The Central Bank of Kenya’s bold move to introduce new generation currency and withdraw Sh1,000 banknotes from circulation in the next four months is commendable.
The decision will help in the war on corruption, money laundering and illicit trade, which threaten to cripple the economy.
Demonetisation has been used in many countries to stabilise currencies, fight inflation, facilitate trade, access markets and push for transparent informal economic activities. CBK Governor Patrick Njoroge confirmed during the launch on Madaraka Day that they have put all factors into consideration on the impact of demonetisation before the rollout to avoid negative effects on the economy.
The 120-day grace period will ensure no financial shortfalls are occasioned in the cash flow that could trigger inflation as happened in India when Prime Minister Narendra Modi abruptly withdrew 500 and 1,000 rupee overnight in 2016. Given that money serves as a medium of exchange, as a store of value and as a unit of account, eliminating counterfeits will restore faith in our currency.
The President also directed that all pending bills be cleared by the end of this financial year. Small and Medium Enterprises are the most affected by delayed payments. It is estimated that both the National and County governments owe suppliers and contractors more than Sh108 billion. This is not good for business. Members of Parliament should urgently formulate a law criminalising delay in payments to suppliers and contractors.
The United Nations Development Programme (UNDP) has backed decision to recall the Sh1,000 currency unit as a legal tender as an important and necessary step to curb illicit cash flow. No doubt, the landmark move will help foster a clean and digitised economy.
At the Kenya Chamber of Commerce and Industry, we are committed to supporting policies by the government aimed at boosting trade ties and bolstering access to international market for the Kenya business community.
For instance, we are in the final stages of formulating a working arrangement with the Dubai Chamber of Commerce on various fronts. To start with, we are working on ATA Carnets system.
ATA Carnets are international customs documents permitting the duty-free and tax-free temporary export and import of goods for up to one year. Carnets are the easiest way to speed to speed up transactions through customs thus saving money.
Notably, they have agreed to build capacity for Small Medium Enterprises (SMEs) on sustainability of their businesses.
Over the years, SMEs have been recognised for their role in provision of goods and services and jobs creation. As a key pillar in the economy, their interests must be jealously guarded so that they can compete internationally. —The writer is the President of the Kenya National Chamber of Commerce and Industry