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‘The print button on my desk is disabled,’ CBK Governor Njoroge says over demonetization



The Central Bank of Kenya (CBK) now says that the ongoing circulation of new currency notes will have minimal impact on both inflation and the macroeconomic environment.

The sentiments by the bank of reserve comes on the back of speculation and hysteria around the ongoing excise which seeks to in part remove the old series Ksh.1000 notes while laying the base for the replacement of the majority of other denominated currency notes over time.

At the same time, a number of critics have associated the new-money printing exercise with clandestine State activities including the covert financing of exchequer obligations.

“The print button on my desk is disabled. We are not printing money to finance government projects though very good in themselves. This is not a risk you need to worry about,” CBK Governor Patrick Njoroge told a news conference on Thursday.

While the introduction of new currency in itself poses a significant risk to the macroeconomic environment including the chance for a hike in inflation, the CBK Governor played down fiscal risks while equating the demonetization exercise to a like for like substitution.

“In a sense it is a simple operation of changing things and hence the impact on inflation is zero. You wouldn’t see a situation where technically speaking more money would be chasing fewer goods,” he added.

“With demonetization we will actually be reducing our monetary base where a lot of money out there will turn into paper after October 1, 2019”


While playing down the effects on economic outcome, Njoroge associated the underlying fear to the impact of new notes rather than the queries on demonetization while basing the jitters back to the introduction of the Ksh.500 note in the early 90s’.

The government of the day was at the time was accused of overprinting the new denomination which at the time became the most valued note overtaking the Ksh.200 note for the purposes of funding the campaigns to the impending 1993 general elections.

The then leader to the KANU affiliated YK’92 youth group and now former Lugari Member of Parliament Cyrus Jirongo would be declared as the ‘owner’ of all Ksh.500 notes in the country as members of public coined the name Jirongo to the freshly minted note as the group showed its generosity to dish out the Ksh.500 notes as it so wished.

Subsequently, the inflation rate of 1993 would skyrocket to a historical high of 46 percent as monetary policy hit an all-time low.

“If you are talking of a disaster zone, Kenya was a disaster zone in terms of macroeconomic management. The exchange rate has never dropped faster than in that period and so was the case for fiscal performance,” Governor Njoroge said.

Money in supply

Trends in broad money in supply (M3) a stat which includes all foreign currency deposits by residents makes for the most informed measure of the impact of new notes to an economy.

While money in supply has remained on the rise in the last decade, economic output has outdone the injection of new money to keep inflationary pressures at bay.

Broad money in supply hit a high of Ksh.3.2 trillion in June 2018 representing a six percent rise in money flows from the preceding 2017 period on increased foreign currency deposits by households.

This in a factor boosted by ever expanding foreign remittances, mainly supported by new partnerships between commercial banks and international money remittance providers.

Money in supply as a share of Gross Domestic Product (GDP) has been on the decline in recent years with credit constrains to the private sector playing a huge part of the outcome.

According to data from both the CBK and provisional GDP estimates from the Kenya National Bureau of Statistics (KNBS), M3 as a share of economic output slid to 36 percent in 2018 from a high of 41.3 percent in June 2015 to represent the declining monetary base.

King elephant

The Ksh.1000 note which is publicly associated with its elephant impression on its face, makes for the most sought after note in the economy informing of the concerns around the demonetization of its old series form.

By June 2018, the Ksh.1000 note made the majority of 210.4 million pieces of notes in circulation beating the long-held beliefs of the higher circulation of lower denominated notes.

Further, the CBK has in the last eight years been injecting additional pieces to meet an ever rising demand for the note.

The lower valued Ksh.50 and Ksh.100 notes only made for 75.63 million and 117.12 million pieces of circulating notes in June 2018.

According to CBK, the Ksh.1000 notes still make for the majority of notes in circulation with part of the sums being linked to illicit financial flows including proceeds from graft and counterfeiting.

The demonetization exercise is aimed at removing part of the 217.6 million individual old Ksh.1000 notes from circulation according to present statistics from the CBK.

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