CBK cites projected stockouts in defence of Sh14.2bn money printing tender » Capital News
NAIROBI, Kenya, Aug 22 — The Central Bank of Kenya (CBK) has defended its decision to award a Sh14.2 billion tender for the printing on new banknotes citing stockout fears.
CBK told a parliamentary committee on Wednesday that projections in mid 2023 indicates a potential stockout hence the move to athorize a five-year printing deal.
The National Assembly Committee on Finance and National Planning quizzed CBK Governor Kamau Thugge on why the printing of 2024 series banknotes was necessary and asked him to explain why Kenya was ditching UK-based De La Rue.
“When we determined they will be a stockout in mid-2023 and its implication we then decided to have this procurement process initiated to avoid the negative consequences of the situation,” Thugge said.
Thugge told lawmakers that a German firm Giesecke +Devrient Currency technologies (G+D) will supply over 2 billion banknotes of various denominations including 460 million Sh1,000 notes.
De La Rue company which has traditionally printed the Kenya banknotes in circulation since 1966 left the country in January 2023.
Lawmakers pressed Thugge on whether the government was involved in De La Rue’s exit, despite holding a 40 per cent stake in its operations. CBK Governor denied government’s involvement.
“De La Rue made its own decision to close down. They [were] not told by anyone in government to close down. They wrote a letter to the National Treasury explaining their decision was based on global developments and business demands,” Thugge explained.
De La Rue exit
Committee Moses Kuria queried why the engagement of the German firm went through classified procurement as opposed to open tender under which De La Rue won the tender to print the 2019 new series bank notes.
“Was it necessary to go through this type of tender rather than an open tender? How do we even ascertain the cost of the tender?” Kuria asked.
Eldas MP Adan Keynan confronted Thugge over the assertion that Kenya had no role in its exit despite holding a stake in the firm.
“We want to know who owns the [German] company and where its headquarters are based? What was the process of awarding the tender? Why did you discontinue the tender with De La Rue which we had shares in?” Keynan posed.
Under the classified procurement, the National Security Council and Cabinet instructed CBK to work with relevant security agencies given the currency is considered a high national security instrument.
Thugge said CBK secured an approval from the Attorney General’s office having justified the need to replenish and withdraw old currency notes.
“Money supply in the economy gets reduced over time. It is therefore critical for the money to be periodically replenished. A stockout of the Sh1,000 notes was looming since De La Rue had shut down its Nairobi plant in January 2023,” Thugge said.
‘Dead stock’
Baringo North MP Joseph Makilap speculated that the German printing firm may monetize the deficit in the market leading to high inflation and economic crisis.
He pressed Thugee on the justification for the printing of Sh639 billion worth of currenty notes despite Sh330 billion being in circulation.
“We want the value of the dead stock in the CBK because we don’t want a situation where money is being printed to fill the money deficit. What is the amount of worn out notes that provided the quantum for the printing firm?” he posed.
CBK Governor allayed fears that the government was printing new banknotes to monetize the economic deficit in the country.
“We can’t monetize the deficit because as it stands within the law, the Central Bank of Kenya [is] allowed to lend upto Sh97 billion at the moment. Inflation has risen in other countries due to monetization of deficit and in any case the law doesn’t allow it,” Thugge said.
Currency Operations Director Paul Wanyagi revealed already new Sh1,000 notes were in circulation confirming the release of a batch of 460 million procured notes.
“The Sh1,000 bank notes are already in circulation. The new notes have minimal changes which include security changes since each firm has its own security features. The color remains same,” Wanyagi stated.
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