to clean their money, they will go for the option of a spending spree. We’ll pump into them in the shopping malls, markets, shops and auction centers trying to buy everything and anything. This is the time you will see corrupt people sending their entire extended families and even kinsmen from the village for prolonged holidays in resorts around the globe.
The looters have less and less avenues to clean their money. Now the Nairobi Securities Exchange (NSE) has also indicated that for the time being they will not accept cash when buying and selling shares, bonds and other investments.
Going forward, customers will have to transact using cheques, bank transfers and mobile money platforms such as MPESA and Airtel Money among others.
In the recent past, it was easier for crooks to launder their money by depositing their money in the accounts of stockbrokers and other firms.
The currupt people used to deposit the money in the stockbrokers accounts to have shares bought on their behalf and later sell the shates hence clean their ill-gotten money that way.
Forex Bureau in the capital city have not yet reported any unusual activities. You see there will be attempts for the crooks to exchange their Ksh. 1000 notes for dollars, Euros, Yuans and Australian dollars among other foreign currencies.
When visting shopping malls and other trading places, we will be keen to find out whether there are long queues at counters.
Right now I am told forex bureaus have been directed to report to the Financial Reporting Center all transactions valued over $10,000 an equivalent of Ksh. 1 million. ex bureaus have been asked to expeditiously report any transactions above $10,000 (Sh1 million).